On Tuesday, Colorado residents voted to impose several new taxes on the state's fledgling legalized pot industry. That includes a 15 percent excise tax for growers and a 10 percent tax on marijuana sales to consumers, which will come on top of the state's existing 2.9 percent sales tax.
At first glance, this seems like bad news for stoners. Who wants to pay an additional 27.9 percent in taxes on something that, before yesterday, was tax-free?
Don't worry, thrifty smokers; you will probably end up with some extra cash in your wallet. That is because while black-market weed was untaxed, it came loaded with extra costs.
Drug dealers don't just charge for their product. They charge you for the risk they take selling you the product, and the fact that you don't have many other options. And their suppliers face serious challenges, as Slate's Matthew Yglesias explained last year:
Try to imagine a world in which you're allowed to have some tomatoes in your house, you're allowed to cook tomatoes, you're not punished for having tomatoes in your possession if the cops stop you, and you're even allowed to buy tomatoes at specialty tomato stores — but where it's illegal to actually grow tomatoes… So tomatoes will be smuggled in from Mexico. Tomatoes will be grown in backyards. People will use lights and hydroponic rigs to grow tomatoes indoors.
These expedients would work, but they'd be horrendously inefficient compared with the modern agricultural, packaging, and transportation methods. [Slate]
Most of the funds from the weed tax will go towards regulation of Colorado's marijuana industry — an important step if the state wants to avoid problems with the federal government, which, despite assurances that it won't challenge Colorado's new law, still technically considers the drug illegal.
A study by RAND Corporation on the potential effects of legalizing pot in California found that the price of weed would "dramatically drop" as "growers move from clandestine operations to legal production" — possibly even falling to $38 per ounce compared to the $375 it cost in 2010. In Colorado, TIME's Brad Tuttle wrote earlier this year, legalization would make "a pot-smoking habit" even "cheaper than a cigarette-smoking habit."
Over-taxation does come with risks. That 25 percent hike is far higher than Colorado's tax on alcohol, creating the risk of "a marijuana market ripe for takeover by the unregulated, untaxed, underground market," warned Denver attorney Rob Corry, who led a group that opposed the tax.
But even anti-tax crusader Grover Norquist backs Colorado's voters, telling the National Journal that it's "not a tax increase" because when something is illegal, the government is pretty much putting a 100 percent tax on it. Instead, he said, Colorado's government is "legalizing an activity and having the traditional tax applied to it."
All in all, Colorado pot smokers might look back on Tuesday as a historically chill day for stoners.
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