Colorado voters approved Amendment 64 in November 2012, legalizing the production, sale and use of adult recreational marijuana under Colorado law. Since then, various mechanisms of state government have been looking at how to implement the amendment, including how best to regulate and tax the sale of recreational marijuana.
- Read the full report: The Fiscal Impact of Amendment 64 on State Revenues (originally released 4/24/13 and updated 1/2/14)
In this report the Colorado Futures Center at Colorado State University sought to provide a clear-eyed and unbiased analysis of the fiscal impact of the proposed Amendment 64 tax measures as part of a broader commitment to look holistically at the sustainability of Colorado’s state budget.
Colorado voters approved Amendment 64 in November 2012, legalizing the production, sale and use of adult recreational marijuana under Colorado law. Since then, various mechanisms of state government have been looking at how to implement the amendment, including how best to regulate and tax the sale of recreational marijuana. The Colorado General Assembly’s Joint Select Committee on the Implementation of Amendment 64 handed down legislative recommendations that include the following proposed taxes related to Amendment 64:
- An excise tax levy of 15% of the wholesale value of marijuana;
- A special sales tax of 15% on the retail sale of marijuana; and
- Extension of the state’s existing 2.9% general sales tax to sales of marijuana and marijuana products.
Subsequent to the recommendations of the Joint Select Committee, the Colorado General Assembly referred a measure to the November 2013 ballot to tax marijuana statewide at the following rates:
- An excise tax levy of 15% of the wholesale value of marijuana
- A special sales tax of 10% on the retail sale of marijuana
That ballot measure was successful, and on January 1, 2014 the first sales of recreational marijuana included the referred taxes as well as the state’s 2.9% regular sales tax. This update to our earlier work estimates the state revenue potential from these taxes for the first full fiscal year of operation of the
recreational marijuana market. That time period is July 1, 2014 – June 30, 2015.
This paper addresses the following key findings:
- The adult recreational marijuana market in Colorado will be $617.5 million and taxation of that market will bring an additional $101.8 Million in state tax revenue in fiscal year 2014-15.
- The 15% wholesale excise tax created by the amendment will not reach the goal of $40 Million for school construction as stipulated in the ballot language approved by voters.
- The high water mark for marijuana tax revenue is likely to be in the first few post-legalization years with revenue flattening or declining thereafter.
- Marijuana tax revenues may not cover the incremental state expenditures related to legalization.
- Marijuana tax revenues will not close Colorado’s structural budget gap