Colorado Cuts Marijuana Tax, Targets Black Market, While Oregon Eyes 20% Tax

COLORADO:  Colorado is leading again, this time with a permanent tax break on recreational marijuana. The state is lowering the tax from 10% to 8% effective in July 2017, a move that could cut into Colorado’s black market. Colorado was the first state to legalize marijuana for recreational use, and now it’s passed a marijuana tax relief. There is even a one-time tax holiday on September 16, 2015, from the 10% state sales tax.

Gov. John Hickenlooper signed the provisions into law, noting that this should lower the price of legal cannabis. A voter initiative is set too. The question for voters is whether Colorado can keep the estimated $58 million in pot taxes collected this fiscal year. Colorado’s Taxpayer’s Bill of Rights—TABOR—requires the state to issue refunds to taxpayers if the state’s spending or revenue collections exceed the previous projections. To try to avoid the refund requirement, legislators introduced HB 15-1367, creating a ballot initiative to allow Colorado voters to approve of the state keeping the $58 million in marijuana revenue.

Regardless of whether the ballot initiative passes, Colorado did lower the sales tax on marijuana from 10% to 8% beginning July 2017. Eliminating the sales tax for just September 16, 2015 meets constitutional obligations. But even that one day tax hiatus has a price. The tax holiday is expected to cost about $100,000, plus $3.6 million for a one-day elimination of the 15% excise tax.

Colorado Residents Looking At Pot Tax Rebate

COLORADO:  Last Monday, Colorado Gov. John Hickenlooper unveiled the state’s $26.8 billion proposed budget for next fiscal year. The budget includes $167.2 million in tax rebates for Colorado taxpayers, including $30.5 million in rebates due to total state recreational pot revenue that was higher than predicted.

The rebates are mandated by the Colorado Taxpayer’s Bill of Rights (TABOR), because the revenue from marijuana sales is different than projections included in the election book for the 2013 Proposition AA. Under TABOR, since the estimate was off, the state has to either refund the excess cash or go to voters to ask if the state can keep it.

The budget proposal was announced one day before the Nov. 4 election that gave Hickenlooper another term. The spending plan includes a 7 percent increase from the current year’s budget, representing $1.7 billion in new spending of state and federal money. $908 million in state spending includes $107 million in additional funds for higher education, $103 million for road projects and a 2 percent pay hike for many state employees.

Colorado’s economy is improving, but much of the new money is due to tax collections exceeding the state’s revenue cap, triggering rebates under TABOR for the first time in 15 years. The provision requires refunds if the revenue is greater than the rate of population growth and inflation. Unless, that is, the voters decide to return the money.