Estimates reveal that the total US marijuana market is about $46 billion yearly. Because roughly 8% of the US population resides in Texas, it is reasonable to deduce Texas potentially has a $3.7 billion marijuana market (8% of $46 billion is 3.7 billion). The illegality of marijuana ensures that illicit actors will profit from this multi-billion dollar industry in Texas, instead of small businesses and local governments. Colorado has found a method to allow law-abiding businesses to earn profits from the marijuana market by legalizing and taxing the substance. Such taxes benefit governments and the public by providing revenues for projects such as school construction and drug-use prevention programs. Texas lawmakers could learn from Colorado’s groundbreaking efforts to improve drug policy through sensible law reform and good governance.
Generally, Colorado’s marijuana tax law levies a 10% sales tax on marijuana and marijuana products from a marijuana retailor. This 10% sales tax upon retailors is in addition to the 2.9% state sales tax and any local government sales tax imposed upon retailors. Thus, a purchaser of marijuana or marijuana products from a retailor would pay a minimum of 12.9% sales tax. The retail marijuana taxes do not apply to medical marijuana sales from a Medical Marijuana Center. Colorado’s marijuana tax law also imposes a 15% excise tax (that is, 15% of the average market rate of the marijuana) on sales from a marijuana cultivator. Excise taxes are taxes measured by the amount of business done, rather than property. The 15% excise tax will be on the cultivator’s sale of marijuana to a marijuana product manufacturer, a marijuana retailor, or another marijuana cultivator.
Though Colorado legislators passed the proposed marijuana taxes, Colorado voters must ultimately approve the taxes before the governor signs the taxes into law. Without voter approval, Colorado could be left without revenue to fund its extensive regulation of marijuana. Lack of voter support does not seem to be a concern however since the Public Policy Polling found that 77% of the 900 registered Colorado voters polled favored the marijuana taxes. Perhaps taxing is favored because Colorado legislators and voters realize the immense public good that could result from marijuana tax revenues. Researchers at Colorado State University have estimated (and have constructed an online calculator that helps one to make his own estimates) a total tax revenue of $94.4 million next year. Additionally, researchers believe Colorado will gain $12 million per year from law enforcement savings.