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Marijuana — A boon for Colorado State Government?

Is marijuana a boon for the state coffers of Colorado? Well of course it is! We were told that it was the answer to all our financial worries. But is it? Let’s see.

Colorado collects a 15% excise tax on the wholesale product and a total of 17.2% on retail sales. Sales of pot in 2018 were $1,545,691,080 with the resulting tax revenue of $266 million and change.

The total budget for the State of Colorado is $28.9 Billion meaning marijuana sales account for about 0.9%. Well that doesn’t seem like it makes much of a dent.

The money is split three different ways to ensure that it benefited “the children.”

In 2017-18, the total marijuana tax revenue for Colorado Department of Education was $90.3 million. However, to put that into perspective, the marijuana tax revenue from 2017-18 was roughly 1.6% of the state’s K-12 education budget of $5.6 billion, which encompasses the budget of Colorado Department of Education, the Charter School Institute and The Colorado School for the Deaf and the Blind.

Anyone sensing a scam yet?

Let’s take a look at a marijuana sales chart:

The first thing one notices is that medical marijuana sales are on a steady decline. While I’ll grant that there are valid medicinal applications for all drugs including rat poison [Note 1], it seems clear that people really just wanted to get high. I am shocked and stunned.

The next thing one notices is that marijuana sales are leveling off. The overall growth rate was something like 7% last year in a roaring economy where people have more disposable income than they’ve had in perhaps decades. Pretty much all the people who want to get high are getting high pretty much as often as they want.

If you were an investor in a risky venture with lots of government entanglements, would you invest for 7% growth? I don’t think so!

What does the future hold? This is actually pretty easy to predict.

  1. There is an oversupply of pot shops which will ultimately drive down the price of pot and subsequent tax revenue.
  2. There will be consolidation which makes production and distribution more efficient and will drive down the price of pot and subsequent tax revenue.
  3. More states will legalize pot creating competition on a more national level and will drive down the price of pot and subsequent tax revenue.
  4. Colorado and other states will react to the drop in revenue by raising taxes even higher.
  5. Pot shops will look to differentiate by increasing potency and delivery systems. They will probably start selling “candy joints” for kids.

So another if it’s too good to be true, turns out once again to be that it isn’t. Not only isn’t it true that it’s the solution to all our funding worries but there’s no redeeming good from smoking pot either. I wonder if we’ll be around when the lawsuits start about what companies knew or should have known about how marijuana caused [insert disease here]?

 

[Note 1] The drug Warfarin, which is a blood thinner, was initially developed as a rat killer. The rats would eat the stuff, bleed out, and die. Ask me how I know.

 
Mark Rosneck

Written by Mark Rosneck

Site owner and bilagáana

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