Colorado voters have twice endorsed the idea of taxing marijuana. But because of an arcane and fundamentally ridiculous peculiarity of Colorado law, they will now have to say so a third time in order to keep the money.
But before they can do that, the state will have to forgo an estimated $3.7 million in marijuana tax revenue. That happens today, Sept. 16, with a one-day suspension of state marijuana taxes.
With Amendment 64 in 2012, Colorado voters legalized recreational marijuana. While it left the details to the Legislature, that ballot measure also explicitly envisioned taxing pot. The supporters of Amendment 64 not only went along, they touted taxing marijuana as a selling point.
Our lawmakers then crafted Proposition AA to establish the marijuana taxes. Colorado voters approved that in 2013.
But the so-called Taxpayer Bill of Rights, or TABOR amendment, passed in 1992, requires that when asked to approve a tax increase, two estimates must be presented in the Blue Book provided to voters. One is the estimated revenue from the proposed new tax for the first year. The other is the estimated total state revenue for that fiscal year subject to the TABOR spending limit. If either of the actual figures exceed the estimate, the new tax must be refunded in its entirety. This applies only to the first year of a new tax.
For fiscal year 2014-15, the first year of the pot tax, marijuana revenue was actually less than the Blue Book figure. But the total state revenue figure is well over the estimate.
Under TABOR, the state will be required to refund all of the marijuana taxes collected in that first year – unless the voters pass Proposition BB, on the November ballot. That measure would allow the state to keep the marijuana tax revenue.
There are two other provisions at play. Another part of TABOR says that if a refund is triggered, the associated tax rate must be reduced by the same percentage as the refund – 100 percent. (Never mind that the pot tax did not cause the violation. The Blue Book estimates were part of Amendment 64.) However, voter-approved Proposition AA gave the Legislature the authority to raise or lower the state marijuana taxes as long as neither exceeds 15 percent.
The fiscal year closed out at the end of June and state revenue numbers were certified Tuesday. That means the state is now officially in violation of TABOR. To comply, the marijuana tax has been cut to zero. But with the authority granted it under Proposition AA, the Legislature has reinstated the taxes effective Thursday. The result is a one-day marijuana tax holiday and an estimated $3.7 million lost to the state treasury.
There had been talk of cutting the tax at 2 a.m. and reinstating it at 4 a.m. thereby losing nothing. But the feeling was that there needed to be a meaningful cut – and more than $3 million is meaningful by any standard.
The tax holiday is regrettable, but voters should approve Proposition BB and let the state keep the 2014-15 pot tax money. Taxing marijuana was one of the principal reasons for legalizing it and there is no reason the state should not keep the revenue generated. That is especially true in that were Proposition BB to fail, the money would be refunded in large part to growers and consumers of marijuana, whereas if the state keeps it the money can benefit all of Colorado’s schools and kids.
Then perhaps the state can revisit at least parts of TABOR.
