Marijuana: Colorado NORML board opposes recreational pot tax measure

Earlier this week, Miguel Lopez, organizer of the annual 4/20 rally, expressed his opposition to Measure AA, the taxation proposal for recreational marijuana up for vote in November, by staging a Civic Center rally at which attendees were given free joints.

The Colorado chapter of NORML (National Organization for the Reform of Marijuana Laws) reached the same conclusion: They, too, oppose Measure AA. Board member Sean McAllister explains why.

According to attorney and activist McAllister, the proximity of Colorado NORML's announcement to Lopez's Civic Center gathering "was coincidental. We didn't know about the event on Monday; there's no affiliation, and NORML's board has been discussing the issue for weeks. But the Monday event did remind us that the issue is becoming important to focus on now."

Miguel Lopez at the anti-marijuana-taxation rally at Civic Center Park earlier this week.
Miguel Lopez at the anti-marijuana-taxation rally at Civic Center Park earlier this week.
Photo by Alex Brown

As McAllister points out, NORML members took part in Governor John Hickenlooper's Amendment 64 task force, and he says concerns about excessive taxation have been shared throughout the process that led to the establishment of proposed levels: a 15 percent excise tax, plus a 10 percent state sales tax that can be increased to 15 percent if revenues fall short of covering costs. However, he says, the board's feelings "were brought to a head now. With a month and a half or two months from the election, people deserve to know what our position is on the issue."

Hence, a press release that lays out three main complaints about the measure. They're laid out as follow:

1. Measure AA is excessive taxation on marijuana consumers that does not uphold the promise of Amendment 64 to treat marijuana like alcohol. The proposed marijuana taxes could amount to an effective tax rate of 30-40% ultimately passed on to marijuana consumers in Colorado. This rate is more than twice the equivalent taxes on alcohol. While we can support the 15% excise tax portion of Measure AA, included in the language of Amendment 64, we feel that the addition by the Colorado Legislature of a 10% "Special Sales Tax" on marijuana was unreasonable and unnecessary.

2. We believe that if Measure AA fails, there will still be adequate funds to effectively regulate recreational marijuana. We believe our state and local regulators can and should meet the challenge of marijuana regulation through the efficient management of their budgeted funds.

3. Excessive taxation under Measure AA, along with the decision of many local jurisdictions to "opt-out" of Amendment 64's business licensing provisions, has the potential effect to keep a black market for marijuana alive in Colorado. In addition to rejecting excessive taxation, Colorado NORML calls on local governments to reconsider their decision to ban the regulated retail sale of marijuana in their community. We believe that banning retail sales at the local level only denies the safe access to marijuana by consumers in their communities, and only serves to support the operation of unregulated local black markets for marijuana.

An early meeting of the Amendment 64 task force.
An early meeting of the Amendment 64 task force.
Photo by Sam Levin

Comparing marijuana and alcohol tax rates is a challenge, McAllister acknowledges, because "tax rates on alcohol are somewhat complicated. It's sixty cents on a liter, and most people buy one-and-a-half liter bottles. But from our assessment, you pay between 10 and 15 percent tax on alcohol if you include all the special taxes.

"Now, for marijuana, the first 15 percent is a tax on the wholesale from the grower to the retailer -- but our sense is that most of these operations will likely pass that on to the consumer. Then, the retailer will have to charge an additional 10 percent tax on top of all the regular taxes, and some local governments are adding another 5 percent on top of that. So marijuana consumers will effectively be paying 30-40 percent taxes on this product, and that amounts to a windfall for the legislature -- taxes that are two to three times the rate of alcohol."

Continue for more about Colorado NORML's opposition to the recreational pot tax measure.   Although no one knows at this point how much revenue recreational marijuana sales will generate, McAllister cites a Blue Book prediction of $130 million annually. "Even if you take $40 million off the top for schools" -- Amendment 64 establishes that a significant chunk of revenues go toward school construction -- "you're still left with $90 million for a regulator that currently has a budget of about $5 million. And even if you quadruple that budget, you're still at two or three times the tax revenue you need to fund all of that."

The decision of big communities like Fort Collins and Colorado Springs to prohibit recreational marijuana sales even though they allow medical marijuana could cut into the revenue, McAllister concedes. But even if that happens, he says, "this is not the agreement voters had in mind when they said marijuana should be taxed similar to alcohol. NORML doesn't believe two to three times higher is what voters agreed to do."

Likewise, Colorado NORML sees local bans as counter-productive. "That decision will keep the black market alive in Fort Collins and Colorado Springs, probably more so than the taxation issue," he believes. "That's why we call on local governments to reconsider the bans. If the intent of Amendment 64 was to generate tax dollars and dry up the black market, local bans will be the primary drivers of this, but the taxation contributes to it, too. If the taxes are too high, people will consider illegal sources rather than legal sources."

Just as important from McAllister's perspective is improved performance by the state's newly renamed Marijuana Enforcement Division.

"The regulator has a lot of responsiblity here to do a better job going forward," he says, "and NORML doesn't think the solution for some of the problems of regulation in the past is to quadruple or quintuple the budget. They already have a multi-million dollar budget, and they haven't done a good job using it to date. They should be able to do a good job with their budget now, or even twice the budget. And there should be more than enough revenue for that with just the regular sales tax."

This last comment is NORML's answer to the question of what'll happen if Measure AA fails: Recreational sales will go forward as scheduled, but with marijuana taxed at a rate consistent with any other product, sans any special taxes imposed by the legislature or local government.

James Cole testifying at a Senate hearing this week.
James Cole testifying at a Senate hearing this week.

Still, there's another factor at play. When the Department of Justice announced late last month that it wouldn't sue to stop Amendment 64, Deputy Attorney General James Cole stressed in a clarifying memo that the feds reserved the right to take charge if state efforts at regulation were deemed insufficient.

Would the failure of Measure AA give the Obama administration an excuse to do so? McAllister doesn't dismiss this prospect out of hand, but he says, "there are many things the legislature can do if the initiative fails -- and that was taken into consideration when we decided on our position. I think there are going to be sufficient funds, and even if that is a concern, there could be stopgap funding for one year while the legislature adjusts the rates and submits them to voters in November 2014. Addressing things in that way should insure that the federal government won't come in and shut down the program."

At this point, Colorado NORML isn't gearing up to actively campaign against Measure AA. "The board is made up of diverse opinions, and board members will probably take their own initiative consistent with their position," he says. "But right now, there are no plans for NORML to, for example, lead or participate in a coalition of groups against the tax.

"The only decision so far is that we oppose the tax -- and whatever happens, pass or fail, we intend to work in the legislature to reduce those rates one way or another."

More from our Marijuana archive: "Photos: Anti-pot-tax rally attracts big crowd for free joints."

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