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Marijuana: Will "no" vote on pot taxes prompt federal crackdown?

Earlier this week, we reported about the war of words between supporters and opponents of Proposition AA, which would set tax rates for recreational pot sales.

Attorney Rob Corry, who thinks the tax levels are too high (a point made at not one but two free-joint rallies this month), has challenged proponents to a debate, and he's getting frustrated by the lack of a response. So he shares some of his views with us and reacts to arguments against rejecting Prop AA -- including the prospect of a "no" vote inviting federal intervention.

A week or two back, Corry says the folks behind No on Prop AA, whose online home is NoOverTaxation.org, directly contacted a wide variety of people in favor of the measure about a possible debate. Those targeted included politicians (Senator Pat Steadman, representatives Dan Pabon and Jonathan Singer, Colorado Attorney General John Suthers) and marijuana scene figures (Brian Vicente, Christian Sederberg, Sean Coleman, Norton Arbelaez). But Corry says the only reply he received was from the Medical Marijuana Industry Group's Mike Elliott, who said "no."

Rob Corry with other attendees at this week's free-joint rally in Boulder.
Rob Corry with other attendees at this week's free-joint rally in Boulder.
Photo by Brandon Marshall

"If push comes to shove and nobody will debate, we have entertained the idea of debating an empty chair or finding somebody to express their position on things," says Corry, who notes that Casselman's is holding open an October 3 date for a Prop AA-oriented event. "But we'd rather not. This issue is critical for Colorado for years to come. If this tax passes, we're never going to get rid of it. It's locked in forever, and it's only going to increase -- and all Coloradans, whether they were for or against Amendment 64, deserve a debate about the issue. They should be able to hear both sides before they make their decision" at the ballot box in November.

One concern among those who favor Proposition AA, which would establish a 15 percent excise tax on recreational marijuana sales and a 10 percent sales tax that could be increased to 15 percent if necessary, involves the federal government. Late last month, the Justice Department announced that it wouldn't sue to stop Amendment 64 from going into effect -- but in a memo to U.S. Attorneys, Deputy Attorney General James Cole reserved the right for the federal government to intervene if states fall short when it comes to regulating pot.

Could the feds interpret a rejection of Proposition AA as an indication Colorado is failing in this regard? Corry doesn't think so.

"The August 29 Cole memo says nothing about taxes," he says. "Now, obviously, these taxes were in the works well before August 29, and if the federal government has a position on Prop AA, it has every right to state its position clearly. But it hasn't endorsed Proposition AA -- and we argue that if it passes, the feds are more likely to come in that if it doesn't."

How so?

Continue for more of our interview with Rob Corry about Proposition AA.

Rob Corry at the first free-joint rally, at Denver's Civic Center Park earlier this month.
Rob Corry at the first free-joint rally, at Denver's Civic Center Park earlier this month.
Photo by Alex Brown

"Basic economics," Corry answers. "With taxes that high, the legitimate, regulated market won't be able to compete with the unregulated market that pays no taxes. People can legally grow virtually unlimited quantities without any government permit, and you can distribute it among adults in virtually unlimited quantities, as you saw at our joint giveaways, which were perfectly legal under Amendment 64.

"These kinds of things will easily undercut the beleaguered stores, and then the federal government will be triggered. Record high tax increases will make the industry dysfunctional, and that would attract federal interference -- because whenever you overtax something, you create an underground market and an incentive to cheat on those taxes. The system will collapse on itself."

But if Proposition AA is voted down, how will the state pay for regulating recreational sales?

"One thing to keep in mind is that the 15 percent excise tax doesn't go to regulate marijuana in any way -- it goes to school construction," Corry says. "And the other costs should be covered by record-high licensing fees these recreational stores are going to be paying -- $18,000 per store in some cases. Between two stores, you could almost hire a full-time employee just from the licensing fees alone."

Amendment 64 was sold in part by with the pitch that marijuana should be regulated in a similar way to alcohol -- and Corry feels the taxes for these products should be comparable, too. "The tax on alcohol is less than 1 percent," he points out. "Now, we've never argued that marijuana shouldn't be taxed along with other retail products, which are taxed at 2.9 percent statewide, and there's a 7.62 percent sales tax in Denver. That, with the licensing fees, is more than enough to pay for regulating marijuana."

Prop AA supporters would no doubt see these assertions as debatable. But whether an actual debate will take place is another matter.

More from our Marijuana archive: "Marijuana taxes: The campaign's case in favor of Proposition AA."


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