Economist: Retail Weed Could Net Colorado Springs $98 Million in Taxes

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Jacqueline Collins
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A Colorado economist believes that Colorado Springs could net almost $100 million in tax revenue if the city legalized recreational marijuana sales.

According to Colorado College professor Neal Rappaport, a 12 percent local tax rate on recreational marijuana sales in the state's second-largest city would collect just over $98 million over a five-year span, while an 8 percent rate would bring in more than $72 million.

To reach his projections, Rappaport studied state Marijuana Enforcement Division sales trends and demographic reports in Colorado towns allowing recreational sales, as well as current medical marijuana sales in Colorado Springs. The professor, who conducted the study for Together for Colorado Springs (a pro-recreational marijuana industry organization), calls his estimates "conservative," and notes that rec sales taxes could "mitigate some issues" connected to the $20 million in upcoming city budget cuts in the wake of the COVID-19 pandemic.

"The mayor has announced $20 million in budget cuts, and there are going to be more," Rappaport says. "People are consuming retail marijuana in Colorado Springs in several forms, either from outside [towns] or purchased medically. Colorado Springs should at least attempt to understand the cost of the ban."

Colorado Springs has nearly 100 medical marijuana dispensaries, but Mayor John Suthers has

repeatedly voiced his opposition

to allowing recreational marijuana sales, and ballot initiative efforts for recreational sales have

come up short in past years

. But Together for Colorado Springs says that it's only one city council member short of obtaining enough council support to get recreational sales on the November ballot, which was enough to persuade

Colorado Springs Independent

founder John Weiss to

step aside from news decisions and advocate

for the group's cause over the next several months.

Because it is considered medication by the State of Colorado, medical marijuana carries a 2.9 percent sales tax rate with no additional local taxation. By comparison, recreational marijuana has a state marijuana sales tax of 15 percent, an additional 2.9 percent state sales tax, and additional local marijuana and sales taxes that vary by locality but average about 9.44 percent, Rappaport says.

More than a fourth of the state's registered medical marijuana patients live in El Paso County, according to the state Medical Marijuana Registry, with the majority of those living in the Springs. Rappaport argues that that number would drop considerably over the next five years if recreational sales were allowed, as would the number of Colorado Springs residents spending their money in Manitou Springs, the closest town with recreational dispensaries.

Rappaport's economic forecast shows that per capita marijuana sales in Manitou Springs are around twenty times the state average, and ten times larger than Denver's. "There will be a shift of sales into Colorado Springs. There are always positives and negative shifts to neighboring communities," he says.

The former U.S. Air Force economics professor doesn't see the military's presence in Colorado Springs as a legitimate reason to ban recreational marijuana, which, like medical marijuana sales, is banned under federal law.

"Marijuana's been legal in the State of Colorado for over five years in retail, and the military is still here. Other states have legalized marijuana with no impact on their military presence. I don't think it's a particularly strong argument," he says.

Update: This post was updated June 2 to fix an error stating that the study showed Colorado Springs could make over $98 million in marijuana tax revenue per year; that figure was spread out over five years.

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