Falling short: Colorado recreational pot revenues not as high as expected
Adults in Colorado have since January 1 been able to legally purchase weed for recreational purposes, and the state initially protected that it would pull in at least $33 million in taxes during the first six months. The release of new figures this week shows that the state fell short, however, earning only a comparably meager $12 million between the first of the year and the end of June.
The latest news contrasts heavily with reports from early January when sales in Colorado far exceeded expectations and netted over $1 million on the first of the year, and around $5 million during the first week. That high demand apparently didn't last long, however, and sales have since slumped to well below what was expected.
State Rep. Dan Pabon (D-District 4) told CNN Money that “it’s too early to be worried” about the financial shortcoming just yet, but meanwhile some experts say they’ve already put their finger on why figures are only a fraction of what they had hoped for: Colorado’s legal weed rules indeed allow retailers to sell marijuana in licensed establishments, but high taxes are keeping many customers away from pot shops in lieu of the street dealers that peddle without a permit.
Only 60 percent of potential pot buyers in Colorado will go through legal channels in 2014, according to an estimate from the Marijuana Policy Group, and a Denver, CO Fox News affiliate says high taxes will likely continue to keep those customers out of retail shops, where the state collects an additional 27 cents on every dollar.
Although state-approved shops provide buyers with a legal, sanitary and safe alternative to the black market, Colorado laws allow for adults to grow up to six plants apiece for personal user — which may end up being sold on the street, albeit illegally — and marijuana sold for medicinal purposes is taxed only 2.9 percent. According to the Marijuana Policy Group, around 23 percent of marijuana users in the Rocky Mountain State carry prescription cards that allow them to make those comparable cheaper purchased.
Others, on the other hand, say the relatively lax laws in place for growers are still managing to limit how much weed can be produced, and a limited supply lends to surge in selling prices: the likes of which is also believed to be an impetus in the poor retail store sales.
“Right now we are pretty significantly under what should be produced,” Ron Kammerzell, the deputy senior director of enforcement for the state Department of Revenue, told the Post Independent over the weekend.
“What that does is raises the prices and if the price is too high, then we can’t compete with the black market, and that was our ultimate goal with Amendment 64 — we wanted to eliminate the black market,” added Kammerzell, referring to the bill that brought Colorado the first legal recreational dispensaries for non-medicinal purposes in the United States.
Earlier this year, the Colorado Marijuana Enforcement Division predicted that residents and visitors will use a total of 130.3 metric tons of pot during 2014, but only 77 metric tons — or around 59 percent — will come from legit sellers.
Although Colorado has the most lax weed laws in the country, selling pot without state approval remains a felony there. Washington became the second state in the US to allow recreational sales earlier this year, and the governor said in February that the state hopes to receive $107 million in revenue through marijuana taxes during the first 12 months the legislation is on the books.