The Colorado cannabis industry pulls in millions of dollars in tax funding. That’s great news for Colorado public services, especially the education department (where most of those funds are funneled). So how many tax dollars are pouring in? Where do those tax dollars come from? And where do those tax dollars go? Let’s discuss the answers in today’s article, provided by Evolutionz, your source for cannabis consultation services.
Colorado Cannabis Taxes Grow
Colorado’s recreational cannabis sales have grown steadily since the legalization of marijuana sales (Colorado saw over 1 billion dollars in cannabis sales in 2016). And alongside sales came an influx of taxes. According to the Colorado Department of Revenue, recreational cannabis tax revenue has grown from about 2 million dollars per month in January of 2014 to about 7 million dollars per month in January of 2015, and to about 11 million dollars per month in January of 2016. In January of this year, Colorado received nearly 16 million dollars in tax from recreational cannabis sales alone. With dollars obtained from licensing and fees, that figure came close to 17 million dollars of government revenue. In short, cannabiz is booming in Colorado, and funds for government programs are rolling in faster and faster. That begs the question, how is recreational cannabis taxed?
Colorado Cannabis Tax Sources
Colorado charges a litany of taxes on all recreational cannabis sales. First of all, the greatest imposed tax is an excise tax. Excise taxes are commonly applied to products that are considered a “vice” (other products subject to an excise tax include tobacco and alcohol). Consumers pay a 15 percent excise tax for recreational cannabis products. In addition, consumers must pay a 10 percent “special sales tax” for recreational marijuana products. What does “special” mean? In this instance, just that: this special sales tax is unique to recreational cannabis sales. On July first this year, the special sales tax will be reduced to 8 percent. In addition, a normal 2.9 percent sales tax rate is applied to all cannabis sales (including both recreational and medical cannabis).
Colorado Cannabis Tax Allocation
So, where do all of these taxes go? Well, that question has a rather complex answer, but you can see a full tax allocation schedule here. In short, cannabis sale taxes will be allocated to a vast variety of departments, especially the education department.
The Education Department
Since day one, voters and legislators have been in favor of routing recreational cannabis taxes towards education here in Colorado. Actually, a huge portion of recreational cannabis sales go towards funding school construction and education facilitation. The excise tax that has been placed on recreational marijuana has been allocated towards the BEST Public School Capital Construction Assistance fund—a fund that aids existing schools through renovation while also building new schools. The goal of BEST Public School Capital Construction Assistance is, as their site states, “The goal of the BEST program is to provide first class, high performing, 21st century facilities and to help alleviate health and safety concerns throughout Colorado.” According to the same site, since its inception, “BEST has received more than $499 million in revenue.” About 5.4 percent of that revenue was generated by the marijuana excise tax alone. In the 2014 fiscal year alone, recreational cannabis taxes paid 23 million dollars toward the BEST program.
Beyond funding the BEST program, cannabis retail tax dollars are also routed towards the Public School Fund. The Public School Fund provides funding to buy books, maintain staff, and reduce class sizes. All of Colorado’s cannabis excise taxes are routed to fund these two educational programs. The remaining funds are routed towards other departments:
Other Government Departments
The cannabis special sales tax, and “normal” product sales taxes are both routed into a Marijuana Tax Cash Fund. This fund is allocated towards marijuana sale regulation, licensing, compliance, and enforcement, which means that Colorado cannabis sales actually cover the bureaucratic costs of cannabis legislation and regulation. Beyond its own regulation, cannabis taxation funds are routed to all of the following departments:
- Agriculture: The Department of Agriculture oversees numerous agricultural operations throughout the Centennial State. Cannabis taxation funds are routed towards FFA funding, the 4H program, construction projects, the agricultural plant industry, and more. The state of Colorado will route over 2 million dollars of cannabis taxation funds toward the Department of Agriculture throughout the 2017 fiscal year.
- Attorney General: The attorney general’s office, or the Department of Law, provides several attorney services to the state. As the authority on state law, the attorney general provides criminal justice services, appeal services, protection for consumers, and oversight over civil litigation and employment, among a variety of other law-related services. The state will route about 1 million dollars of cannabis taxation funds toward the office of the Attorney General throughout the 2017 fiscal year.
- Governor’s Office: The governor’s office is tasked with operating election procedures, building out and supporting local governments, and more. The state will route about 1 million dollars of cannabis taxation funds towards programs withing the Governor’s Office throughout the 2017 fiscal year.
- Health Care Policy & Financing: The Health Care Policy & Financing branch of the Colorado government offers a program called Screening, Brief Intervention, and Referral to Treatment (or SBIRT). Cannabis taxation dollars are allocated to fund SBIRT. In the 2017 fiscal year, roughly 750,000 cannabis taxation dollars will be apportioned to pay for the SBIRT program.
- Higher Education: Colorado’s Higher Education department provides funding for undergraduate and graduate schools. Recreational cannabis tax dollars are being utilized towards cannabis research in a university setting at Colorado State University of Pueblo. 900,000 dollars are allocated to be spent on cannabis research this year.
- Human Services: The Human Services Department of Colorado covers a vast variety of programs, including Mental Health Services for Juvenile and Adult Offenders, detoxification programs like Pueblo’s Circle Program, and more. Roughly 16.5 million dollars of recreational cannabis taxes will be spent on Human Services programs.
- The Judicial Branch: 1.5 million dollars of recreational cannabis tax funds will be allocated towards the Correctional Treatment Cash Fund within the Colorado Judicial Branch this year. The same dollar amount was spent in 2016.
- Labor & Employment: Though no funds will be allocated to the Labor and Employment Department of Colorado this year, in 2016 half of a million dollars were utilized towards initiating the Colorado Veterans’ Service-to-Career program within the Labor and Employment Department.
- Local Affairs: The Department of Local Affairs has several divisions, including the Division of Housing, the Division of Property Taxation, and the Division of Local Government. Over 17 million dollars of recreational cannabis taxes will go towards the Department of Local Affairs, with the vast majority of that funding allocated towards affordable housing loans and grants.
- Public Health & Environment: The Public Health and Environment Department provides numerous public safety and education services, including providing support for local public health agencies. The Public Health and Environment Department also provides cannabis education to the public, including the Marijuana Education Campaign, and supplying cannabis health information, training, and surveillance. This department will receive over 18 million dollars in support from recreational cannabis tax dollars.
- Public Safety: The Colorado Department of Public Safety monitors regulatory agencies throughout the state. About 300,000 dollars will be routed to support this department in 2017.
- Regulatory Agencies: Colorado regulatory agencies will receive some support from recreational cannabis taxation. In 2017, about 300,000 dollars will be allocated to fund various Colorado regulatory agencies.
- The Department of Revenue: From 2014 until 2016, this branch of the state government received about 22 million dollars in funding to enforce marijuana regulations. In 2017 those funds will be rerouted to other departments that monitor marijuana growth, operations, transportation, and sales.
- Transportation: Recreational cannabis taxation dollars also go towards the Colorado Department of Transportation. Last year, half of a million dollars were allocated towards the First Time Drunk Driving Offenders Account, and nearly half a million dollars were spent on the Marijuana Impaired Driving Program. This year, that latter figure will triple, to further enforce cannabis-impairment laws.
- Placeholders & Transfers: On top of all the aforementioned allocations, roughly 16 million dollars will be set aside to be spent on legislative and budget initiatives throughout the year. Recreational cannabis tax dollars provide a surplus that is conducive to cover various unexpected government needs.
You can see view further details on the state’s projected allocations of recreational cannabis funds on the Colorado Office of State Planning and Budgeting site.
The Future of Recreational Cannabis Taxation
As sales rise, taxes are flooding the Colorado government. That’s great news for public programs, and great news for Colorado as a whole. Recreational cannabis funds are filling gaps in funding throughout the state. As more and more tax dollars come in, the state bureaucracy is diversifying the utilization of tax dollars. Recreational cannabis taxation supported a handful of programs and departments in 2014 and 2015; nowadays, it appears that nearly every department is getting a piece of the proverbial pie.
What’s more, is cannabis is self-governing, at least financially speaking. As we mentioned, the tax dollars derived from marijuana sales are going towards cannabis regulation programs and departments that strive to educate the public and Colorado youth about marijuana. Therefore, cannabis taxation ensures cannabis regulation, which is a step away from black market marijuana growth, transportation, and sale.
It’s easy to see that the lift on recreational cannabis prohibition provides greater freedoms for Colorado citizens while also self-regulating and standardizing the cannabis industry—making marijuana safer for those who enjoy it. Plus, it’s a big bonus that recreational cannabis dollars support Colorado as a whole, especially its education programs.
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