Colorado May Have to Refund Some Marijuana Tax Money

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Legalization appears to be doing well in Colorado. Very well. Maybe a little too well.

marijuana leaf and moneyThe nascent legal weed industry has generated so much tax revenue in the last year that officials may have to give much of it back to the taxpayers. Money that was intended for school district construction projects across Colorado may instead end up back in the pockets of consumers, providers, and pretty much everyone else who owes taxes for 2014.

A clause in the state’s constitution caps the amount of tax revenue the state can take in before it must issue refunds. With a marijuana tax haul of more than $60 million in from last year, that could amount to a substantial amount of money for taxpayers.

An unforeseen outcome

This certaintly wasn’t the result foreseen by the cannabis advocates who wrote the constitutional amendment that legalized pot in 2012. Even hardcore activists favored a tax to fund school construction needs.

“I have no problem paying taxes if they’re going to schools,” said Maddy Beaumier, a Denver resident who buys from a dispensary near the state Capitol.

Amendment 64 passed by a relatively wide margin in the 2012 election, making Colorado one of two states to legalize recreational weed that year, the other being Washington State.

The law imposes a tax of about 22 percent on each marijuana purchase in Colorado. That includes a 10 percent sales tax and a 15 percent excise tax on pot sales. Revenue from the excise tax is supposed to pay for school district construction projects.

Voters approved the marijuana tax scheme at the polls in 2013, a year after they first legalized weed. There was broad support for the new law, especially the school-funding provisions.

Now Colorado’s libertarian experiment in legal pot is coming up against an anti-tax political culture dating to at least the early 1990s. In 1992, voters approved a ballot initiative that requires the state to pay back any tax revenue greater than a limit determined by a formula using inflation data and population growth statistics.

The reality of that policy has put fiscal conservatives in a tough spot, since they oppose both taxes and legal weed. GOP lawmakers said they believe the tax on cannabis is appropriate.

“This is a little bit of a different animal,” said state Sen. Kevin Grantham, a Republican. “There’s a struggle on this one.”

Will the excess taxation be refunded?

It’s not clear the money will actually reach taxpayers. State officials said they were looking for legal ways to avoid the refunds. Lawmakers in both parties said they didn’t want to see school construction defunded over a technicality.

Colorado Welcome SignBut they acknowledged voters may have to settle the matter at the polls. Republicans, who generally support tax refunds, oppose payouts from the marijuana tax.

“I think it’s appropriate that we keep the money for marijuana that the voters said that we should,” said GOP Senate President Bill Cadman.

But not everyone wants the government to keep the money. The tax adds a substantial amount of money to the cost of any legal cannabis purchase, and that can put weed out of the reach of some consumers.

“I don’t care if they write me a check, or refund it in my taxes, or just give me a free joint next time I come in,” said David Huff, a carpenter who lives in Aurora. “The taxes are too high, and they should give it back.”

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