How much are you willing to pay for weed?
In Colorado, an ounce is going for more than $500 after taxes. That, at least, was the market price on Jan. 1, opening day of the first retail weed stores in the world. Though experts say the price should come down eventually, some regular users got sticker shock.
“I think people were a little bit surprised at the price,” said Rachel Gillette, executive director of NORML’s Colorado chapter. “We are concerned about that.”
The $400 pre-tax price tag was attached to some of the best marijuana in the state. But that was before taxes, which add another $111. That makes legal pot in Colorado much more expensive than high-quality black-market weed almost anywhere in the country.
If such disparities continue, it could encourage many users to return to buying pot from illegal dealers. They face little risk in doing so, since possession and use are still legal; only the dealers face serious criminal penalties.
On the other hand, that situation would probably spark retailers to lower their prices. And it could lead state lawmakers to slash the marijuana tax, one of the heaviest in the state.
“If marijuana continues to funnel into the black market, I am happy to look at shocking the black market out of the legitimate industry by slashing taxes, but this is way too early in the game,” said state Rep. Jonathan Singer, who sponsored a bill on marijuana regulation. “And judging by the thousands of marijuana consumers lined up around the block yesterday, Coloradans appear comfortable with taxes as they are.”
Aside from taxes, the cost of legal weed in Colorado is determined entirely by supply and demand. Big crowds showed up opening day, Jan. 1, but only a handful of retail stores were ready for business, leading to long lines and crammed shops.
Medical marijuana users, by contrast, pay about $250 for an ounce of marijuana before taxes because they’re not affected by recreational pot laws. And they aren’t subject to the same taxes. At one dispensary, an eighth of an ounce that sold to MMJ patients for $25 a day before was selling to recreational customers for $70, well above most black-market prices.
But Gillette said market observers expect the numbers to drop over time. The same thing happened to the medical pot industry when it was born in 2000, but prices eventually stabilized there, too, she said.
“It’s a new industry, a new market,” Gillette said. “I think things will work themselves out in a few years. We saw the same thing happen with the medical marijuana industry before prices came down.”
According to a report released last spring by researchers at Colorado State University, the price of an ounce of marijuana should settle at about $185. That’s more likely once new stores have opened across the state. Officials have cleared 348 retail licenses, but many stores are waiting for approval from local governments before they can open shop.
Phyllis Resnick, lead economist at Colorado State’s Colorado Futures Center, agreed that prices should drop once more time has passed.
“My sense is that competition will eventually arise … and costs will fall below what the black market wants,” Resnick said.