Marijuana's Tax Problem

The legalized recreational marijuana industry is still in its infancy and as expected, is facing a host of problems that come with a growing field. In states like Colorado, where recreational marijuana has been legal for over a year, taxation has become one of the drug's most pressing problems. Tax Issues Colorado's 10 percent pot tax earned the state $58 million this fiscal year. However a loophole in the state's tax law may force policymakers to return that money to the taxpayers in the form of a rebate. The state's Tax Payer's Bill Of Rights dictates that the government must return any tax revenue that exceeds previous projections. In hopes of keeping the funds, government officials are calling for a vote in which Colorado residents will determine whether or not those funds can be kept and used on the community improvement projects they had been earmarked for. Black Market The 10 percent tax on pot has also kept illegal marijuana in high demand. Although part of the reason many voters chose to legalize cannabis was to fight against illegal drug sales, the tax on government regulated marijuana makes it more expensive than illegal varieties. Many say the state needs to lower its tax rate in order to allow legal dispensaries to compete with illegal dealers. Evolving Policies This year, Colorado has been working to reform its tax laws to better accommodate the new industry. On September 16, 2015, Colorado pot users will enjoy a tax holiday on which marijuana will be sold tax-free. The state also passed a law lowering the marijuana tax from 10 percent to 8 percent beginning in July 2017 in an effort to further suppress illegal markets.