Taxing weed: Colorado’s estimates and Maryland’s proposal

The legalization and taxation of recreational marijuana in Colorado could be an indicator of how Maryland’s treasury may or may not benefit should a similar law pass in the coming 2014 General Assembly session.

Del. Curt Anderson and Sen. Jamin B. “Jamie” Raskin was expected to introduce legislation to legalize, regulate and tax the sale of cannabis in Maryland [subscriber access] in the coming 90-day session. The expectation is that the state would benefit to the tune of $100 million or so in new tax revenue at a time when Maryland’s coffers still bear a striking resemblance to Old Mother Hubbard’s cupboards, according to some legislators.

On Wednesday, people lined up to buy marijuana sold legally for first time for recreational purposes in Colorado. Sean Azzariti was the first to buy the drug. He paid $40 for roughly 3.5 grams [slightly more than one-twelfth of an ounce for those of us not on the metric system] of Bubba Kush, according to The Washington Post.

At those prices, that works out to about $324 per ounce, based on some quick back of the envelope math.

Colorado legislators hope that the law that created the most regulated legal sale of marijuana in the world, according to NBC News, will bring in between $60 million and $67 million. Much of that revenue generated by taxing pot sales  in the state of about 5.2 million people is earmarked for schools.

In Maryland, a state of about 5.8 million, Anderson and Raskin say they their bill would generate about $100 million based on a number of licensing fees to growers, wholesalers and distributors and a tax of $50 per ounce, according to a 2013 analysis by the Department of Legislative Services.

But there are questions about the Colorado estimates.

An April 2013 study by the Colorado Futures Center at Colorado State University estimates that tax revenues will be peak in the early years of legalization. Ultimately, taxes will drive the price up and push consumers back into the untaxed and unregulated black market.

The report also estimates that for the state to hit the $40 million guaranteed annually for schools, the cost to grow marijuana would exceed $1,100 per pound.

The Bubba Kush that Azaritti bought Wednesday in the Rocky Mountain state cost roughly $5,183.91 per pound according to our quick back of the envelope estimates.

“Our overall conclusion was while there is some revenue here, this is not a panacea for fiscal imbalance going forward,” said Phyllis Resnick, lead analyst and author of the report, told the Pew Charitable Trust’s Stateline website. “Our conclusion at the end was there is at least a risk, even with a high revenue number, once you take all this into account, there is not going to be a significant amount left over relative to the size of the (state’s budget) gap,” which is anticipated to be $3 billion to $3.5 billion by 2025.

Anderson and Raskin anticipate that 40 percent of the taxes raised by the state would go to state drug treatment programs. An additional 10 percent would fund studies on the medical efficacy of marijuana.

Del. Heather Mizeur, a Democratic candidate for governor in 2014, has her own ideas. Her pot for tots plan would channel taxes on marijuana to a fund to pay for the expansion of preschool in Maryland. The estimates made by her campaign fall as much as $156.6 million short of fully funding her preschool proposal that costs an estimated $279.1 million once it is fully implemented.

Of course, the discussion about expected tax revenues in the state could be moot if the bill can’t get out of the House Judiciary Committee, where Chairman Joseph F. Vallario Jr. is seen by supporters of the legalization effort as a significant hurdle.

Related:

• Legalizing marijuana: Baby boomers should admit they “want to get high”
• Legalizing weed for fun and profit [subscriber access]
• 19 more charged in Md. prison sex, smuggling case [subscriber access]
• Mizeur’s pot for tots plan doesn’t add up
• Mizeur plan to fund pre-K with pot tax requires high intake [subscriber access]
• Del. Mizeur proposes legalizing marijuana