How Will States Tax Legal Marijuana?

Though some don’t like the prospect, legal marijuana will come with taxation. Given the current budgetary problems being experienced by most state and local governments, taxes help make legalization a more inviting prospect.

Many are looking to Colorado to see how they handle recreational marijuana taxes. This week, lawmakers there are considering excise and sales taxes on marijuana of up to 30%.

“We should see a financial benefit as a state that can help pay for enforcement and other fundamental issues,” said Christian Sederberg, a Denver lawyer.. “The other side is that if you tax something too high, then you simply crowd out the regulated market. We’re confident we’ll find the right balance.”

TaxIt will be difficult early on to determine the right amount of taxation that will keep the price of legal cannabis below that of the black market. But it is imperative that the right balance be found in each state that legalizes recreational cannabis; if it is not, the black market will continue to thrive, spawning violence and other criminal activity.

The Colorado legislature is debating several marijuana-related measures this week, including taxation.

State Representative Jonathan Singer said finding the right tax rate was also a matter of public safety.

“The big thing is that we want to make sure we’re able to put the appropriate safeguards in place so that marijuana doesn’t end up in the hands of kids, criminals or cartels,” he said. To make this a reality, the black market must be cut out and marginalized.

“Higher taxes on the legal, commercial model will prevent the transition to a legitimate market from happening and keep more people buying it illegally,” said Michael Elliott, executive director of the Medical Marijuana Industry Group. The economic boom that can come from legalization will not be realized if businesses cannot compete with drug dealers.

Dr. Jeffrey Miron, an economics professor at Harvard University, says that their is also the matter of the federal government and what they are going to do. “It’s easy to get a little overexcited that legalizing marijuana is going to solve the world’s budgetary problems,” he said. “But the question for the tax revenue part of this will be how much the federal government allows these markets to come completely above ground.”

There is so much potential when it comes to economic activity and tax revenue from cannabis legalization, but the government – whether it be federal, state or local – has a way of fouling things up. They already are by dragging their feet towards the inevitable fact of legalization.

The legal marijuana market should already be up and running nationwide, but it has been delayed by several decades, mainly by federal law. Every day that goes by without legalization means more revenue lost (not only in sales and excise taxes, but in tax revenue from employees in the industry).

The madness must end. States like Colorado and Washington are paving the way.

– Joe Klare

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  • steve B.

    I live in Alabama and yesterday they tabled the bill can legislation stop us from gettin legal MMJ help,

  • steve

    I live in Alabama and yesterday they tabled the bill can legislation stop us from gettin legal MMJ help, and what can we do now other than try again and in meantime break the law,,,