Colorado pot-tax debate yet another debate over market ideology

The debate between supporters and opponents of Colorado pot tax Proposition AA is an ideological debate on how taxes will affect pot as a product in an emerging market. Voters will decide where they stand tomorrow.

Prop AA stipulates a two-fold tax on marijuana: A 15 percent excise tax, initially included in the language of Amendment 64, and a special 10 percent sales tax. If approved by voters, cities that allow recreational marijuana will reap 15 percent of the sales tax. The kickback to local governments will theoretically spur more communities to sign off on the recreational-pot retail industry.

No one knows for sure what the taxes will do, but there’s lots of speculation. The guide to Colorado’s initiatives, the Blue Book, calculates the retail price of an ounce of pot, after taxes, at $201.56. A Colorado State University study that draws heavily from figures produced by the Rand Institute puts the figure at $185.

Though polls published by the Yes on Prop AA campaign show a majority will vote to pass it (consistent with independent polls conducted last April), not all marijuana supporters have rallied in Prop AA’s favor. The Colorado branch of NORML described the measure like a Ferrari with a “Pinto welded onto it.” The feeling among opponents is that Amendment 64, which made recreational pot legal, stipulated a 15 percent excise tax. So the Prop AA sales tax is a bait-and-switch.

Rob Corry leads the primary group actively rallying against the measure, the No on Prop AA campaign (they are unaffiliated with NORML). He claims the tax increase will push marijuana consumption back into the black market, and impose a tax that overburden’s poor people.

“If Prop AA does pass, you’ll have a dysfunctional marijuana market because the underground, untaxed, unregulated market will be able to undercut the legitimate market by 50 percent, so that invites federal intervention on an unregulated, untaxed market,” Corry said. Like many calculations anticipating the legal market, however, this prediction seems based more in an ideological belief in free-market mechanics—than in data, if only because data on this emerging market is hard to come by.

Corry said the No campaign has gained support from conservative leaders like gubernatorial candidate Greg Brophy and former Senator John Andrews. Corry notes that the Libertarian Party of Colorado has, in a “no-brainer,” come out against the tax increase. The Green Party has also urged a no vote on Proposition AA, making strange bedfellows with the Libertarians.

Unlike NORML, Corry and the No campaign do not seem to support either the excise tax or the sales tax. Corry says that Amendment 64 included an excise tax of “up to” 15 percent. He said he never imagined the legislature “would take 100 percent of the pie that was available to it as early as possible.

“Our assumptions were the legislature might start at 5 percent and inch it up to 15 if necessary.” Not providing the option to vote only on one or the other of the taxes, he said, was a “politically cynical” strategy.

The No campaign literature depicts the vote as a struggle against corporate interests and shady backroom deals that finance bigwig industry people who are intent to either levy excessive tax against “poor people,” or who want to see Amendment 64 fail — specifically, Gov. John Hickenlooper. But the claims are hyperbolic, if not unsubstantiated. Many in the Yes on Prop AA campaign were active supporters and even framers of Amendment 64. They want the amendment to succeed. The sales tax would not directly benefit industry people, but rather funnel money back into government for regulation.

Hence, the split is mostly ideological. The No campaign’s literature alludes to Jason Sullman’s (probably insensitively worded) “Cannabis Cartel,” the label he uses to describe the rules Denver’s City Council passed that allowed only medical marijuana facilities to transition to recreational vendors in the law’s first year. Language like that calls into question what extent of taxation and regulation the No campaign would find acceptable.

Corry also insists that the Department of Justice doesn’t support Proposition AA.

“I asked them pointedly in writing and they responded in writing that they didn’t take a position, so, that means they don’t support Prop AA,” Corry told the Colorado Independent.

“That is not accurate,” said Jeff Dorschner, U.S. Attorney’s Office Public Affairs Specialist. “The U.S. Attorney’s office does not take a position on state initiatives. And that is exactly, in those words, what was communicated to Mr. Corry.”

In other words, not taking a position doesn’t translate as taking a position, in this case.

In fact, the short letter to Corry could also be read as implicit support for the measure. The language is written in legal jargon, but clearly argues for the development of an effective regulatory system, without stipulating how to make such a system possible.

“However, the Department of Justice has made it clear in recent guidance on marijuana enforcement that there is an overriding importance of a strong and effective state regulatory system with sufficient resources to be effective in practice, not just on paper,” Dorschner wrote in the letter to Corry.

The Yes and No groups don’t agree on how much it will take to fund a proper regulatory body, as each side anticipates a different economic outcome of the tax. The Yes on Prop AA fears that without the sales tax, the excise tax alone would not be enough to meet the $40 million promised by Amendment 64 to school construction and the development of a rigorous Marijuana Enforcement Division. The No Campaign calculates the MED, which needs roughly $5 million annually, would be fine without the taxes.

The hyper-focus on taxation leaves out a landmark reason for legalizing marijuana: It will drop state incarceration rates and it will cut a path for the rest of the nation.

The Drug Policy Alliance held a convention in Denver last week that largely rallied against the war on drugs. There were nearly 750,000 people arrested nationwide on marijuana-related complaints in 2012 — that’s one arrest every 42 seconds. The pressure on Colorado to succeed is immense.

Executive Director of the Drug Policy Alliance, Ethan Nadelmann, told the Colorado Independent in an interview last week that approving the measure was crucial in marijuana’s national future.

“There’s this upcoming vote on the tax, and you know, they’ll have to approve this tax, I think, in order to provide the revenue for implementing the initiative,” Nadelmann said. “It’s all about keeping the ball moving forward.”

[Photo by Tessa Check, of 3-D Denver’s Discreet Dispensary]


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