The Denver Post opinion pages solicited commentary from various marijuana policy and industry leaders, as well as the public, for a special cannabis-themed edition of the Sunday Perspective section the weekend before 4/20. The Cannabist will be presenting these op-eds throughout the week.
A story from The Washington Post early this year lays out a startling observation about the future price of legal cannabis, and Colorado’s lawmakers should take note.
The piece, by Keith Humphreys, argues that as the legalization experiment continues across the land — or if it is allowed to under Attorney General Jeff Sessions — the price of weed will drop like a bowling ball.
As with so many aspects of marijuana policy in a nation where the drug is legal in several states, but forbidden by the feds, there is a head-fake element to what should have been a simple realization out of the gate. For decades and decades of black-market sales, we became accustomed to the idea that crazy tobacco sold for thousands of dollars per pound. Humphreys reminds us it never needed to be so. The Devil’s Lettuce grows about as easily as normal lettuce. They call it weed for a reason.
Stick that sticky icky in your pipe and smoke it.
Now that growers in pot-legal states are able to work freely in competitive marketplaces, ganjapreneurs have been able to harness the benefits of better and better growing techniques, reducing costs.
Indeed, Humphreys notes, some analysts predict that with a fully developed legal market, Mary Jane’s wholesale price could fall to less than $50 a pound.
Yes, such a landscape is likely a long way off, and might never flower. But as we’ll see, the price is already dropping in Colorado, even as demand increases.
For users, of course, such news will be met with high praise.
For governments collecting the tax revenue, the fact must count as one enormous buzz-kill. Especially when you consider that an eighth of an ounce goes a long way in the possession of a casual user.
Colorado calculates the average market wholesale price for a pound of herb at $1,471. When officials ran the calculation as recreational sales went live on Jan. 1, 2014, the price was $1,876. That’s a drop of $405, or a decrease of nearly 22 percent.
The taxing impact hasn’t been noticeable, as the market continues to grow. In 2014, medical and recreational sales hit nearly $700 million. Last year, laughing-grass sales topped $1.3 billion.
Taxes last year totaled $157,511,445.
But, because of the way Colorado structured its taxing scheme, Humphreys’ observation spells trouble down the road. He notes that unless Colorado’s volume of consumption rises by a third this year, tax collectors will take in less revenue than the year prior.
What happened to the blessings of the green genie? Colorado lawmakers scrambling to craft the enabling and regulatory legislation following voter approval in 2012 of Amendment 64 focused on a handful of revenue-raising strategies, the bulk of which will raise less and less money as the price of reefer drops.
The biggest revenue driver, and the one most vulnerable to Humphreys’ epiphany, are taxes as a percentage of the price.
Former and current governor’s office officials tell me the idea of charging a flat tax to growers per ounce, as California and Alaska are doing to establish a reliable baseline, didn’t come up back in the day. Perhaps, lawmakers should start thinking in those terms.
Then again, Colorado’s director of planning and budgeting, Henry Sobanet, tells me that Hickenlooper never wanted state coffers to depend on sales of pot, other than to raise sufficient monies to combat negative effects through treatment and awareness campaigns. Rather, the state relies on fixed — and hefty — licensing fees for permits charged to bud dealers and cultivators. Collections from that strategy cover much of regulatory costs.
I will note that I didn’t see the future from the perspective of 2012 and 2013 any more clearly than those crafting the rules. And I find Hickenlooper’s view a reasonable one. Sin taxes often strike me as out-of-bounds. And the prices the state and local governments add to grass are way beyond what they add to sales of alcohol — a far more addictive and dangerous plaything.
Still, my views aren’t shared by the majority of Colorado voters, who have supported hefty taxes on pakalolo in order to bolster state spending. And given the state’s perennial struggle to make ends meet, it would seem in keeping for lawmakers to move toward a more robust taxing strategy.
After all, if even Cannabis Cup winners become dirt cheap, how many users would really complain about a reasonable flat tax enhancer? Freaking out about a future such as that one would be totally unkind.
