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Tax revenue from recreational weed could top $17M

Seeing green in C. Springs?


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While other cities have raked in cash since Colorado voted in 2012 to legalize recreational weed, Colorado Springs has so far resisted.

Locally, 54.7 percent of voters approved Amendment 64, a statewide measure that made owning and consuming recreational weed a constitutional right in Colorado. But they’ve never gotten the chance to weigh in on whether to allow recreational dispensaries within city limits.

City Council voted in September 2014 against putting that question on the ballot. Then, in 2017, another citizen-driven effort to ask voters how they felt about recreational weed, led by a group called Citizens for Safer Neighborhoods, ultimately didn’t succeed.

A new report raises the question: Is now the right time to reconsider?

Prepared by Neal Rappaport, economist and adjunct professor at the University of Colorado at Colorado Springs, along with Ben Murphy, a 2020 graduate of Colorado College — the report was paid for partly with leftover money from Citizens for Safer Neighborhoods’ earlier effort. It draws on data from marijuana sales in Colorado.

The report’s 2021 forecast predicts that retail weed, if legalized before then, would bring between $8.4 million and $17.7 million in additional sales tax revenue, at a time when Mayor John Suthers has said the city will see $20 million in budget cuts for 2020 caused by the COVID-19 crisis.

Revenue could be lower, though, if the economy is still limping in 2021.

The report predicts revenue from legalized retail marijuana would largely come from “hidden” local tokers, who currently use medical or black market weed because they don’t have convenient access to recreational dispensaries — or purchase from dispensaries outside Colorado Springs.

Colorado Springs has twice the number of medical marijuana stores per capita as the state average, the report points out, referencing state data.

While it’s unlikely that all medical marijuana users would switch to retail marijuana right away (and presumably pay higher taxes), the forecast predicts that a shift would occur gradually over time — and would lead to a decrease in medical marijuana sales.

Long term, however, the report found that legalizing retail marijuana could add $43.7 million to $98.2 million to city revenue between 2021 and 2025.

The forecast looks at revenue based on a local tax set between 4 and 12 percent.

“I think that you can obviously tax too
little in the sense you’re not generating revenue,” Rappaport says. “You can obviously tax too much in the sense you’re putting people off, but I think there is not enough evidence to know that there’s one single optimal rate.”

Rappaport was paid for the analysis, but says it’s based on economic principles, not personal opinion.

Still, he says, “it’s a fiction that people in Colorado Springs are not smoking marijuana for recreational purposes. So once you get past that fiction ... the question is: Where do you want the revenue?”

Disclosure: John Weiss, founder and owner of the Colorado Springs Indy, is a member of the working group seeking to legalize recreational marijuana in Colorado Springs.


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