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EDITORIAL: Colorado unleashes tax-free pot

By: The Gazette editorial
September 15, 2015 Updated: September 15, 2015 at 4:10 am
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For advocates of marijuana anarchy, holidays don't get better than this. Wednesday is Colorado's famous/infamous tax-free pot day. Stores are stocking up for record-setting sales. It's a good week to keep especially close watch on teenagers and younger children who may be vulnerable to a sudden surge in the pot supply.

The Legislature and governor, who had no better option, chose to lift the state's 10 percent state sales tax for a day to comply with a complex provision of the Colorado Constitution. The tax holiday will cut the cost of a midgrade ounce by about $20. Additionally, the holiday lifts the state's 15 percent excise tax on pot sold by suppliers to retailers. Stores loaded up in advance to sell sales-tax free pot to customers and will race late Wednesday to restock shelves with excise-free wholesale products from producers. Stores that restock in time can pass along the excise savings with lower pot prices for days or weeks past the tax-free holiday. Think we're inundated with pot? Wait until Wednesday.

Marijuana retailers cannot believe their good fortune.

"At first I was in disbelief we were doing this," said Cheri Hackett, a dispensary owner in Northglenn, as quoted by the Associated Press. "Once our lawyer said, 'No, we really are doing this,' we started getting ready. We're thinking there will be huge crowds."

When her prediction proves true, tax-free ganja day will illustrate the most fundamental principle of taxation. To get less of an activity, government imposes or increases a relevant tax. To get more, it reduces or eliminates a tax.

Gov. Hickenlooper said as much when he signed the bill in June that established tax-free pot day. The same law will permanently reduce the state's tax on recreational pot from 10 percent to 8 percent, starting in 2017. With a permanent tax reduction, Hickenlooper hopes to increase recreational sales. He wants recreational pot, which stands to generate more revenue for the state, to better compete with tax-reduced "medical" pot. The governor believes abuse of medical sales, as a means of consumer tax avoidance, feeds black markets.

"We still have a black market, and we want to moderate our taxes to make sure that the risk of someone selling illegally. ... We want to eliminate that," Hickenlooper said, as quoted in the Denver Post in June. "And one way is to make sure there is not as large a price differential."

By signing the bill, Hickenlooper also established a November ballot question that will ask voters if state government can retain a refund of marijuana tax revenues required by the state constitution's Taxpayer's Bill of Rights (TABOR). The public is owed a refund because state revenues exceeded expectations the first year of recreational pot sales, even though marijuana tax receipts fell short of expectations.

TABOR is also the reason lawmakers created tax-free pot day. Provision (3)(c) says a tax increase is "reduced up to 100%" if state revenues exceed estimates the first year of the tax. Legislators and the governor believe they satisfy the law by reducing the tax 100 percent for only a day.

"This fiscal glitch that we have with the constitution... that's part of the magic of living in Colorado," Hickenlooper said, as quoted in the Post.

Indeed, it is one of those "only in Colorado" quirks that makes this state the butt of late-night TV jokes. Though many will celebrate Wednesday, a sudden drug surplus stands to burden employers, law enforcement, schools, hospitals and responsible parents. It will undoubtedly make pot more available to kids, who can lose 8 IQ points with regular use. That's neither magical nor funny. It is tragic.

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