This is good news and bad news. The funding for schools will be a boon to education in the state, and that's certainly not bad. However, I expect will almost certainly lead to decreased education funding from other revenue sources, and ultimately place education footing on less solid ground for years to come.
It was brilliant PR move to earmark the tax revenue for education, there's no doubt about that. It's very hard to argue with such things, and many other states have opted to dedicate certain "sin taxes" to select public works. For example, earmarking some funds for veterans affairs out of state lottery tickets as my state (Iowa) does, or education as many more states do.
On the surface, this seems like a brilliant way to justify revenue collection for what many citizens would consider unseemly or undignified. It is an effective sales pitch to say to a voter, "You may disagree with marijuana legalization, but it will bring in $50 million dollars to state schools."
The problem is that budgets will adjust to incorporate this earmark for future years. That is, education budgets are likely to reflect this revenue for future years. That's precisely what has happened in so many states where state lottery revenues have been earmarked for education and other noble causes. John Oliver's Last Week Tonight had an excellent take on a similar topic: the "sin tax" of state lottery tickets. See here: https://www.youtube.com/watch?v=9PK-netuhHA
It is wonderful that marijuana taxes are going to a good cause. It is dangerous to make education funding dependent on a volatile tax source, and the evidence suggests that is exactly what will happen.
Sure, but we didn't earmarking marijuana taxes for education so that we could improve education. Any informed voter would know that. We did it so that we could get uninformed/uneducated voters to pass the legislation. Now, I don't mean "uninformed/uneducated voters" in a negative way. Most voters, even intelligent ones, are classed as uninformed/uneducated when it comes to most topics. Because really, who has time during their day to research all of these measures? And funding education sounds good. So a little "end justifies the means" was used here to make moves towards ending the war on drugs.
I want to re-iterate, using marijuana taxes for education had nothing to do with improving education. Those who have studied the educational system in the U.S. know that funding is not the primary issue. The system itself is sick, and not from malnutrition. It is misguided, is mis-incentivized, and in many ways corrupt (mostly due to incompetence).
For example, in the past few years when schools have gotten additional funding, they have tended to spend it on technology. They buy iPads for students and teachers, smartboards, and online learning management services (Blackboard, Google Classroom, etc).
None of those things have had a meaningful impact on the quality of education. The schools continue to underpay teachers, promote hostile work environments, continue to promote overpriced, poor quality textbooks, don't feed their poor students, force teachers to buy their own supplies, make students sick by not running AC, accept donations from their teachers and parents, and the list goes on.
What I'm getting at is that additional funding for education is not, and will not ever be about improving the quality of education. If voters want to improve education they need to focus their attention on fixing the system itself first. Funding should only ever be increased in tandem with efforts to root out bad actors and steer our sinking ship of education away from the rocky harbor it's currently in.
Blindly increasing educational spending is the same as blindly donating food and money to the proverbial "Africa". In a similar manner, the corrupt governments where that money and food goes steal those resources to continue to fund their wars and terror. We need a Bill & Melinda Gates for education, not more fund raising.
I am in Arizona, one of the least funded states in terms of education. Your statement " accept donations from their teachers and parents," is slightly off here. In Arizona they DEMAND money. My free public school education came with a 'recommended' $1500 per year, per kid. They do accept payments however.
It is not mandatory, your kid is not expelled if you don't pay. But the school does very clearly say "this charter school has better teachers, because we pay bonuses out of the donation money". So I make payments, because the other choices would be private school (more $$), regular public school (less education), or homeschool (no.).
It is not 'accept donations' . Require, or demand. Personally, I make payments.
A charter school is not a public school. It exists outside of this system you are talking about, and has a whole host of other problems. But it is disingenuous to bring a charter school into this discussion, because they are not the same thing as publicly funded public schools.
Aren't Bill and Melinda Gates already the Bill and Melinda Gates of education?
"Our United States Division works to improve U.S. high school and postsecondary education and support vulnerable children and families in Washington State."
The Gates Foundation is by far the biggest philanthropic organization in U.S. education, even though the primary focus of the Gates Foundation is global public health.
In my state, these kinds of expenditures are funded through district bonds which are a one-shot property tax increase for a set period of time, whereas teacher salaries and other yearly expenditures are funded through levies which have to be periodically increased to keep pace. Additionally, whenever we pass referenda to bump the base pay for educators, the state legislature is very very quick to turn them into unfunded mandates. It's not an issue with the districts or the voters, it's fundamentally a problem with the legislature and how they earmark funding.
I think you're very wrong about educational funding. There's a high correlation between a schools relative wealth and its relative academic success in each state (mainly tied to property taxes). Yes, I'm sure there are exceptions, and yes there's lots of room for systematic improvement. But more money could absolutely make a difference at the underperforming schools.
Your hunch is correct. Wealthy areas have a demographic that supports education. When kids have stable homes, with parents who care about them and their education, schools do well.
When kids move three or four times a year, never know if they are going to eat dinner that night, get beaten or ignored at home, have parents on drugs or in and out of jail, it doesn't matter how much money you pour into the schools.
Are sin taxes really that volatile? I don't have good data, but many people suggest marijuana (as well as alcohol) is counter-cyclical and demand is relatively inelastic.
Even a small (4-6%) change in revenue can wipe out inflationary increases in funding for education. Even if they're counter-cyclical, the evidence is that replacing education funding with something more volatile is risky, because it's replacing consistent funding with something that is based on market dynamics.
A better solution would be to have a budget that accounted for potential volatility, and specified where surpluses should go, and where things should be cut from if revenues are down.
State governments generally do not without some creative accounting. Most states have "balanced budget" requirements, although they're allowed to issue bonds - provided said bonds are specifically earmarked for specific programs, and in some cases approved through a separate process like a referendum.
Yes, but wouldn't it be way better to make them honestly try to balance budgets, rather than knowing they can always over-run and kick the can down the road?
In Ireland in 2008 we were warned the only two industries that would remain unaffected by the looming recession were the funeral and cigarette manufacturing industry. The two were absolutely stable the entire time almost every other industry brought in less tax revenue/revenue.
Sin taxes can be some of the most stable sources of income as in the case of cigarettes and this is more evident during times of downturn when everything else is being slashed or falling in value. The problem is you need to wait to judge revenue after other states legalise.
Death is inevitable. Cigarettes are addictive - there's a physiological impetus to continue smoking if you're addicted. Marijuana is significantly less addictive, and it takes very little willpower to stop using it during times of hardship.
For clarification I wasn't referring to the funeral industry as a "Sin Tax" -- I just included it because it was a quoted industry so we can agree to discard it. My point is "Sin Taxes" in the case of tobacco are extremely stable even if predictably dwindling. Tobacco is universally and legally available. Marijuana isn't as addictive but luxury goods/Sin Taxes have a whole different set of economic laws applying to them that makes them stable and both MJ and tobacco are luxury goods.
It's also pretty trivial for smokers to grow a few marijuana plants if disposable income gets low. There goes that tax revenue. Cigarette tobacco on the other hand requires more processing and growing it for personal consumption generally isn't done.
This fact - that weed is not an industrial crop solely amenable to cultivation by industrial agriculture - is one of two major reasons that weed isn't legal and tobacco is.
The other is that grass makes the citizenry less economically productive.
I use marijuana as a pain killer alternative to opiate based pills. I can not stop using it, I have a chronic pain condition. My consumption exceeds the top 10 of my friends casual use. I don't think marijuana revenue will decline as much as you do.
I would think that your anecdotal evidence wouldn't map to the actual circumstances very well. A strong majority of marijuana users in Colorado are recreational, and they can give it up without any physical consequences like you would face if they had to deal with difficult financial times.
According to [0], $326,716,273.59 sales were made for medical marijuana, $246,810,599.03 sales were made for recreational marijuana. Recreational marijuana is also a little less than 30% more expensive. [1]
I guess that means that more pot is being sold with a medicinal marijuana card than recreational. Or, did you have other numbers?
The line between medical and recreational is (or at least was) very fuzzy, though.
Before recreational was legal there were a lot of more or less healthy people getting licenses for silly symptoms, like nausea or difficulty sleeping. There was a very low burden or proof and it was pretty well known that a lot of people were making up problems just to get the license.
I don't know of anybody actually doing it, but it's entirely possible that a lot of the not-so-serious medicinal users are now just keeping the license for price discounts and better availability. It'll be interesting to see those numbers in a few years as the licenses need to be renewed.
Medical marijuana is not subject to any special taxes (aside from normal sales tax on all goods, which is 2.9% across the state + any local sales tax). That amounts to less than $10MM, and it dosn't count towards the tax revenues from Amendment 64, which was the constitutional amendment that legalized recreational marijuana.
It's also worth mentioning that because it is relatively easy to access a medical marijuana card in Colorado, heavy recreational users have an incentive to get a medical card.
In particular as smoking seems to tie in directly with the stress response. Stress any smoker, and the first thing they want to do is to light one up. And what is more stressful than being "downsized"...
I don't see what your concern has to do with marijuana taxes. Education funding is always in jeopardy, and has been for decades. Marijuana taxes are another source of funding, but nothing else has really changed.
Marijuana taxes are not the sole source of education funding, and they're not even close to being the biggest funding source. Politicians will have to budget funding for education just like they always have.
Edit: FWIW, I looked it up, and we (Colorado) spent $4.2 billion on K-12 education and another 2.8 billion on higher education in 2013. The marijuana tax revenue number mentioned in the article is only $70 million, which is less than 1% of the total education budget.
Earmarking is PR, it has little to no effect on actual education budgets (beyond setting an irrelevant floor). Money is fungible and budgets for education are never actually indexed to revenue from a particular tax.
Couldn't Colorado just use the additional tax income for more long-term projects (building new schools or upgrading existing ones, for example) or products that could enhance education in schools (more computers, tablets, textbooks, etc), that wouldn't require an ongoing commitment of funds every year?
The silliest tax earmark was for anti-pot education, especially aimed at under 18. Seeing users and magazine ads everywhere saying it is good for adults, but how could you say its bad for teens then?
Well one argument is that teen brains are not done developing, and something that has a negligible effect on an adult might not be so for teenagers... even if there are no harmful long-term effects it might interfere with schoolwork or other things that teenagers are responsible for. I have read these arguments but I don't know what the available evidence points to, this seems like the kind of thing I'd want this sort of education to cover.
Alcohol and tobacco are most definitely harmful for everybody, and it's certainly possible to argue that choosing to use a potentially harmful substance is not something minors are prepared to make a reasoned judgement about.
More generally, I think that showing teenagers that people who buy ads in magazines don't necessarily have their best interests at heart is a good thing!
The irony seems lost on them that something similar happens within your body with constant drug use. Let's hope the sin tax scenario remains open to future reversibility as the body does.
Yeah, it'd be interesting to also see how much less / more policing is required, drug rehab programs, anti-drug programs, loss economic behavior due to increased drug use, diversion of consumption from other taxable goods to MJ (say a decrease in alchohol tax revenue), etc. Hopefully much less policing is required, but I don't think it was particularly policed all that much to begin with. In fact, policing tax collection may have increased.
Tourism revenue might see a boost though, but that may decrease over time if other states adopt legalization. It also may be offset by an increase immigration of drug users and emigration of non drug users (assuming you can accurately predict non drug users are more economically valuable than drug users)
Just looking at the topline number I think is pretty meaningless. I think also couching legalization in term of economics might be setting things up for failure and it might make better sense to say it's just philosophically the right thing to do(??)
These are critical parameters that we're completely blind to. I'm pro-legalization myself, because I think the data will ultimately support it as being the best option, but we need to check that hypothesis with reality.
Shouldn't there be an aspect of "what is right?" Just because taxes are more or less, revenues increase or decrease, we were putting a huge financial burden and physical burden on a drug that is no worse than alcohol. I think that is the top consideration, what is right, not which way is more financially helpful.
(Not trying to be argumentative here, sorry if it sounds that way. It feels like this point is heavily missed)
I think a big part of the focus on tax revenue is "marketing". I only say that because a decent subsection of US society would oppose cannabis (or any recreational drug) on principle if it was only a moral issue. By focusing on more objective benefits, legalization proponents are able to bypass some of the "moral" opposition.
Basically, for people like me, morality would dictate that it's wrong to arrest or imprison a person for doing something that is, at worst, a bit unhealthy. Still, just as many people split the other way and think it's immoral to promote "vice" at all. The balance may shift but it's there.
Contrast that with the economic argument and you'll have a hard time finding people who would choose revenue going to the black market over funding something useful or lowering the tax burden on those who don't buy cannabis.
Alcohol is heavily taxed, and as any liquor store owner will tell you, it's taxed at every possible opportunity: production, distribution and end user sales.
We should be striving to bring overall tax rates for tobacco and marijuana up to match alcohol.
The difference is, because of its prohibition, marijuana has a thriving black market. They need to stamp out the black market before they can get taxation to that level.
A friend of mine visited me in Denver from another state. He came back from a weed store with a little bottle and exclaimed "dude, this was only 10 bucks! It'd cost me like $50 back home!"
I'm really looking forward to seeing data on what happens to the black market for other drugs, with marijuana now easier to get legally than illegally.
Considering those get taxed on top of VAT and are even higher in my country (it's not a % tax but a fixed number per defined unit but it comes down to ~30% post VAT on tobacco products for eg.) and AFAIK US has no VAT (maybe I'm wrong ?) I wouldn't call 25% tax incredibly high.
Is it? The numbers earlier suggested Colorado only brought in half the tax for alcohol it did for weed. My bet is alcohol costs the state far more in police and social services than weed does. Weed smokers don't usually get in car wrecks or end up in fights that lead them to the ER.
I'd argue alcohol is way worse than weed. I like my whiskey, but its one of the leading causes of deaths for anything from car accidents to cirrhosis.
I for one would love to see a comprehensive study on the cohesive "value" of both drugs in society and alter taxation accordingly. Alcohol has to cost the most for highway patrol and other social services. Decriminalizing marijuana has to have a substantial savings. Taxation is fair - sin taxes are completely optional and the state needs money. It sounds like the weed tax is too high and the alcohol tax is too low.
I think also couching legalization in term of economics might be setting things up for failure and it might make better sense to say it's just philosophically the right thing to do(??)
Policies like this are almost always better-off as economic rather than moral proposals.
It's hard to get people to agree to what's right, whereas it is distressingly easy to get people to agree to what's profitable.
It's because profitability is a real world concept with factual right and wrong answers---that we might not know at any one time, but can be figured out in principle.
The bad news is that this amount of revenue will become the new normal, i.e., future budgets will always assume this amount of revenue or more. I think the novelty factor wearing off and other states legalizing marijuana will put a dent in this number in the future. So hopefully the government won't go too nuts assuming hockey stick growth.
> The bad news is that this amount of revenue will become the new normal, i.e., future budgets will always assume this amount of revenue or more.
That's good news, not bad news (for legalization advocates). It becomes the new normal, which means that if anybody wants to reverse course, the burden is on them to find alternative sources for $50-100MM in tax revenue.
And a major chunk of the tax revenue is explicitly earmarked for public education, which is makes it that much more difficult for a politician just to ignore the tax revenue and repeal Amendment 64 without finding an alternate source.
> It becomes the new normal, which means that if anybody wants to reverse course, the burden is on them to find alternative sources for $50-100MM in tax revenue.
That "alternative source" is invariably tax increases. Politicians aren't terribly clever about these sorts of things.
> And a major chunk of the tax revenue is explicitly earmarked for public education
That's not at all an iron-clad guarantee of how the money is spent, you may want to look up e.g., the North Carolina Education Lottery.
Tax revenue is capped in Colorado. Their version of proposition-13, called TABOR, limits revenue increases to population increase plus inflation. Colorado is having a one-day marijuana tax holiday Sept 16. They are arguing about how to refund the rest of the over-taxation required next year. Its been done several times before, either with small rebates or tiny decreases in the income tax rate.
The number will grow beyond the $70 million, likely by quite a bit given how early it is.
There's no chance other states will put a dent in the $70m figure unless you're calculating Colorado losing population. The majority of tax revenue is coming from counties other than Denver and Boulder. Pot tourists are a small fraction of the base. Texas legalizing pot isn't going to slam the tax revenue for eg Summit Colorado.
I've had a hard time convincing many of fellow Coloradoans of how harmful alcohol is compared to marijuana. It's newly legal, so people fear it more irrationally.
Colorado's budget is a $27 Billion per year. Marijuana taxes fund 0.26% percent of the budget. "Big new revenue source" is plainly not an argument for legalization.
Sure: California recently increased it's sales tax by 1%. Sales Taxes are 30% of the California budget, so that equates to a 3% change in revenue. That's more than 10X the revenue generation of Marijuana Taxes.
> Sure: California recently increased it's sales tax by 1%.
Presumably, you are referring to the 1% temporary 2009-2011 boost during the budget crisis, from 6.25% to 7.25%
> Sales Taxes are 30% of the California budget, so that equates to a 3% change in revenue.
All other things being equal, assuming 30% of the budget is sales tax before the increase, a 6.25% to 7.25% increase in sales taxes is closer to a 5% overall increase in revenue.
>California recently increased it's sales tax by 1%
If by "recently" you mean 2009, then yes. However that went back down in 2011. CA State sales taxes have been within ± 0.5% of 7.75% since 1991 (aside from a 1 year dip to 7%) [1].
I've always thought that the biggest win of legalizing marijuana is simply that it keeps a lot of the low level thugs off of the street. You know, the run of the mill thugs who might or might not lace the marijuana with cocaine or something worse to keep users coming back?
If it is legal to get those thugs will have to shift to the harder stuff which pushes them more underground and off of the most common streets. This makes it safer for a lot of users who would use regardless of legality.
Guess it depends on where you or where your friends leave. A lot of my former Army buddies smoke marijuana to deal with PTSD. Several of them go to dealers just like I describe and are not the biggest fans of it.
Just because you've seen something doesn't mean it doesn't exist. I'm by no means saying that is the norm, only that it definitely exists, and I'm all for any way of getting them away from people who just want to get baked.
Why tax the hell out of it? It sounds like some sort of psychological projection where the government are your parents and to appease them, you're willing to bargain badly for something. "If you just let me stay out a few extra hours, I'll clean the entire house tomorrow." Why be so groveling and weak?
I'd contend that black markets for tax evasion are qualitatively different from black markets for restricted goods. Consider the hefty tax on cigarettes. Sure, there's a cigarette black market, but it's not nearly the majority of the market.
The (highly-opinionated) Tax Foundation did a study on this [0]. I'm not sure how reliable their numbers are (again: they're a foundation with an agenda), but if you read through their own spin, you can see that the big tax-based black market for cigarettes exists where there's a state-border disparity in tax rates, and even then, in 48 states the (estimated) black market took up less than half of the actual market.
So: set taxes at whatever arbitrary level, but don't go too high. Also, consider setting national tax rates instead. So many of our problems derive from state-level control of stuff. Delaware corporations, state taxes, state laws. But I'm just a poor socialist / federalist.
Legally distributed drugs can and are still competitive with black market equivalents because legal vendors don't need to build stolen shipments, bribes, and gang war into their pricing.
Regulations is a secondary taxation on legal dealers. Businesses have to pay high license fees, buy required security, keep records of EVERY PLANT (rfid tags).
Its still profitable enough and safe enough from police harassment that there about 900 businesses.
Yeah but black markets can still exist even if it is profitable for some. From what I've read some consumers are turning to black markets because it's cheaper than licensed stores [1].
Detroit decriminalized possession (up to 1 oz.) in 2012 to reduce police work.
I'm agreeing with you, they should (I'd rather it be statewide). I'm just offering clarification, it wouldn't be a large spending decrease in terms of enforcement.
From what I understand about the drug trade, and the Cartel de Sinaloa specifically (re: Chapo Guzman), Chicago could probably fix its pension issues and have money left over by taxing the amount of cocaine that flows through that city.
I feel like this article assumes a ton of context. I guess Colorado has a tax free day today? I had to infer that from article, since it doesn't explain it, just references some "accounting error". Which might be the prediction being off? Who knows!
Yes, CO has a tax free day on cannabis only. My understanding is they reaped too much in taxes and their laws are such that they have to give the overage back. The tax-free day is a way to do that.
That's some bizarre logic. Tax-free day doesn't "give back" anything, it just slows down the rate at which they exceed what they thought was acceptable.
You're both right. There's a tax-free day to slow down the amount of tax brought in, but state law does require returning unexpected tax windfalls that exceed inflation and population growth. Wikipedia has a good overview: https://en.wikipedia.org/wiki/Taxpayer_Bill_of_Rights
Yes, from what I understand the Colorado law has a requirement that taxes justify their rate based on the revenue they will raise. This tax far exceeded the revenue, and so the constitution (or law or both) requires "payback" to the people for the excess tax revenue-- this comes in the form of suspending the tax until it can be lowered... and in this case this means the tax will be suspended for one day until the new lower tax goes into effect.
Attention all poor Southern states desperate for new revenue sources who coincidentally refuse to legalize, QC and tax something that people are already producing, trafficking, distributing and consuming inside your borders.
The distribution of pot taxes indicates who the tax payer customers may be. First there is the location of taxes. The resort town bring in a fair amount indicating tourist types dont want the effort or danger of developing black market.
Second is almost half the revenues come from refined products like edibles and vapes. Some people think smoking is either stinky or cancerous.
A detailed revenue report comes out every year. It is a developing industry and quickly changing.
It was brilliant PR move to earmark the tax revenue for education, there's no doubt about that. It's very hard to argue with such things, and many other states have opted to dedicate certain "sin taxes" to select public works. For example, earmarking some funds for veterans affairs out of state lottery tickets as my state (Iowa) does, or education as many more states do.
On the surface, this seems like a brilliant way to justify revenue collection for what many citizens would consider unseemly or undignified. It is an effective sales pitch to say to a voter, "You may disagree with marijuana legalization, but it will bring in $50 million dollars to state schools."
The problem is that budgets will adjust to incorporate this earmark for future years. That is, education budgets are likely to reflect this revenue for future years. That's precisely what has happened in so many states where state lottery revenues have been earmarked for education and other noble causes. John Oliver's Last Week Tonight had an excellent take on a similar topic: the "sin tax" of state lottery tickets. See here: https://www.youtube.com/watch?v=9PK-netuhHA
It is wonderful that marijuana taxes are going to a good cause. It is dangerous to make education funding dependent on a volatile tax source, and the evidence suggests that is exactly what will happen.