One of the amazing things about Colorado’s booming cannabis economy is that it means production costs are steadily falling. But what does that mean for the tax revenue that has stringent ties to the wholesale prices? It’s a conundrum that is going to challenge the state throughout 2017 to keep weed profitable.
How cheap is legal marijuana becoming in Colorado? According to the Washington Post, Colorado’s Department of Revenue puts it at $1,471 per pound. That is a 24.5% drop from last year’s peak value. And sure, Colorado consumers and pot tourists have reason to celebrate, but it does create a stumbling block for policy-makers who have tied the wholesale price to the total amount of tax revenue they collect. Colorado charges a 15% tax on weed production. In 2016 that meant 15% cut of $1,948 per pound. But in 2017, that will mean 15% of only $1,471 gets collected.
It’s not just Colorado facing falling tax revenue. In all, it is something that Washington, Maine, Massachusetts, Oregon, and Nevada will have to confront as well before their marijuana prices reach their lowest levels, which experts predict could go as low as $50 per pound. For all of these states to continue turning a profit—and funding state programs, like education, infrastructure, and civic projects—from the nation’s biggest cash crop, policy and the collection of taxes from cannabis must evolve.
Luckily, California and Alaska seem to have already hit on a sustainable plan for their future that will allow cash to flow, and consumers to enjoy low weed prices. Alaska has a $50 per ounce flat tax that remains steady no matter what the wholesale price of pot reaches. In California, they levy a similar flat tax on growers, which keeps the state’s profits more steady even if wholesale prices drive their taxable revenue down. If the early-adopting states plan to keep their respective markets profitable, experts suggest they take note.
image:Â Brennan Linsley/AP
