Pot taxes strengthen school budgets, drug-prevention efforts
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States with legal pot have collected more than $1.6 billion since the newest sin taxes went into effect in 2014, with the money paying for everything from public schools to mental health services to programs that deter convicts from re-offending.
But that revenue could see explosive growth now that President Trump has signaled a more agreeable stance toward legal-weed states, striking a deal with Republican Sen. Cory Gardner this month to respect Colorado’s marijuana operations. Trump also agreed to back a legislative fix for the “states’ rights issue,” Gardner said.
The agreement comes at a time when taxes related to California weed sales, which became fully legal early this year, are poised to quickly surpass all other states.
In an exclusive analysis for the USA TODAY Network, Beau Whitney, a senior economist with Washington, D.C.-based cannabis analytics firm New Frontier Data, forecasts collections in California could exceed $2.1 billion through 2020, based on a 15 percent state excise tax.
For perspective, it takes about $1 billion a year to run the city of Sacramento. The New Frontier analysis doesn’t count a mishmash of city, county or cultivation taxes.
Even so, analysts with credit-rating firm Fitch Ratings warn effective tax rates as high as 45 percent in California are likely to push pot sales back onto the black market and cut legal tax revenue.
Analysts say mainstay revenue such as income, property and sales taxes still dwarf marijuana taxes in local and state government budgets.
However, “every dollar is important,” said Stephen Walsh, a director with the U.S. Public Finance group at Fitch. “It’s very difficult for governments to raise taxes.”
Cannabis taxes represent a welcome infusion of all-new money, he said.
Nine states and the District of Columbia have decided to legalize recreational marijuana. Cannabis consumers are willing to trade high tax rates — from 20% in Oregon to as much as 45 percent in California — for the freedom to partake in the small network of states.
Were the federal government to OK sales throughout the nation, New Frontier analysts forecast that through 2025, weed could bring in about $100 billion in fresh revenue for the U.S. Treasury Department. That includes a hypothetical 15 percent federal sales tax, business tax revenues and payroll deductions.
But for now, revenue is on the rise in the handful of states that allow sales, though the way state budgets are structured makes it difficult to trace marijuana taxes from the point of sale to the purchase of school textbooks.
Colorado and Washington, which started allowing recreational marijuana sales in 2014, have so far collected nearly $1.48 billion in revenue.
Washington has brought in more than $773 million to pay for healthcare services, research from state universities on the effects of short-term and long-term pot use, reducing marijuana use among minors and other efforts.
Meanwhile, Colorado has received more than $702 million, with the money going toward grants that help pay schools’ capital construction costs, as well as shoring up local and state tax bases. The state collected $247,368,473 last year alone, revenue records show.
In an interview, U.S. Rep. Jared Polis, D-Colorado, said bringing underground economic activity above-ground, then taxing it reasonably, creates “a more efficient market.”
“You collect additional revenue that can help meet your state budget shortfalls,” Polis said.
While Colorado’s counties and cities can choose whether to allow marijuana businesses, Polis said some less-prosperous parts of the state have seen pot turn into an important revenue producer, letting officials support schools and children’s scholarships, along with addressing infrastructural needs.
In Alaska, one of the smallest markets, tax proceeds are split between the state’s general fund and efforts to stop convicts from re-offending. Alaska taxes pot growers, and collections have steadily risen from $577,901 when they started in July 2017 and peaking at more than $1 million this January, for a total of about $8.25 million, revenue records show.
The list of states with legal weed is growing, with others that have voted to allow it now including Oregon, Nevada, Massachusetts, Maine and Vermont.
After starting tax collections in 2016, Oregon has divvied up about $126.9 million in marijuana taxes between schools, city and county governments, mental health, alcoholism and drug services, the Oregon State Police and the Oregon Health Authority’s drug prevention and treatment services.
“These funds will be used in combination with other resources for drug and alcohol prevention for a comprehensive, evidence-based approach to reducing drug misuse and excessive alcohol use,” said Jonathan Modie, OHA spokesman.
A campaign to prevent minors from using marijuana and data collection on alcohol and drug use are part of the drug prevention and treatment program, he said.
The amount of pot money Oregon allocates annually to school districts is based on a district’s weighted daily membership, a metric that takes into account how many full-time students are in a district and other factors, such as the number of students with special needs or experiencing poverty.
Salem-Keizer Public Schools, Oregon’s second largest school district, is receiving a little more than $2.7 million in marijuana money this year, said Oregon Department of Education spokesman Peter Rudy.
That’s enough to pay for the equivalent of 27 teachers, considering each costs around $100,000 with salary and benefits combined, according to district spokeswoman Lillian Govus.
In a statement, Oregon Gov. Kate Brown said, “We know that Oregonians care about our children’s education and their neighbors’ health, and we see that in how they decided to spend cannabis tax revenues. Every dollar counts when supporting those values.”