Denver debates a municipal tax on retail marijuana.

Denver debates a municipal tax on retail marijuana.

Colorado is on track to legalize recreational marijuana at the beginning of 2014. Legalization will bring many things to the Centennial State, including tax revenue.

Earlier this week, Denver City Council voted 7 to 5 in favor of putting a 5% tax on sales of recreational marijuana on the November ballot.  If it is approved, taxes on pot could total as much as 30% in Denver once Amendment 64 takes effect on January 1, 2014. Voters will also be asked to approve a 15% excise tax and a 10% special state sales tax on recreational marijuana.

Under Colorado’s Taxpayer Bill of Rights (TABOR), voters determine the fate of proposed tax increases.

Revenue raised by the 5% Denver tax would help “fulfill the city’s needs to effectively regulate and enforce this new law,” according to Denver Mayor Michael Hancock. That includes oversight, drug education programs, and a larger police force. All told, Denver could receive as much as $9.2 million annually from recreational marijuana taxes and fees.

Sweet spot

During the Denver City Council meeting, arguments for and against an additional municipal sales tax on retail marijuana shifted between the need for adequate revenue to oversee and regulate the industry, and concerns over the black market. There was general consensus that a “reasonable rate” of taxation was needed, but speakers disagreed on what that rate should be. Several speakers asked that the additional municipal tax not be imposed on sales of medical marijuana.

Voicing another concern, Denver District Attorney Mitch Morrissey spoke of the increased crime and violence that the city is seeing thanks to the legalization of medical marijuana. And when Amendment 64 takes effect? “There will be a cost…an increase… to my office.”

City council members approved both a flat 5% sales tax and a sliding tax scale between 3.5% and 15%. The final vote on which tax rate will make the November ballot is scheduled for August 19.

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photo credit: Jeffrey Beall via photopin cc