Colorado Voters Let State Keep Marijuana Profits

Instead of going into taxpayers' wallets, the revenue the state generated from legalizing pot will go to schools and substance abuse programs.
by | November 4, 2015
A medical marijuana dispensary in Denver. (Wikimedia Commons/Jeffrey Beall)

This is part of our 2015 elections coverage. Get more results here.

Colorado will keep all of the roughly $60 million it collected last year in marijuana taxes, avoiding a taxpayer refund that would have netted less than $10 per person and kept millions from going toward school construction.

The scenario, in which voters got to decide whether they wanted to divvy up the money or let the state keep it, is because of an odd feature in Colorado's unique Taxpayer Bill of Rights. Referred to as "TABOR," it's a constitutional measure that limits the annual growth in state revenue and spending. The growth follows a formula linked to the inflation rate and the percentage change in the state's population. Generally Colorado has to refund money to taxpayers when its total revenues exceed the growth formula.

TABOR also gives taxpayers a lot of control regarding taxes and new tax revenue. That's where Tuesday's ballot measure, Proposition BB, came in. When voters originally approved a tax on marijuana, TABOR required that the state give voters an estimate of how much money the new tax would generate ($66 million) and how much total revenue the state would garner without that new tax (about $12.1 billion). When the 2015 fiscal year ended, the tax collections had reached about $60 million. But the state's total revenue exceeded the projection by several hundred million.

The total revenue didn't blow TABOR's annual growth limit for fiscal 2015. But because voters approved a new tax based on that projection, TABOR triggers an automatic, one-time refund of all the new pot tax revenue collected last year. Voters stopped the refund, easily approving Prop. BB by 66 percent.

The tax revenue will now go toward the programs it was allocated for: $40 million for public school construction and $12 million to fund marijuana education, substance abuse treatment and prevention, and youth mentoring services. The remainder goes to the state's general fund. Voters approved those allocations when they approved the marijuana tax in the first place.

State Sen. Pat Steadman, who led efforts to place the issue before voters, said Coloradans have been clear about what they want regarding the marijuana revenue.

"They passed the taxes overwhelmingly, and tonight they said, 'Yes, we meant it,'" he told the Durango Herald.

Opponents of Prop. BB tended to take their stance based on a dislike of the marijuana tax in general. Robert J. Corry Jr., chair of the "No on Prop BB" campaign, argued that the state "collected unlawfully exorbitant taxes." Justin Haskins, editor of the conservative Heartland Institute, said he thought it would be more responsible to spend the money first on government services (like health and policing) related to the pot industry.

This is part of our 2015 elections coverage. Get more results here.