Colorado may have to refund millions in pot taxes

By Katie Kerwin McCrimmon

The cash grab for pot taxes has spurred intense lobbying from cops and public health advocates, but a new analysis shows Colorado may have to give most of the money back to taxpayers.

Colorado’s Joint Budget Committee on Wednesday began reviewing potential revenues from marijuana taxes and budget experts warned lawmakers about spending pot cash since Colorado’s Taxpayer Bill of Rights (TABOR) may force automatic refunds. (Click here to review the budget committee staff’s marijuana tax analysis.)

Gov. John Hickenlooper last month proposed spending nearly $46 million from marijuana revenues to prevent kids from using pot, about $40 million on substance abuse treatment programs, $33 million on law enforcement and $12.4 million on public health programs to counter marijuana use. (Click here to see Hickenlooper’s proposal for how to spend pot revenues.)

HEALTH - Grow Facility

But the governor’s requests for cash may be delayed. And treatment and prevention programs could stall if legal and budget analysts are correct that Colorado may not be able to touch most of the pot proceeds without a new vote from the people. Budget Committee staffers consulted with lawyers and found that TABOR may trigger the pot tax snafu.

Because revenues from pot sales may exceed projections that voters were given in the state’s “Blue Book” before approving legalized marijuana in 2012, and because Colorado’s overall economy is improving and more revenue is flowing into state coffers, TABOR may force lawmakers to return the cash through refunds to individual taxpayers. Colorado voters approved TABOR in 1992 and the amendment requires government entities to return excess cash unless voters specifically allow them to keep it.

News that TABOR may require pot cash refunds left Sen. Pat Steadman, D-Denver, who is co-chair of the budget committee, dismayed over what he called a “bizarre” turn of events.

“The upshot of this is that…you can’t really effectively do a new tax or a tax increase in a growing economy?” Steadman asked. “That is an absurd result.”

He believes voters who approved legalized marijuana thought they were approving tax increases.

“If I were an ordinary voter…this would just strike me as completely bizarre,” Steadman said.

Joint Budget Committee Staff Director John Ziegler said that because of the low “Blue Book” revenue estimates and projections for a growing economy, it appears likely that TABOR will kick in.

“One thing we recommend is that you not try to chase the forecast,” Ziegler said. “I think you need to wait and see what actually happens.

“In my opinion, trying to appropriate money before you know how much money comes in is a dangerous road to go down,” Ziegler said.

He pointed out that uncertainty clouds marijuana sales on multiple fronts. Sales and revenue estimates are merely projections and could prove to be far off target. Ziegler and his staffers suggested three possible courses of action:

“The first is that the General Assembly waits to see what actually happens,” Ziegler said. “If an excess (in revenues) occurs, the General Assembly could refer a measure (to the voters) to retain projected revenues. If the voters do not approve that measure, then the state would have to return (those revenues).”

The second course of action would be to return pot revenues to taxpayers.

And a third option would be to cut or eliminate taxes on pot “to try to avoid the excess,” Ziegler said.

Lawmakers on the budget committee took no action on Wednesday.

But Rep. Cheri Gerou, R-Evergreen, said the picture on pot revenues was about as hazy as Claude Monet’s famous and barely visible images of the Rouen cathedral in France.

“What all of this is going to be based on is what the actual numbers are,” Gerou said. “We won’t have those final numbers (until late next year).”

Ziegler confirmed that Gerou was correct that answers will continue to be elusive for more than a year.

“The final audited numbers don’t come out until December. Yes, it would be December of 2015 for the 14/15 (fiscal) year.”

Lawmakers ran out of time on Monday to finish their briefing on pot taxes. The discussion is expected to continue today.



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One thought on “Colorado may have to refund millions in pot taxes

  1. There’s more than a little irony involved when the constitutional darliing of the right wing in the form of TABOR has the effect of encouraging pot use by making it more affordable. Cognitive dissonance may set in among some social conservatives…

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