Many financially strapped states could soon follow the lead of Colorado when looking to break free from their financial rut. According to Moody’s, the Centennial State, the first state to tax legalized recreational marijuana sales, expects to bring in nearly $100 million in tax revenue this year, a figure that exceeds the state’s original expectations by 40 percent.
Colorado began imposing sales and excise taxes on recreational marijuana on the first day of the new year, and in a report released Friday by Moody’s Investor Services, the firm stated that legal sales in Colorado will reduce the size of the black market and revenue from those will mean more tax payments flowing into state reserves.
The tax revenue generated from marijuana sales have been earmarked for treatment, school construction and deterring young people from using the drug. According to Reuters, School districts will likely get $40 million, or nearly 30 percent, of the projected $134 million in total marijuana tax revenues.
“We anticipate near-term growth in these revenues as the Colorado market matures and as legalization lessens the appeal of black market sales,” Moody’s analyst Andrea Unsworth said to the Washington Post.
Andrea went on to caution the supporters of legalized marijuana that tax revenues generated from the sale of the recreational drug is a small fraction of the state’s budget and the sale of marijuana would not sway the budget too much in one way or the other.
According to Reuters,Moody also projected that in addition to the slight tax bump the state is expected to receive, the decriminalization of marijuana would likely reduce policing costs. The investment firm also went on to suggest that there may also be other unquantifiable enforcement expenditures, which may offset the state’s cost savings.
Recently, the Colorado Association of Chiefs of Police asked the governor for two-thirds of the marijuana’s total tax revenues, citing the need to police new violations such as unlicensed sale of the drug and drivers under the influence of marijuana.
Colorado’s 15 percent imposed excise tax on wholesale marijuana and 10 percent sales tax on retail sales will stay in-state, along with a pre-existing 2.9 percent tax on medical marijuana, while local governments will only keep 15 percent of sales tax revenue.
In addition to Colorado, Washington will begin marijuana sales in June.
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