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1 Joseph Henchman, Lessons on Legalizing and Taxing Marijuana from the Colorado and Washington Experience 1 (2014)

handle is hein.taxfoundation/lgmjcw0001 and id is 1 raw text is: Lessons on Legalizing and Taxing Marijuana from the Colorado and Washington Experience Joseph Henchman Vice President, Legal & State Projects, Tax Foundation Hearing on Sections 6-9 of B20-466, the Marijuana Legalization & Regulation Act of 2013 Before the Joint Hearing of the Committee on Business, Consumer and Regulatory Affairs and Committee on Finance and Revenue October 30,2014 Chairman Orange, Chairman Evans, and members of the Committee: I appreciate the opportunity to testify today on proposed legislation that would legalize and tax marijuana in the District of Columbia. While the current draft of the legislation would impose a 6 percent tax on medical marijuana and a 15 percent tax on all other marijuana products, in addition to license fees ranging from $2,000 (retailer) to $6,000 (producer), it is my understanding that final tax and fee amounts are still under consideration. I have attached a Tax Foundation report I recently authored, Taxing Marijuana: The Washington and Colorado Experience. This report summarizes those two states' experience with legalizing and taxing marijuana to date. Our study relied on revenue projections issued prior to legalization, actual revenue collections reported by the relevant state agencies, and discussions with legislative and administrative officials to relate their experience so far. As a non-partisan 501(c)(3) organization, we take no position on the proposed legislation, but we hope that the material we provide will be helpful in the Committee's consideration of the issue. While legalization in both states is still new (Colorado legal sales began January 1, 2014, and Washington legal sales began June 1, 2014), both states have encountered similar challenges. * Both states had pre-existing medical marijuana programs and thus had to determine whether to wrap these programs into the larger retail scheme, or continue a separate existence which in turn required differentiating its purpose and administrative apparatus. Colorado and Washington both have chosen to continue their separate medical marijuana programs, with the only tax imposed being the retail sales tax on all other goods and products. Both states apply this tax even to edibles and liquids that normally would be exempt from sales tax as grocery or food item, which required special legislation in Washington. * Both states limited the quantities of marijuana products that consumers may purchase. Colorado, for instance, limits purchases by residents to one ounce of any kind of marijuana (non-residents can purchase up to one-quarter of an ounce), while Washington limits adults to one ounce of bud (the flowering part of the plant), 16