High Taxes 

How Will Oregon Profit from Legalizing Weed?

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STEP ONE: Legalize weed.

Step two: Profit!

It's not quite that simple, but one of the most successful arguments in favor of legalizing marijuana is that doing so will give a significant boost to states' coffers. When Coloradans voted to legalize marijuana, there was a feel-good element baked into the small print: The measure dictated that the first $40 million the state made from excise taxes on recreational marijuana would go to building public schools. Just like Wu-Tang, buying weed is for the children.

Once we get past the future ideal of the Schools That Weed Built (official school names TBD by Colorado Department of Education), it's unknown how much cash will end up going to the only two states (so far) to legalize and tax recreational marijuana. While Colorado's retail dispensaries have been open since January, the state only has budget numbers from January and February—in other words, it's just too early to tell. And it's way too early to tell for Washington, where retail stores won't open until June.

But both states are bullish on the revenue possibilities—seeing the potential for windfalls that could, as the New York Times noted in February, "reshape government bottom lines." In February, the budget office of Colorado Governor John Hickenlooper predicted that in the state's next fiscal year, it would receive almost $134 million in taxes and fees from recreational and medicinal marijuana. In Washington, the Economic and Revenue Forecast Council has said it expects the state to rake in almost $190 million between 2015 and 2019.

Some of that money's from fees levied at retailers and growers—but the biggest chunk is from taxes. (Sorry, libertarians—but hey, at least now you've got something else to be annoying about!) Both Colorado and Washington have excise taxes for recreational marijuana; like the taxes for gasoline, cigarettes, cell phone plans, and alcohol, the tax is paid by the merchant, which then passes the price on to the consumer. In Colorado, a 15 percent excise tax on marijuana, when combined with the state's 2.9 percent sales tax and 10 percent sales tax specific to recreational marijuana means those legally buying weed in the state will be giving about 30 percent of what they spend to taxes.

Washington, meanwhile, is planning a 25 percent excise tax for each marijuana and marijuana-infused product sale, and sales of marijuana will also be subject to the state's usual sales tax of about nine percent on average.

Tellingly, neither Washington nor Colorado are relying on any of these funds just yet—like almost everything else that comes with legalizing marijuana, there are a lot of unknowns. Those range from how many people will end up legally buying and smoking weed (in Colorado, those numbers started lower than expected, but appear to be growing), to how much it will end up costing states to oversee marijuana sales and taxation, thus offsetting hoped-for revenues.

Even so, people already have an eye on where newfound tax revenue might go—even in Oregon. Of the three marijuana legalization initiatives that might land on Oregon's ballot [see "Choices, Choices," this issue ], two specify the recipients of the revenues collected from marijuana taxes and fees. The initiative from New Approach Oregon (the Control, Regulation, and Taxation of Marijuana and Industrial Hemp Act of 2014) singles out a few big financial beneficiaries, chiefly Oregon's Common School Fund, Mental Health Alcoholism and Drug Services Account, and State Police Account (enjoy your drug money, cops!). Paul Stanford's Oregon Cannabis Tax Act of 2014 has a broader outlook, with the vast majority of revenue simply going to "the state's general fund to finance state programs."

One, if not all three, of those initiatives will almost certainly be on the ballot in November—and one, if not all three, will almost certainly pass. And once it's legal to buy and smoke marijuana in Oregon, the state will find itself in the same position as Washington and Colorado: trying to figure out the complicated finances of getting high. No matter how it works out, the state will end up with a revenue stream that it doesn't have now. Given that Oregon is often strapped for cash—but has more than its fair share of potheads—that's not a bad place to be.

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