Colorado is making so much money with cannabis sales that they literally have to give some of it back to residents. So proclaimed a recent AP story by Kristen Wyatt on the booming cannabis industry in the Rocky Mountain state.
The voter-approved law that made cannabis legal in the state was designed to put tax revenues towards schools and other state programs, but an existing state law may send some of the money directly back to residents.
As Wyatt describes it in her piece, the law is causing “quite a headache for lawmakers.”
Colorado’s state constitution sets a limit on how much tax money the state can take in before it has to give some back to the residents. In 1992, Colorado’s voters approved the Taxpayers’ Bill of Rights, a constitutional amendment mandating that all new taxes appear before voters. It states that the state of Colorado must pay back taxpayers “when the state collects more than what’s permitted by a formula based on inflation and population growth. Over the years, Colorado has issued refunds six times, totaling more than $3.3 billion,” Wyatt reports.
“That means Coloradans may each get their own cut of the $50 million in recreational pot taxes collected in the first year of legal weed. It’s a situation so bizarre that it’s gotten Republicans and Democrats, for once, to agree on a tax issue,” Wyatt writes.
Because there is so much tax revenue, and tax collections in Colorado are rapidly increasing, the governor’s budget writers predict roughly $30.5 million will go back to individual residents (about $7.63 per adult in Colorado.)
Both political parties agree there’s “no good reason” to put cannabis dollars back into voter’s pockets, and lawmakers are scrambling to figure out how to avoid it.
That would most likely require asking residents to vote themselves out of the extra cash, by voting to exempt cannabis taxes from the refund requirement.
Lawmakers will have to figure out if the refund money would go to all taxpayers, or just people who purchased cannabis.
In the past, refunds have been paid through income tax returns, as Wyatt notes, “but Colorado also has reduced motor vehicle fees or even reduced sales taxes on trucks… Lawmakers seem confident that the refund mechanism won’t matter because voters would approve pot taxes a third time if asked.”