Legalize it, but tax it! Colorado seeks to regulate marijuana sales

Last year, Colorado became the first state to legalize recreational marijuana. Now it’s decided how to regulate it. The legislature approved a 25 percent tax on the sale of marijuana among other requirements.

After voters legalized marijuana in Colorado, the state had to figure out how it would manage marijuana as an industry. It chose to tax it heavily.

“The average recreational cannabis consumer is going to be looking at a tax anywhere from approximately 31 percent to 35 percent, depending on local sales tax,"says Warren Edson, a lawyer who specializes in marijuana law.

The big tax is designed to fund education and the regulation of the pot industry.

“It'll be interesting to see if the average consumer goes back to the black market," Edson says. 

Edson also adds that some medical marijuana providers, who are not subject to the tax, may get involved in the larger recreational market. That, he says, would leave patients without a low-tax source.

Mark Kleiman, public policy professor at UCLA, says there’s a reason for the stiff tax

“The best reason to set a tax rate is to limit both interstate export and local drug abuse," says Kleiman.

And, of course, there's the money. California raises $100 million a year taxing medical marijuana.

About the author

Sabri Ben-Achour is a reporter for Marketplace, based in the New York City bureau. He covers Wall Street, finance, and anything New York and money related.

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