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Originally published Thursday, February 28, 2013 at 3:40 PM

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Colorado task force ponders how to tax legal pot

A state panel set up to regulate marijuana in Colorado is recommending that lawmakers enact a 15 percent excise tax, with the profits going to school construction.

Associated Press

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DENVER —

A state panel set up to regulate marijuana in Colorado is recommending that lawmakers enact a 15 percent excise tax, with the profits going to school construction.

State regulators are working out the details of exactly how to tax marijuana now that Colorado residents have voted to legalize it.

The panel made its recommendation Thursday, but the marijuana tax question is far from settled.

Colorado lawmakers could set a lower tax, or they could add sales taxes beyond the current statewide 2.9 percent. Legislators could even create a special new "marijuana tax" for consumers, plus a series of required licensing fees for growers and sellers.

Besides schools, the taxes must fund marijuana safety enforcement and drug education measures.

Any option would have to go back to voters for final approval.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

Pot smokers in Colorado were the biggest winners in the vote that legalized the drug. Now state regulators are working out the details of exactly how to tax it, so the benefits are shared statewide in the form of increased revenue.

A state panel meets Thursday to draft final recommendations based on the voter-approved marijuana legalization question that asked for excise taxes up to 15 percent to fund school construction.

Colorado lawmakers could set a lower tax, or they could add sales taxes beyond the current statewide 2.9 percent. Legislators could even create a special new "marijuana tax" for consumers, plus a series of required licensing fees for growers and sellers. Besides schools, the taxes must fund marijuana safety enforcement and drug education measures.

Any option would have to go back to voters for final approval.

Marijuana proponents and critics agree that taxes should be hefty. But if levies are too high, legal pot could be so expensive that people continue buying it underground.

"If this doesn't work and taxes are so high the black market still dominates, then what was the point?" asked Mike Elliott of Colorado's Medical Marijuana Industry Group.

Fiscal analysts have no idea where to begin predicting how much tax pot smokers could produce. The unknowns include how many people are buying pot now and what they're paying, how many people will start smoking marijuana now that it's legal and whether prices will drop once commercial sales begin. If the federal government blocks commercial pot sales, the marijuana tax windfall would be zero.

"It's a big question mark," said Colorado state budget analyst Dan Krug, who ran through multiple tax scenarios with the marijuana task force set up to recommend legislation to regulate weed. Krug's estimates ranged from a few million dollars a year up to $72 million annually, depending on tax rates and growth of the industry.

In Washington, the only other state to legalize marijuana for recreational use, the tax picture is clearer.

Voters there set 25 percent taxes at each of three different stages - from growers to processors to consumers. The measure also defined exact spending levels on things like education. For example, Washington will spend exactly $20,000 on Web-based education on the health and safety risks of marijuana.

Colorado's task force is likely to adopt a vague recommendation asking state lawmakers to set excise fees and add licensing fees steep enough to cover the costs of regulation. They'll leave it lawmakers to figure out those exact costs.

Task force members will also settle recommendations Thursday on regulations unrelated to taxes, including rules for growing marijuana at home.

The task force already has asked for potency labels, limited marijuana advertising, set residency requirements for marijuana workers and limited commercial sales to less than an ounce. The group decided against a residency requirement for pot customers, opening the door for marijuana tourism.

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Kristen Wyatt is on Twitter at http://www.twitter.com/APkristenwyatt

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