A University of Oregon economist said Thursday that the best-case estimates for Colorado’s legal marijuana tax revenue were overstated because of a faulty model.
Economist Ben Hansen said at the Oregon Economic Forum that misjudgments in Colorado’s revenue estimates stemmed from a term familiar to students in Econ 101: elasticity of demand.
Previous estimates of demand for recreational marijuana only looked at the potential shift from the black market to the legal market. But with the medical market suctioning off some new consumers, revenue forecasts changed.
Oregon voters will decide in November whether to legalize marijuana.
Colorado had varying revenue estimates on its first-of-its-kind recreational pot market.
Voters approved $70 million worth of pot taxes last year, a wild guess considering the drug had never been sold legally before. With eight months of taxes reported, Colorado has brought in more than $45 million in taxes, licenses and fees.
Colorado Gov. John Hickenlooper in March estimated pot taxes would raise $98 million.
Legalizing marijuana increases its supply and drops its price, Hansen said. That price drop makes additional taxes harder for consumers to notice. The tax rate in Colorado and Washington for legal pot is north of 40 percent. In Oregon, the rate is at about 15 percent.
Hansen says if pot is legalized, taxes function as a kind of fine for marijuana consumption.
“We can kind of double-dip,” he said. “We’re no longer paying to arrest and incarcerate people, and we’re getting tax revenue from it.”
