Colorado Taxes Legal Pot 25 Percent - Prop AA Hooray?

Colorado Taxes Legal Pot 25 Percent - Prop AA Hooray?

The state of Colorado is on track to pass Proposition AA, a measure to tax newly legal marijuana at a combined 25 percent - 15 percent at the wholesale level and 10 percent at the retail level.

According to election results, with 68 percent of precints reporting, Prop AA is winning 64-35, all but guaranteeing its passage. Does that mean pot prices are going to skyrocket and people will eschew the legal market for the black market?

Not at all, because legal pot can be up to 90 percent cheaper than black market weed, which is marked up to cover the risk involved in dealing an illicit substance. Ounces in Colorado have already fallen from $400 to $100-$150, and that's before mass commercial production. A 25 percent tax on $400 ($100) is much more harsh than a 25 percent tax on a $100 ounce ($25). And when ounces are $30, taxes could be 100 percent and the market would bear it. Seriously, who would say no to a $60 ounce?

According to state estimates, "passage of Proposition AA is estimated to increase state tax revenue by $67 million annually, which includes $27.5 million in excise tax revenue and $39.5 million in state sales tax revenue. Local governments where retail marijuana stores are operating will receive a proportionate share of $6.0 million based on the percentage of sales in each jurisdiction."