Colorado approves pot taxes, but turns down a nearly $1 billion income tax increase

November 6, 2013

An employee of Good Meds medical cannabis center in Lakewood, Colo., handles a jar of pot. (Matthew Staver/The Washington Post.)

Coloradans approved one tax increase and defeated another by nearly equal margins on Tuesday.

After legalizing marijuana last year, voters were asked to approve the taxes to fund it. And they did, handily accepting a pair of taxes that amount to a 25 percent levy on the drug that the residents of Portland, Maine, simultaneously voted to legalize on Tuesday. But a separate Colorado measure to raise the income tax in order to fund public schools appeared to be a tax too far. Pot taxes were approved in a 65 percent to 35 percent vote, with all but 8 percent of precincts reporting. The income tax measure was defeated by virtually the same margin — 66 percent to 34 percent — with a similar share of the precincts reporting.

Opponents of the income tax measure portrayed its defeat by a wider margin than polls suggested as a referendum on tax policy, broadly, and on the state’s Democratic Gov. John Hickenlooper.

“Colorado is largely seen as a harbinger state, people come here in order to test political messaging, political issues,” Kelly Maher, executive director of Compass Colorado, one of the groups that opposed the measure, said on Tuesday night.

That measure, known as Amendment 66, would have replaced and raised Colorado’s flat income tax with a two-tiered system. A large chunk of revenues generated — estimated at $950 million in its first full year of implementation — would have been dedicated to public education. Proponents argued that it would pay dividends down the road by creating a smarter future workforce. Opponents said the tax increase was unnecessary, would choke small businesses, and be a drag on the economy. It also wasn’t clear that more money translates to a better education, they argued.

But education funding in Colorado still won a boost on Tuesday, as some of the money raised by the new pot tax will go to public school construction. That measure, proposition AA, institutes a 15 percent excise tax on the wholesale price of marijuana and a 10 percent sales tax on pot products. The first $40 million raised each year from the excise tax will go to school construction. The remaining money raised is expected to more than cover the cost of regulating the new industry.

Niraj Chokshi reports for GovBeat, The Post's state and local policy blog.
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