Decline in Colorado Marijuana Sales and Associated Tax Revenue Continues

The Decline of Colorado’s Marijuana Market

Contrary to the pandemic boom, marijuana sales in Colorado are dwindling. As of now, the state collects fewer taxes from marijuana than it did back in 2018.

Wider Legalization and Its Effects

Around half the United States, including 24 states and Washington, D.C., has legalized recreational marijuana. This has indeed taken a toll on Colorado’s market. The state’s marijuana economy is seeing its lowest recorded prices, as highlighted by state budget documents.

The Role of Intoxicating Hemp

An analysis by the Joint Budget Committee staff points to the rise of intoxicating hemp as another blow to Colorado’s marijuana industry. This new market arose from changes in the 2018 Farm Bill that legalized hemp for non-drug uses.

Intoxicating Hemp’s Emergence

The intent was to use hemp for textiles. However, it has led to a $2.2 billion market for products like THC-infused seltzers and gummies, available even in gas stations.

Regulations and Legal Challenges

While California’s governor has taken steps to ban intoxicating hemp products, Colorado recently restricted sales to licensed marijuana sellers. State attorneys, including Colorado’s Phil Weiser, urge Congress to tighten hemp regulations, citing hurdles in enforcing laws.

Declining Tax Revenues

Legal marijuana sellers face dwindling consumer interest, leading to a sharp decline in sales and taxes. Colorado collected $424 million in taxes during the 2020-21 budget year, only for this to tumble 41% to $248 million in the 2023-24 period.

Predicted Stabilization

The governor’s Office projects tax revenues to level off this year, possibly increasing. However, the Colorado Legislative Council is less optimistic, suggesting another fall before minor recovery next year.

Implications for State Funding

Marijuana taxes contribute significantly to Colorado’s state funding, exempt from the Taxpayer’s Bill of Rights cap. While budget cuts loom, marijuana tax downturns add strain to government spending capability.

Budget Adjustments

Last year, lawmakers already reduced services funded by marijuana taxes, cutting a $20 million payment to the BEST program. More cuts are anticipated in the upcoming legislative session.

A Larger Economic Trend

Other early marijuana-legalizing states experience similar revenue drops. While Washington and California see declines, none match Colorado’s 8% fall, where sales declined by $100 million.

A Need for Reevaluation

The situation has coerced budget writers to reconsider spending methodologies. Initially, the tax income was directed to drug-related areas, but its scope gradually expanded.

Jeff Bridges, a key figure in Colorado’s finance administration, remarked on the broadening use of marijuana taxes beyond its intended scope. This expansion calls for a critical reevaluation.

Conclusion

Colorado’s recent experiences reflect a wider trend across states. As regulations evolve, there remains an urgent need to balance innovation with fiscal responsibility.