Pubdate: Wed, 23 Jul 2014
Source: Washington Post (DC)
Copyright: 2014 The Washington Post Company
Contact: http://mapinc.org/url/mUgeOPdZ
Website: http://www.washingtonpost.com/
Details: http://www.mapinc.org/media/491
Author: Niraj Chokshi
Page: A19

POT MAY NOT BE WINDFALL FOR WASHINGTON STATE

A slow start to sales, high taxes and easy-to-get medical marijuana 
may translate to lesser-than-expected revenue from Washington state's 
newly legal recreational pot market, according to a report from 
Moody's, the credit rating agency.

Marijuana for recreational use went on sale in Washington this month 
and is taxed three times - 25 percent each at the production, 
wholesale and retail levels - in addition to state and local sales 
taxes. Combined, the trio of taxes translate to an effective rate of 
44 percent, Moody's found.

"The tax structure in Washington State is likely to be a major 
deterrent for consumers who do not see the value in obtaining the 
product from a storefront as opposed to a medical dispensary," 
Moody's analyst Andrea Unsworth writes in the report. Why pay a 
higher tax when getting approval for medical marijuana is reportedly 
relatively easy? Washington's forecasters revisited their estimate 
last month and anticipated $51.2 million in revenue from fees and 
taxes for the 2015 to 2017 budget and more than two times more for 
the following two years.

A similar situation appears to be playing out in Colorado, where 
recreational marijuana sales began Jan. 1. Colorado economists in 
2012 predicted $67 million in revenue from retail pot in the 
2014-2015 fiscal year. They dropped that estimate to $54 million in 
March and then $30.6 million last month. State forecasters explained 
why in a report:

"One reason that revenue has lagged behind earlier estimates is that 
medical marijuana users have not converted to the adult use market," 
they wrote.

Aside from its high tax rates on recreational pot, the state has 
opened up only about 7 percent of the market. Of the 334 
marijuana-store licenses available, Washington has issued just 24, 
well below what was originally expected. The state also has licensed 
fewer growers than expected.

Yet Moody's says it isn't concerned about the state's credit 
standing. The state never planned to lean heavily on the revenues for 
funding, and the shortfall will probably be temporary. Supply will no 
doubt eventually meet demand, Unsworth writes.

- - Niraj Chokshi from GovBeat
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MAP posted-by: Jay Bergstrom