Pubdate: Thu, 02 Apr 2015
Source: New York Times (NY)
Copyright: 2015 The New York Times Company
Author: Jack Healy


DENVER - In the State Capitol, they are calling it Refund Madness.

A year after Colorado became the first state to allow recreational 
marijuana sales, millions of tax dollars are rolling in, dedicated to 
funding school construction, marijuana education campaigns and armies 
of marijuana inspectors and regulators. But a legal snarl may force 
the state to hand that money back to marijuana consumers, growers and 
the public - and lawmakers do not want to.

The problem is a strict anti-spending provision in the state 
Constitution that touches every corner of public life, like school 
funding, state health care, local libraries and road repairs. 
Technical tripwires in that voter-approved provision, known as the 
Taxpayer's Bill of Rights, may require Colorado to refund nearly $60 
million in marijuana taxes because the state's overall revenue 
estimates ended up being too low when the marijuana tax question was 
put to voters. Lawmakers are scrambling to figure out a way to keep 
that money, and they are hoping Colorado voters - usually stingy when 
it comes to taxes and spending - will let them. In rare bipartisan 
agreement on taxes, legislators are piecing together a bill that 
would seek voters' permission to hold on to the marijuana money.

"Despite our anti-tax feelings in the state, there's an exception 
being made when it comes to marijuana," said Michael Elliott, the 
executive director of the Denver-based Marijuana Industry Group, a 
trade organization that has not taken a position on the refund issue. 
"The industry is making a huge economic impact."

But anti-tax feelings run deep in Colorado, and some anti-tax groups 
said they would fight any effort to deprive the public of a refund, 
even if it amounts to only $11 or less a person.

"It should go back to the taxpayers," said Gregory Golyansky, the 
president of the Colorado Union of Taxpayers. "When government tries 
to keep the money that rightfully belongs to the taxpayers of 
Colorado, it is an enormous issue. There should be a tax refund."

Selling, taxing and regulating a federally outlawed drug were never 
going to be easy for states at the forefront of marijuana 
legalization. And as Colorado enters its second year of retail 
marijuana sales, it is confronting a range of unpredictable problems. 
Among them, two neighboring states and several sheriffs have sued to 
strike down Colorado's law, saying that marijuana is flowing out and 
that the state's law enforcement officers are looking the other way 
regarding violations of federal law.

But few people in Colorado are pushing to repeal the state law or 
shut down marijuana sellers. Instead, lawmakers are mostly making 
incremental tweaks, like ensuring that food stamps cannot be used to 
buy marijuana, debating changes to the appearance of edible marijuana 
and pondering what warnings - if any - to offer pregnant purchasers.

Marijuana is legal in Colorado, but federal law makes banking nearly 
impossible for the cannabis industry. The result: a dangerous 
all-cash operation that requires armed guards and layers of security.

"It's the nuts-and-bolts of how do we make the trains run on time now 
that we're here," said Representative Jonathan Singer, a Democrat who 
has worked extensively on marijuana issues.

Distributing marijuana revenue presents a particularly thorny 
problem. After Colorado and then Washington State became the first in 
the nation to legalize recreational marijuana for adults, Colorado 
voters approved a measure levying hefty taxes on the plant and on 
wholesale bulk marijuana, as well as a 10 percent sales tax. In all, 
retail customers are paying 30 percent or more in taxes at the register.

Voters dedicated $40 million of marijuana revenue to school 
construction and repairs. Other marijuana revenue goes toward paying 
for the inspectors, enforcement agents and other costs of running the 
offices that regulate the substance.

While millions are pouring into the state from locals and tourists 
buying marijuana oils and tinctures, candy and cookies and raw 
plants, the tax revenue is falling short of the $70 million that the 
state thought it might collect. Nevertheless, the state is now in the 
awkward position of having to give back that marijuana money because 
it collected more than it had anticipated in taxes last year across 
the board - including construction, oil and gas and other sections of 
the state's booming economy.

Blame lies with the Taxpayer's Bill of Rights, said Tim Hoover, a 
spokesman for the Colorado Fiscal Institute, which tracks budget 
issues in the state. He compared the much-derided law to HAL 9000, 
the sinister computer in the movie "2001: A Space Odyssey."

"It has its own malevolent programming that is really hard to 
override," he said.

The complex measure, first approved by voters in 1992, essentially 
requires that when Colorado collects more money than it had 
anticipated, it has to give some back to taxpayers. Refunding nearly 
$60 million in marijuana money would shortchange school construction 
and other needs that had been depending on marijuana taxes, and force 
the state to pay for them from its general fund.

"It's not that the pot tax came in too high," said State Senator Pat 
Steadman, a Democrat who has been trying to write a law that would 
provide a solution. "It's that every other revenue came in high."

The marijuana refund could amount to a few dollars for each taxpayer, 
handed out as a break on state returns. But Mr. Steadman said the law 
was unclear on who, exactly, should be paid back. The marijuana 
customers? The growers and wholesale businesses paying taxes? The 
public, who approved this whole setup?

"I swear, the more you work on it, the tougher it gets," Mr. Steadman 
said. "It's really complicated."

His bill, expected to gather bipartisan support, would kick the 
question of marijuana refunds back to the public, asking voters 
whether the state could keep the money.

Most marijuana businesses have supported the sales taxes Colorado 
placed on the substance. But Miguel Lopez, who organizes Denver's 
annual 4/20 rally - intended to be a giant feel-good festival - said 
he was sick of what he called high taxes on recreational marijuana. 
He said they were hurting small stores and helping to keep the black 
market alive.

"We're still struggling to survive while losing the economic battle," 
he said. "It's just too high."
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MAP posted-by: Jay Bergstrom