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Colorado's marijuana tax revenue is up, and it's great for schools

As Coloradans get higher, so does state tax revenue.
As Coloradans get higher, so does state tax revenue.
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Colorado has imposed some hefty taxation on marijuana: special sales and excise taxes at a rate of 25 percent, plus 2.9 percent in state sales tax rate, plus local taxes. All of that taxation has reaped bigger than expected rewards in the form of revenues, as a new report from Moody's Investors Service notes, and those rewards are set to keep growing quickly.

Governor John Hickenlooper had initially estimated there would be $70 million in tax revenues during the first full year of legal pot. But in February, he provided a more optimistic outlook, saying total revenues for the first full year would be $98 million, a roughly 40 percent increase. He also said in February that revenues for the first fiscal year, starting in July, would top out $134 million, though he has since dialed down those expectations back, by around $20 million.

That kind of acceleration might sound like some drug-addled math, considering that Colorado had only $7.5 million in revenues during the two months combined. But according to Moody's, the first two months' worth of weed tax hauls "likely significantly understate long-term revenue potential." That's because the state's full pot economy hadn't even yet grown to its full potential. New retailers have continued to open, growing cultivation has boosted supply, and more licenses have been issued, meaning many more opportunities to sell bud.

All of that pot-smoking is great for Colorado's kids, as it turns out. Of the pot revenue spending that is authorized, the lion's share, $40 million, is for public schools. But the additional, unexpected revenues have yet to be allocated. Hickenlooper has proposed spending that new money largely on substance abuse treatment and prevention, as well as law enforcement.

There is one bummer in the news, however: pot revenues aren't going to be a huge cash cow for the state. Even if total revenues did reach $134 million, that would only be around 1.4 percent of the state's total general fund.

Updated on 4/15/14: This post was updated to reflect Colorado's latest estimates of total tax revenues from marijuana. It was also corrected to better distinguish between fiscal- and full-year figures.

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