This Tuesday, Colorado voters struck down one of the nation’s most sweeping school-financing measures while upholding the proposed excise and sales tax for the sale of recreational marijuana. Voters decided that approving an income tax increase that would invest in education reform for smaller class sizes, full-day kindergarten, and more effective education spending was too much of a burden to bear. However, voters approved a 15 percent excise tax on the sale of recreational marijuana that will go towards school capital construction along with a 10 percent sales tax that will fund the enforcement and regulation of the legal marijuana industry. The results of this election illustrate the interesting dichotomy between the voters of Colorado and state taxes, something that has been apart of Colorado state politics since 1992.
In 1992, Colorado voters approved Amendment X, also known as the Taxpayer’s Bill of Rights (TABOR), a constitutional amendment designed to restrain the growth of government at all levels. Under TABOR, state and local governments cannot raise tax rates without voter approval and cannot spend revenues collected under existing tax rates if the revenues grow faster than the rate of inflation and population growth without voter approval. Revenue in excess of the TABOR limit must be refunded to taxpayers in their tax returns, unless voters approve a revenue change as an offset in a referendum. As a result of TABOR, Colorado taxpayers have received more than two billion dollars from the state.
When the teachers’ unions of Colorado teamed up with Governor John Hickenlooper to campaign for the passage of Amendment 66 that would provide one billion dollars for education improvements, they knew they would have to face a Colorado electorate that has not been favorable to tax increases in the last two decades. Supporters of this amendment believed that less than a one percent increase in income tax for homes that make more than $75,000 would not be that much, especially when the revenue would be put towards a partisan issue such as education, yet opponents were too focused on the tax increase and the lack of guarantee that the changes would actually work to approve this measure.
Interestingly, while voters find a tax increase to fund education improvements as an overstepping of the state government, a large 25-30 percent tax on the sale of recreational marijuana seems to be totally reasonable. Amendment 64 was called the “Regulate Marijuana like Alcohol Act,” and in the Act’s purpose and findings clause, it states that marijuana should be “taxed in a similar manner to alcohol and regulated in a similar manner to alcohol.” With the approval of Proposition AA, voters chose to tax and regulate marijuana at a much more intense and higher level than alcohol.
If you were to walk into a liquor store in Colorado and purchase a six-pack of beer that costs around seven dollars, you will pay a combined state and federal tax rate of about eight percent. If you are more interested in getting a spirit and decide to purchase a 20-dollar bottle of vodka, you will pay a combined state and federal tax rate of about 12.5 percent. In Colorado, taxes on alcohol are by volume, not by price, so the more gallons of beer, wine, or liquor you buy the higher your tax rate is going to be. However, in almost no circumstances should you pay close to 25 percent in taxes of the alcohol you buy. Yet that is exactly how the sale of recreational marijuana is going to be.
TABOR has given the voters of Colorado a special privilege to decide how high their state government can set their taxes. It has allowed voters to avoid tax increases on their income or property, while giving voters an increase in the amount they get in their tax returns. Since TABOR has been amended to the state constitution, Colorado voters have played a large role in the decision making process about the level of taxation and spending that the state government can do. While many tax increases have died at the ballots on Election Day (such as Amendment 66) the tax rate on the recreational sale of marijuana seemed to be a special case that did not warrant a striking down at the hands of Colorado voters. The results of this election are revealing of the priorities of Colorado voters at this time.
Brad Bachman, Staff Writer