Colorado Pot Tax Proving More Lucrative Than Expected

A blog about business and economics.
Feb. 20 2014 11:02 AM

Colorado Pot Tax Proving More Lucrative Than Expected

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A Colombian police officer holds a sample of marijuana, on Feb. 14, 2014, in Cali, Colombia.

Photo by Luis Robayo/AFP/Getty Images

About a month into Colorado's adventure in legal marijuana commerce, Gov. John Hickenlooper is raising estimates of how much tax revenue it will bring in from $70 million all the way up to $98 million.

It is worth noting, though, that you really want to think about the fiscal impact of legal pot in a more comprehensive way. A key question about the public health impact of legal marijuana is how does it change alcohol consumption patterns. To the extent that legal marijuana displaces legal booze purchases, you're going to see an offsetting decline in alcohol tax revenue. Which would be fine—a big win for public health, in fact—but not quite the financial bounty states may be hoping for. Alternatively, if legal pot leads to a complementary surge in beer drinking, you'll have lots of tax revenue but potentially large problems.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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