Outrun Change

We need to learn quickly to keep up with the massive change around us so we don't get run over. We need to outrun change.

Update on marijuana regulation – #13

Not a lot of news on how the recreational marijuana market is doing lately. There is some preliminary info suggesting the tax haul won’t be as big as expected. Will take more time before we can fully see how severely the regulatory burden is constricting the market.

Just as a marker for the future, I believe the heavy regulation of recreational marijuana will severely constrain the industry. We shall see. I will watch developments as they become visible.

1/1 – Daily Bulletin – New year brings new restrictions on medical marijuana enforcement – A paragraph in the omnibus spending bill approved by Congress in December would ban the U.S. Department of Justice from spending money to enforce federal marijuana laws in states with laws addressing medical marijuana. The law doesn’t repeal the federal ban on marijuana, only applies to so-called medical uses, and is only in effect for 2015.

The temporary prohibition was pushed by a conservative Republican from Southern California and a Democrat from Northern California, whom I assume is left of center. Article indicates the -R congressman favors legalization.

1/10 – Wall Street Journal – In Colorado, Legal Pot Fails to Meet Predictions of Supporters, Critics / Forecasts of Tax Windfall, Dire Consequences Don’t Prove Entirely True – Tax revenue isn’t coming in a strong as expected, which is no surprise to me. Estimates of state’s FY 15 revenue from recreational marijuana:

  • $100M – from the Governor’s office in 2/14
  • $  67.0M – previous estimate from state’s economists
  • $  58.7M – current estimate from state’s economists

Looking at the graph of tax revenue by month for calendar year 2014 shows the expected rising tax collections. From July through October the tax seems to have stabilized at an average of around $4.4 or $4.5 a month. Annualized, that would be around $55M a year.

Suggested reason for the shortfall is the 25% tax, which the article suggests is driving people to the medical marijuana stores. Of course you have to claim illness to get the medical stuff, but that is a low hurdle to clear if you want to save 25% of the purchase price.

Article says there is a huge amount of pot tourism. One survey suggests half the recreational sales in Denver and 90% in some mountain communities are from tourists.

As the article saying the adverse social impacts haven’t appeared, there are two main supports. Doctors and hospitals report a surge in calls and visits for over ingesting edibles. Second is a survey of high school students who admit using pot. Data points in the survey are 2011 and 2013, which is before the recreational sales went into effect. I think that is a bust in methodology.

Article says there is a spillover of recreational marijuana into neighboring states.

The social impact and spillover is not part of my focus. We will have to wait a while for that data to be compiled. To include in the article that there hasn’t been any social impact is as funny as it is unfounded.

On the other hand, the adverse financial effects of regulation are starting to appear.

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