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Is The Colorado « Cannabis Tax » For Schools Working?
Colorado's experiment using cannabis revenue to fund state schools has worked. However, is this a model that can be used to drive reform in other places? The taxation argument is certainly a powerful one. Yet, it has to be customised to regional discussions and priorities.
Tax revenue allocated to schools from the legal cannabis trade was one of the most powerful arguments used in Colorado's legalization campaign in 2014.
To an extent, the idea has been a success. Taxes from the new industry have also given dilapidated in-state infrastructure a much-needed boost. About US$80 million has been injected directly into the state public school system since 2014. Some of this has been new school construction; some of it has come in the form of maintenance grants.
But this is not the whole story. When observed against the bigger picture, this is still just a drop in the bucket. One study indicates that the state’s schools need US$18 billion in capital construction costs through next year. Cannabis taxes have funded a microcosmic amount of what the school system needs.
Where is the rest of it?
PUBLIC EDUCATION DISMAY
It is hard for some Europeans to understand the situation actually facing American public schools. In Colorado or elsewhere. The wars waged on this battleground certainly do not just involve funding, but a lot of them certainly do.
For the better part of three decades (at least), American public schools have been slowly losing ground. They are not alone. Public services in general have declined.
In fact, the reason that the marijuana trade taxes are so significant is actually twofold.
First, this is the only industry in the U.S. where state taxes are not deductible from federal ones. This means that local impact from a state industry stays at home. This is terrible for the industry of course. But in this situation, it is good for local residents. And schools. However, in addition, the special focus and tax fund also helps. It earmarks funds that cannot be spent elsewhere.
So, yes, the money means something to a system in various stages of disrepair. But what does the impact really have here and elsewhere?
WHY THIS IS AN ISSUE
From the beginning, cannabis legalization has been a battle fought on multiple fronts. The sin taxes argument was always front and centre. It was a legitimate argument politically. Legalization also takes money away from the black market.
Money talks in the United States, especially in situations where most public infrastructure, not just schools, is crumbling. And the legalization business has proven to be catnip for the nation’s governors. Many of them are even Republicans these days.
If you look at the numbers, it is hard not to see why. National legalization could easily generate close to $30 Billion in new tax revenue annually.
On a state-by-state basis, that is a lot of green.
Further, many other states have followed Colorado’s lead. In Oregon, for example, 40% of state tax revenue from cannabis is earmarked for education. That is not true, however, in other states. Many seem to be waking up to the reality of a tax windfall thanks to a new industry.
Here is the ultimate issue. Everyone knows that this is a great, new, taxable industry. And for this very reason, it is also one more way to starve the federal government of this revenue too.
Right now, in the United States, there is a concerted effort to weaken the federal government. This means shrink services, as well as income. What rescheduling the drug will mean nationally, is the opposite of that. There are actually many reasons why federal reform may take much longer than it should. Even now.
There is a real need and hunger for the tax revenue produced at the source. While federal legalization would solve a host of issues, from banking to healthcare problems, it will also rob states of the direct tax revenue from the most dynamic industry in the country right now.
Welcome to the complexities of reform.
WHY THIS IS NOT AN ISSUE IN EUROPE
Outside of the United States, this is really a non-starter kind of conversation. Yes, taxes from the industry are absolutely significant. As are jobs, research and other income the industry generates.
However, other countries have not had their tax bases as shredded as in the United States. Nor have public school budgets ever been so closely tied to local property taxes. This is especially true in Europe where home ownership in general is much lower.
And while sin taxes are certainly attractive to legalization advocates everywhere, the double connection to education specifically is much less. Further, “drug use” - especially soft drug use, has always been treated as more of a public health issue than a crime.
In Europe, all these forces are adding a different flavour to the tax conversation. For example, Swiss activists have used the “sin tax” idea to successfully now push through a taxed, low-THC (essentially CBD) market that is finally taking off. The next step is clearly full legalization based on tax revenue alone.
In Holland, the more regulated industry will also start to generate identifiable taxes. However, these taxes will be fed into the regular channels that exist now. Public spending on schools will be affected as part of the whole.
WHERE THIS MIGHT BE A TIPPING POINT IN EUROPE
There are two places where regulated marijuana industries will make a huge impact on tax bases in Europe right now. This could be directed specifically to education. Or it could be toward a general fund for general tax purposes. Or medical research. The latter two are far more likely.
Where is this likely to be an issue? Spain and Greece.
In Spain, the Catalonian state government has essentially decided to go “Full Colorado.”
This means for now that the cannabis club culture will be connected to regulated grows. It also means that there will be taxes associated with the same. This is ostensibly a “non-profit” environment, however, there are always associated revenues with this business. That starts with real estate and grow material.
In Greece, the situation looks actually far more promising. Given the dire overall economic situation, the Greeks appear to be well on the road to establishing a true Mediterranean paradise. Think Jamaica but with fabulous, millennium-old ruins. This is an idea that could easily float right now in every German banker boardroom. Especially as Germany has just legalized medical use. In Greece, that tax income will absolutely be used to finance schools. But it will also be used to refloat the credibility of a bankrupt government.
From a bird’s eye view, in fact, Greece has just come to this moment faster than the U.S.
They did not even have to elect a president Trump to do it.
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