Gold Dome, Jacob Sullum, Politics

Don’t forget markets and choice in Amendment 64 implementation

Amendment 64, the ballot initiative that legalized cannabis in Colorado, was also known as the Regulate Marijuana Like Alcohol Act of 2012. Under “Purpose and Findings,” it says marijuana should be “taxed in a manner similar to alcohol” and “regulated in a manner similar to alcohol.” How is that working out so far? Judging from the recommendations made by the Amendment 64 Implementation Task Force, not so well.

Start with taxes. Colorado’s excise tax on beer is 8 cents per gallon, in addition to a federal tax that of 58 cents per gallon. According the U.S. Treasury Department, the federal tax comes out to a nickel per 12-ounce container. Let’s be generous and say the state tax adds another penny, so that’s nine cents a bottle, or a rate of about 8 percent if you buy a $7 six-pack. For distilled spirits, the federal tax is $13.50 per “proof gallon” (which is 50 percent alcohol), to which Colorado adds a tax of about 60 cents per liter (regardless of alcohol content, apparently). The Treasury Department says the federal tax amounts to $2.14 per 750-milliliter bottle, to which, by my rough calculation, the state tax adds something like 35 cents; let’s call it $2.50 per bottle in total excise taxes. That’s equivalent to a 12.5 percent tax on a $20 bottle of vodka.

By comparison, the task force says the state should impose a 15 percent excise tax on marijuana at the wholesale level, plus a special sales tax at a “reasonable rate.” According to the task force’s report, some members thought 25 percent would be reasonable, while others thought it would be “too high, encouraging the survival of the illegal market and increasing the incidence of home cultivation among private citizens” (which Amendment 64 allows). Let’s say the sales tax is 10 percent. Without knowing the wholesale “cost” (a largely notional number when retailers are required to grow at least 70 percent of their inventory, as the task force recommends) or the retail markup, it is hard to say exactly how much these levies would increase the price for an eighth of an ounce, which currently sells for about $25 in Colorado’s medical marijuana dispensaries. But these taxes clearly are much heavier than the taxes collected on alcoholic beverages.

What about regulation? While newcomers are free to make and sell alcoholic beverages (provided they obtain the necessary licenses), the task force wants the recreational marijuana market limited to existing dispensaries for a year. While alcohol regulations generally prohibit vertical integration, with exceptions for businesses such as brewpubs and wineries that sell directly to the public, the task force wants to require vertical integration (for the first three years at least). While alcohol can be consumed in bars and restaurants, the task force seems determined to foreclose any such option for marijuana (although the rules it recommends seem to leave some loopholes). While sellers of alcoholic beverages are free to advertise on TV and radio, on billboards, and in general-interest publications, the task force wants to ban such ads for state-licensed pot stores (a form of censorship the state constitution does not seem to allow).

There are various other ways in which the legal treatment of marijuana in Colorado, as discussed so far, sharply diverges from the legal treatment of alcohol, despite Amendment 64’s promise that they would be similar. In a recent letter to John Hickenlooper, a former brewpub owner who is now Colorado’s governor, Bill Althouse, a Colorado activist who identifies himself as executive director of the Campaign to Regulate Alcohol Like Marijuana, offers some modest proposals for alleviating this disparity, including:

  • If a child sees a parent consume alcohol, Protective Services may remove the child from the home.
  • If a parent has one drink, it will cause loss of custody of children in a divorce case.
  • No alcohol may be served by the drink anywhere in Colorado.
  • All publicly viewable consumption at sporting events, backyards , political rallies, fraternal organizations, breweries, vineyards, farmers markets, and picnics, even if the alcohol is free, is a crime.
  • Alcohol consumption outside a private home is a crime.
  • No alcohol advertising is allowed except for adult only publications.
  • All alcohol production and sales must be a monopoly selected by the State.
  • All craft beer is illegal, only large brewers may be licensed as retailers
  • All alcohol sales are package sales only, must be in child proof containers and placed in plain dark paper exit packaging stapled shut before leaving the store.
  • Non Colorado citizens will be limited to one bottle of beer per purchase.
  • Colorado citizens will be limited to a six pack per purchase.
  • Home brewers must grow their hops under artificial lights in a separate locked space and brewing must also occur in that locked space. Using sunshine is a crime.
  • Alcohol retailers must only sell alcohol and nothing else.
  • Outside investment in beer production or hops growing is illegal.

As Colorado’s legislators consider the task force’s recommendations during the next month or so, they should keep Althouse’s suggestions in mind. Maybe that will help steer them toward policies that show greater respect for free markets, consumer choice, and freedom of speech.

Jacob Sullum is a senior editor at Reason magazine and a nationally syndicated columnist.  This article was originally published at reason.com

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