Campaign launched to tax recreational pot

The Colorado Statesman

Proponents of a campaign to tax newly legalized recreational marijuana in Colorado officially launched the effort Wednesday on the heels of an announcement by the Department of Justice that it will defer to the state on enforcement.

The Committee for Responsible Regulation is comprised mostly of marijuana industry representatives and union officials with the United Food and Commercial Workers Local 7. But the campaign has widespread support, including local municipalities and business organizations.

Proponents have the backing of Gov. John Hickenlooper, Attorney General John Suthers, the Colorado Municipal League, the Denver Metro Chamber of Commerce, Colorado Concern and the Colorado Association of Police Chiefs, among others.

The support offers a noticeable departure from the Amendment 64 campaign last year to legalize marijuana, in which those groups and individuals opposed the effort. But with prohibition in the rearview mirror, the state is faced with the challenge of enforcing and regulating the burgeoning industry.

Increasingly, recreational cannabis is in the public spotlight. Marijuana activists on Wednesday placed a bill- board near Sports Authority Field at Mile High — where the Denver Broncos play and kicked off the season on Thursday — highlighting the relative safety of marijuana compared to alcohol. It calls on the NFL to “stop driving players to drink” with harsh penalties for marijuana use, noting that, “A safer choice is now legal.”

And over Labor Day weekend at Dick’s Sporting Goods Park in Commerce City, where jam band giant Phish performed to an audience estimated at over 30,000, the band covered Peter Tosh’s reggae tune “Legalize It,” offering a nod to the end of prohibition in Colorado.

But the increased attention brings added scrutiny and a need for rules, regulations and enforcement. Proposition AA would levy a 15 percent excise tax and a separate 10 percent special sales tax. Those dollars would go towards enforcement costs, with the first $40 million of the excise tax earmarked for capital school construction.

The legislature referred the measure to voters in May when Hickenlooper signed a package of marijuana regula- tory bills at a ceremony at the Capitol.

For Assistant House Majority Leader Dan Pabon, D-Denver, the ballot initiative is the last part of a “regulatory marathon” that consumed much of his time and resulted in a chaotic end to the legislative session as lawmakers tweaked the dozens of rules and regulations.

“Now on the final leg of this marathon, the last six miles I would call it, is the funding of the regulations,” Pabon said at a news conference outside the Capitol announcing the campaign.

The actual dollar figure for revenue is unknown because the industry is new and it is unclear how many people will take advantage of legalization. But estimates place it at $70 million.

“We really think that we need to keep the promise to Colorado voters by passing this; by establishing a regulatory structure and making Colorado a model for how to appropriately and responsibly regulate this product,” explained Brian Vicente, chairman of the Committee for Responsible Regulation and co-author of Amendment 64.

Sen. Pat Steadman, D-Denver, who has been an advocate for marijuana activists at the legislature, also attended the news conference on Wednesday. He believes the rules and regulations established by the legislature fulfill a promise to voters that continues with Proposition AA.

“What you see in the legislation that passed this last session to implement Amendment 64 is fully in keeping with the intent of voters,” he said.

Rep. Jonathan Singer, D-Longmont, who sponsored the legislation that referred the measure to voters, said the tax question is about making the marijuana industry “pay its own way.” He said it is encouraging to see a wide range of groups come together to support the ballot question.

“Never before have we really seen law enforcement come together with members of the marijuana business community to support a tax initiative on this new burgeoning industry,” Singer pointed out.

The industry itself reminds voters that it is perhaps the only industry that is calling for regulatory taxes. Norton Arbelaez, founder of the Medical Marijuana Industry Group, points out that a tax is a good faith promise to the people of Colorado that the industry will operate responsibly and legitimately.

“This is good for business because it sets the stage for responsible business owners to operate within a well regulated business environment,” explained Arbelaez.

For Mark Belkin, community affairs and organizing director for UFCW Local 7, which represents food and commercial workers, the new industry offers an opportunity to create thou- sands of jobs in Colorado.

“Imagine if there was news that there would be thousands and thousand of new jobs created in Colorado,” remarked Belkin. “Well, that’s the reality with the implementation of Amendment 64.”

Polling back in April indicated voter approval at 77 percent. But some opponents are surfacing within the marijuana community itself. Rob Corry, a well-known medical marijuana attorney, is leading the opposition.

He believes the industry has already been established as legitimate and that an expensive tax could empower the black market. Corry points out that local municipalities are also imposing their own taxes, which could result in a total tax of as much as 40 percent or more.

“The black market will step back into Colorado,” opined Corry. “And the black market would be completely untaxed and unregulated.”

Federal response

The primary goal of Amendment 64 was to regulate marijuana like alcohol, but also to erase underground markets. Colorado and Washington, which has also legalized marijuana, have sort of become the test cases for the federal government.

U.S. Attorney General Eric Holder last month wrote in a memo to federal prosecutors that the Justice Department would not target legalization in Colorado and Washington, turning a blind eye to a marijuana marketplace.

But the Justice Department is watching closely, making sure that the states can keep the federally illicit substance away from children and limit gang activity. Another concern expressed by Holder is trafficking into other states where marijuana remains illegal.

The Denver Post on Tuesday reported that marijuana is flowing out of Colorado in greater quantities than ever before. Traffickers are using legalization as a shield to grow large quantities of the drug in order to sell it in other states where the price can be more than double what it is in Colorado.

Since 2009, the Drug Enforcement Agency reported a spike as much as 300 percent in Colorado marijuana seized in other states. Many of those statistics, however, are speculative, as the agency is rarely able to confirm where the cannabis originated.

U.S. postal inspectors reported 15 packages seized in 2010 containing marijuana originating from Colorado, compared to 209 in the first five months of 2013, according to The Denver Post.

If Colorado is unable to keep its marijuana within the state, the Justice Department could choose to crack down. U.S. Sen. Patrick Leahy, D-Vt., has called for a hearing on Sept. 10 to clarify federal response. More answers could come then when the Senate Judiciary Committee meets.

But for the moment, there is optimism that the feds will respect the will of Colorado voters. Following the release of Holder’s memo on Aug. 29, a flood of response poured in.

“We share with the federal government its priori- ties going forward. We are working to improve education and prevention efforts directed at young people and on enforcement tools to prevent access to marijuana by those under 21 years of age,” said Hickenlooper. “We are also determined to keep marijuana businesses from being fronts for criminal enterprises or other illegal activity, and we are committed to preventing the exportation of marijuana out of Colorado while also enhancing efforts to keep state roads safer from impaired drivers.”

Suthers appeared frustrated that his office had to wait nearly 10 months for clarity from the feds.

“The position taken by DOJ is very much along the lines I anticipated and I remain mystified as to why it took so long to articulate it,” said Suthers. “Clarification of the federal position, however, is nevertheless welcome. Colorado state government will continue to develop a regulatory scheme that is as effective as possible under the dictates of Amendment 64 with recognition that the federal government will take action if the state regulatory scheme does not deter activity that runs afoul of federal enforcement priorities.”

Pabon was relieved that after spending months crafting a regulatory framework, the Justice Department indicated its willingness to let the experiment play out.

“We drafted the most robust marijuana regulations in the country because public safety is our top priority,” said Pabon. “The feds’ action validates all our hard work to protect public safety, comply with the will of the people of Colorado and keep marijuana out of the hands of kids and criminals.”

But the industry still faces issues because of its federal prohibition. One of the most significant problems facing the industry is the banking issue. Because marijuana remains illegal federally, banks — which are backed by the federal government — have declined to do business with cannabis-related businesses.

U.S. Rep. Ed Perlmutter, D-Golden, on Wednesday sent a letter to banking regulators urging them to issue formal guidance to banks, credit unions and other financial services providers allowing them to provide regular banking and financial services to licensed marijuana-related businesses.

Perlmutter has also introduced the Marijuana Business Access to Banking Act, which would allow financial institutions to provide banking services to marijuana businesses.

“We need to address the public safety, crime and lost tax revenue associated when these legal and regulated businesses are operating in a cash-only system,” said Perlmutter. “We also need to provide financial institutions assurance that they can make their own business decisions related to legal, financial transactions without fear of regulatory penalties or criminal prosecution.”

But U.S. Rep. Cory Gardner, R-Yuma, is a bit perplexed by the federal government’s recent guidance on marijuana policy. He believes that by allowing Colorado to proceed, the feds raised a whole new set of questions.

In a letter to Holder, Gardner questions the Justice Department’s constitutional authority on overriding federal law.

“While I commend the DOJ for finally issuing guidance after nearly 10 months since Colorado voters legalized marijuana’s recreational use, its new policies are in contrast to the Controlled Substances Act. Essentially, DOJ policy now allows states like Colorado to opt out of federal marijuana laws. Do you believe the DOJ has the authority to override federal law?” Gardner wrote to Holder. “Do you believe you have the authority to change law without the approval of Congress?”

Overall, however, the response to the Justice Department has been positive. Mason Tvert, co- author of Amendment 64 and a longtime marijuana activist who now acts as spokesman for the Marijuana Policy Project, called Holder’s memo historic.

“The next step is for Congress to act,” said Tvert. “We need to fix our nation’s broken marijuana laws and not just continue to work around them.”

Peter@coloradostatesman.com