Legal Weed Will Cost an Average of $15 a Gram in Colorado and Washington

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Marijuana’s legalization comes with an unwanted consequence: higher prices. When you legalize a “drug” or an intoxicant, the government will naturally tax it. This part of progression and part of the legalization compromise. And when you compromise with the government, you’re going to get hit.

We’re only T-Minus 70 days until America has legal marijuana, and both Colorado and Washington will implement varying taxes (Washington’s are worse) on recreational cannabis in 2014. The consequence: the average price of weed over the counter for consumers in those states figures to be around $15 after taxes, according to Time and experts on this matter.

Compared to their current medical averages of $8-10, that is nearly double the price of medical marijuana in these states. On the dank side, this means medical marijuana isn’t going anywhere (and perhaps will become even more medical as retail’s issues reflect its need). On the schwag side, this means weed is going to get more expensive for just about everyone.

Regulators say that will put the price of marijuana pretax at an average of $12 a gram, a price that the ACLU’s Holcomb says is competitive with illicit pot on the street. Colorado votes on its pot tax — a less onerous 15% excise tax and 10% sales tax — next month. Sam Kamin, a professor at the University of Denver who advised Colorado on its regulations and who will also be serving on the ACLU’s panel to devise a plan for California, says finding the “sweet spot” for taxation is key. “We want this to be self-funding regulation that is robust, but we don’t want the price of legal marijuana so much higher than the black market that it becomes attractive again.”

Again, the evolution of marijuana requires–just like alcohol and cigarettes before it–that money goes to the coffers of our country. But, unfortunately, it’s not just recreational smokers looking for a fix that will feel this price hike: it will have an impact on medical marijuana prices.

This is one inherent draw back (and concern) that will hit these states in direct correlation to legalization–the other being a lower quality of weed. Legal weed means an influx of tourists, and tourists mean more weed will be purchased. It also means that anyone over the age of 21 without a medical marijuana card now has that option to exit the black market and purchase weed over the counter, legally. That’s a lot of new people buying weed legally.

Likewise,  that means that there will be a higher demand for legal cannabis and far less supply. For the Econ majors: when you combine a 15% or 25% sales tax (15% in CO, 25% in WA), that means the average price of pot simply must rise.

Currently, if you look at Colorado or Washington dispensary menus, it’s rare to find a gram over $10 and an eighth over $40. Yes, some dispensaries will charge in the $45-50 range, but in an increasingly competitive market, it’s less and less common.

Medical weed is cheap in these states–but when there’s less weed in those states, that can’t last for long. And there simply aren’t enough growers able to meet the states’ lofty regulations to produce the amount of cannabis necessary to maintain prices.

Look no further than California and Hollywood, where dispensary caps and eighth prices (for the real OG Kush) veer towards and often over the $50 line. California has well more legal patients than Washington and Colorado, and while pastures are green in California, the high concentration of people (who want that good stuff!) makes for higher prices. And when anyone over the age of 21 can buy weed legally, Colorado and Washington will look more like California when it comes to demand per capita.

Thus, it’s no surprise that dispensary owners and growers in Colorado indicate the market cap–currently around $2,000 for a pound of high grade marijuana)–will rise to the $3,000 and perhaps beyond sometime in 2014. Recreational marijuana will, after tax charge people on average around $55, and the medical average figures to soar near at least $45 and perhaps even $50 because of that .

For medical marijuana patients, it’s a drag. No, they won’t have to pay the recreational tax, but they will clearly feel its effect through this transitory system. Immediately, there is no clearcut solution to solve this high demand conundrum. There are already, as anyone in the industry will tell you, never enough growers, never enough hash blowers, and never enough dispensaries to satisfy the people’s insatiable desire for cannabis.

Being a legal, regulated industry worker isn’t an easy thing. It’s a stigma and a Scarlet Letter in some people’s eyes. Growing–the crutch of cannabis–is a difficult profession that only a select group of people have a mastery over. Partially because it’s still, you know, federally illegal.

If these professionals aren’t the ones manning mass-production ware-houses, the product sours, and for connoisseurs, finding the headiest bud becomes a hassle (unless they’re home-cooking).

And mass production is a very scary thing–and a road, thankfully, these states are not going down. Look no further than Canada’s plan to mass-produce weed out of a chocolate factory and prohibit home growing (something Washington is considering). If you can’t even try to be economical by growing your own legally, you’re forced into either: the legal rip off or the black market.

With mass-production and no home growing, the industry would become stale and nightmarish.

Consequentially, it’s also a real concern and a likelihood that these lofty taxes will help the black market maintain its existence. Why would a grower leave his cosy, unregulated job (particularly in the overly-strict Washington) to give 25% of his profits to the government and start charging his homie down the block more? Most black market growers likely won’t, and many pros could potentially migrate there as well.

The conclusion: recreational marijuana isn’t all flowers and nuggets.

With Colorado and Washington’s bold moves comes an unprecedented microscope on the two states. Everyone is watching their moves. While the movement must remain united and optimistic that the two testing grounds for legalization will be a success, there are real concerns, some of of which are caused by the government’s insistence on making legalization as difficult as possible for people whose professional lives depend on it.

It will be a roller-coaster ride from the get go, and one that no one can predict. If it flops? Fuck it–let’s all just move to Uruguay.

 

 

  

About Author

Barry has been writing about marijuana for over two years. Prior to joining Marijuana.com, Barry wrote about sports and music. His work has appeared on TIME, The Huffington Post, Deadspin, and elsewhere on the Internet. In his spare time, he enjoys disco and Kosher Kush.

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  • http://Enteryourwebsite... Aaron.kightlinger

    “Compared to their current medical averages of $8-10, that is nearly double the price of medical marijuana in these states. On the dank side, this means medical marijuana isn’t going anywhere (and perhaps will become even more medical as retail’s issues reflect its need). On the schwag side, this means weed is going to get more expensive for just about everyone.”

    Check out http://www.420Leaks.org for documents obtained via public records requests in Washington to see how folks are working to all but repeal medical cannabis.

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  • Randy Rhodes

    pot is like FOOD and should not be taxed.

    • Lyric Indosia Torus

      i tell everyone who talks about its tax that its TO BE TREATED absolutely no different than CILANTRO! NOT DRINKS N SMOKES! cilantro has no issues with bullshit “acceptance” its not thought twice about, not taxed and can be home grown and sold with no tax whatsoever. the legal case behind this treatment is completely rock solid , concrete, physical, and inarguable. im going to let them decide on how to treat it, let them settle in “the ways” and then immediately bring up a personal court case vs state and have the laws/bills/whatever tha fuck thrown out completely and replaced with the exact description of cilantro treatment stated above effective immediately upon hammer knock committed by the judge of that case

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  • whatever

    At that price the black market will continue to thrive……..even politicians can comprehend that much, they want it to fail…..

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  • http://marijuanacolorado.co 420 Colorado

    Weed sales have begun in Colorado and cost is more like $20 – $25 per gram after the 35% tax.
    http://marijuanacolorado.co

  • Sarah

    iam fixin to take a trip to denver colordo n iam commmin from carlsbad new n i was worndin i dont have a red card or a meical card how do i go buy buyin it while iam up there for a few days n where please help me

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  • the doc

    personally after doing the numbers for both a i502 producer/processor and i502 retailer I believe that the average sell price of a gram in Washington will $20-23 not including sales tax of another 9.6%. I would be surprised to see even $25g average plus sales tax.

    In Washington you have a 25% excise when you sell the weed to a retailer, then another 25% excise when you sell to the customer. The problem stems from not the sales tax, which is not classified as income for the business but from the IRS 280E tax code that both the retailer and producer can not claim a tax deduction for the excise payed to the state.

    The only tax deduction you get is the “cost of goods” which is ok for the producer, but terrible for the retailer cuz all there other business expenses like wages, rent etc, are classified as income and you must pay federal income tax on it.

    Thus from all the figures im looking at, a retailer might turn over 4-5million in turnover and get maybe 100K in his hand as take home profit after all the taxes are payed. Who in there right mind would do that? Turn over 100K per week so you can take home 2K….and that’s at a price of 20-23 per gram…

    All the state has to do to get the price of weed back down to $12-15 per gram is don’t have any excise at all on the i502 products and have a huge sales tax that the end user pays. Sales tax in not classified as income thus the federal government wont get the massive tax that classifying excise as income like it is at the moment.

    The state would still get the same amount of money and the Washington customers would get fair price for there weed, but as it stands at the moment the IRS will get the majority of the profit and both the business owners and there customers get screwed in the arse….

    That is both my view and the view of a few different accountants that I have consulted with to crunch the numbers…

  • CoolHandLuke

    What this insane taxing is going to do is keep the black market growers busy. Example, when legalization for recreational use starts spreading to other states, and it will by public demand and pressure, the officials and legislators are going to keep this extreme taxation standard going.This is going to create a scenario where herb users will be buying connoisseur grade herb from their neighbor a few houses down who will have a grow in a spare bedroom and selling it for $150 for an OUNCE , instead of going to a regulated dispensary who will be selling subpar mediocre grade herb that was grown in a giant warehouse and selling for $400 an ounce. This is going on now in Colorado. The black market isn’t going anywhere and I don’t blame tokers for buying from the home grower looking to make a profit. Washington’s I-502 had corporate backers behind it, that was one of the reasons why I-502 did not allow home cultivation for recreational use and a few months back in the fall of 2013, some of the officials wanted to even ban Washington MMJ residents from legally being able to grow their own so they would be forced to buy from the state regulated industry and I’m glad the officials failed in trying to ban them from growing MMJ. It’s about GREED.

    I don’t know how the officials in Colorado are going to handle the black market growers from making a profit but regular herb users who are Colorado residents aren’t going to pay $400 for an ounce when they can EASILY find a home grower thru word of mouth that will regularly supply them with $150 ounces of quality herb. In this economy, $400 dispensary ounces are going to create MANY home growers willing to chance selling outside the regulated industry and these dispensaries will eventually feel the huge chunk that profiting home growers are taking out of them. The govt knows legalization is soon going to go nationwide. Too many people are demanding the laws be changed. The corporations know this too. They are planning on taking it over with mega-chain store type business models. The main thing I’m concerned with is other state’s following Washington state’s so-called legalization model where home growing is still a felony unless you have a MMJ recommendation. THAT is NOT legalization ! The politicians and corporations do not want competition and that’s the real reason why Washington state’s I-502 banned “recreational” home grows.

    I can accept not being allowed to sell what I grow in my house, what I couldn’t accept is not being legally allowed to grow my own personal supply. I live in Colorado and I’m not worried about it, but I’m concerned for other non-legal states who will eventually pass recreational bills. I’m concerned that other state’s politicians will copy Washington state’s model of legalization and forbid their state residents from legally growing their own personal supply. If this becomes the trend in the next few years when other states begin changing their marijuana laws, then citizens will still face arrest for growing marijuana because the reality of it is that people WILL end up growing their own marijuana. Especially when they see the prices that it will be selling for in the legalized and regulated marijuana shops. If one cannot grow their own supply, then it is not really legal. Look at what the Canadian govt has done with their MMJ legislation, as of April 1st, 2014, Canadian residents who are MMJ registered will no longer be allowed to grow their own MMJ. There were corporate motives behind this. To make Canadians buy their MMJ thru the authorized MMJ facilities.

    This is something that legalization advocates in the US must fight for in having the legal right to grow their own because as the laws for possession begin to change allowing use, it’s going to skyrocket the amount of those who will grow their own to save money. I will never stop growing my own. I never registered with the state either before Colorado’s A64 passed, however I did keep a yearly MMJ recommendation from a doctor and grew my own supply.

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  • historyspeaks10

    i fail to understand this notion that people, tourists, will flock to CO and WA just to buy ‘legal’ weed. when i can buy just as good of quality or better ‘illegal’ weed in the town in which i live in another state, why would i load up and spend more money just to go to WA or CO to buy weed there? the idea is preposterous that it will create some type of tourist market other than those searching for some type of novelty experience. personally i dont need to have other people see me buying weed in a store when i can get it from the same reliable source i’ve been getting it from for the last 15 years.

  • Jim Woodman

    Willie Billie Bong says, “It ain’t fair”.

    https://soundcloud.com/jimwoodman/willie-billie-bong