Everyone in Colorado may get a pot tax refund
NEW YORK (CNNMoney) — Thanks to Colorado’s new pot tax and a quirky state law, residents may get a special one-time tax refund next year.
The total could be about $59 million. That’s how much the state expects to collect from taxes on the sale of recreational marijuana, which Colorado legalized last year. Some of that money was slated for schools, but it may go back into taxpayers’ pockets instead.
The reason for the refund: Colorado is expected to collect more in total tax revenue than it thought it would this year. That’s not permitted in a year the state rolls out a new tax, which this time was the 28% pot tax.
The pot tax itself didn’t generate as much money as expected.
But the state is poised to take in $219 million more in total revenue than it thought it would during the current fiscal year, which ends June 30.
Here’s what happened.
Whenever a new tax is implemented, a law in Colorado aimed at protecting taxpayers’ rights goes into effect.
It requires the state to estimate its total annual tax collections, and that number effectively serves as a cap on the amount of taxes it can keep.
Colorado issued such an estimate when it introduced the pot tax, and now it looks all but certain that total state taxes will surpass that threshold.
“We would have to experience a pretty significant economic downturn between now and June not to be in excess [of the cap],” said Phyllis Resnick, an economist at Colorado State University.
That means a refund is likely in order. And under the law, the state will have to give back the money collected from the new tax — the $59 million or so it expects to collect on pot sales.