15 Pages Posted: 23 Oct 2012 Last revised: 13 Nov 2012

Date Written: 2012

Abstract

The tax rules governing newly legalized marijuana in Washington and Colorado are described and evaluated here, with particular attention to revenue estimates and likely federal reaction.

Washington imposes three tiers of cascading 25-percent taxes.

Colorado caps excise taxes at 15 percent until 2017. Any percentage-based excise tax as well as any additional taxes will require voter approval, which cannot come before next November.

The relatively weak revenue rules of failed 2012 legalization proposals in Oregon and California are also discussed.