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US stock market daily report (February 20, 2014, Thursday)
A budget proposal released Wednesday by Colorado Governor John Hickenlooper gives the first official estimate of how much the state expects to rake in from tax on marijuana sales for next fiscal year, which begins in July, to the tune of an estimated whopping $98 million, easily blowing away the estimate of $70 million given to voters, on the marijuana-legalization amendment. The estimated tax collected include tax on medical marijuana. The legal pot market in Colorado is far exceeding expectations with estimated sales of nearly $610 million for next fiscal year. State sales tax on pot in marijuana is 12.5% while tax on medical marijuana is only subject to a 2.9% sales tax.
Blooming projections come from updated data about how many retail pot stores are located in Colorado at 163 as of February 18. Additionally, since there is no 'price fix' for pot, recreational pot is going for much more than the $202 an ounce forecasters estimated in 2013.
Retail sale of marijuana began January 1, 2014 in Colorado with strong sales to date although exact sales for January will not be made public until early next March. Olympia economic forecasters predict the state's new legal recreational marijuana market will bring in nearly $190 million for the state of Colorado over four years, starting in mid-2015.
Hickenlooper's budget proposal outlines plans to spend nearly $99 million next fiscal year on substance abuse prevention, youth marijuana use prevention as well as other priorities.
Hickenlooper wrote in a letter to legislative budget writers, who must approve the plan, "We view our top priority as creating an environment where negative impacts on children from marijuana legalization are avoided completely." The Governor added that, for regulating pot, "This package represents a strong yet cautious first step." Later in the year lawmakers can expect a more complete spending prediction from Hickenlooper.
Six priorities were given by Hickenlooper for spending the pot sales taxes. For use prevention by youths, spending plan allows $45.5 million. Substance abuse treatment allotted $40.4 million. Public health slated for $12.4 million. There is a proposed spending for an additional 105 beds in residential treatment centers for substance abuse disorders. A three-year "statewide media campaign on marijuana use," presumably highlighting the drug's health risks, is slated for $5.8 million. Colorado's Department of Transportation is slated to receive $1.9 million for a new "Drive High, Get a DUI" campaign, plugging the state's new marijuana blood-limit standard for drivers.
The state also has a 15% pot excise tax, not included in the Colorado pot tax plan. The excise tax is projected at $40 million a year designated for school construction, expected to to be reached next year.
Mason Tvert, a legalization activist who ran Colorado's 2012 campaign, said other states are watching closely to see what legal marijuana can produce in tax revenue. Tvert, who now works for the Marijuana Policy Project said, "Voters and state lawmakers around the country are watching how this system unfolds in Colorado, and the prospect of generating significant revenue while eliminating the underground marijuana market is increasingly appealing."
On Wednesday, the Denver Post reported that banks holding commercial loans on properties that lease to Colorado marijuana businesses say they don't plan to refinance those loans when they come due. Theoretically, property used as collateral for those loans is subject to federal drug-seizure laws, which makes the loans a high risk.
Landowners with preexisting leases with pot businesses won't be offered new loans by Colorado's two largest banks, Wells Fargo Bank and FirstBank. Commercial loan clients are being told by Wells Fargo and Vectra Bank to either evict marijuana businesses or seek refinancing elsewhere.
Wells Fargo spokeswoman Cristie Drumm told the Post "Our policy of not banking marijuana-related businesses and not lending on commercial properties leased by marijuana-related businesses is based on applicable federal laws"
Last Friday, the Obama administration laid out a path for banks to bring marijuana commerce out of the shadows and into the mainstream financial system. The U.S. Treasury Department issued new rules that could make it easier for banks to do business with marijuana dispensers. In separate guidance, the Justice Department directed U.S. attorneys not to pursue banks that do business with legal marijuana dispensers as long as the dealers adhere to the guidelines issued in August.
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