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Marijuana sales tax could increase under a proposal by Hickenlooper to bridge school funding gap

Chuck Grimmett
/
Creative Commons

Marijuana sales taxes could rise as much as 50 percent if the Colorado Legislature approves a measure proposed by Gov. John Hickenlooper on Tuesday to help bridge the gap in school funding.

As The Denver Post reports, Hickenlooper proposed the increase, which would take effect July and generate $42 million in additional revenues.

The state faces a $135 million shortfall in school funding, due in part toa constitutional provision that mandates a cut in residential property taxes, a primary source of funding for public schools.

The provision known as the Gallagher amendment states that residential assessed values can make up no more than 45 percent of the state’s overall assessed value, meaning if home values rise at a faster pace than commercial properties, as has been the case in recent years, it can trigger a statewide cut to residential tax assessments.

This has also impacted local governments that rely on property taxes as, in some cases, residential tax collections decrease by as much as 18 percent. And the property tax rate can’t go up without voter approval.

Increasing the tax on marijuana sales is likely to face resistance because it comes just one year after lawmakers approved a tax cut and the current law earmarks revenues from pot sales only for marijuana-related expenses, such as drug prevention and treatment, but lawmakers have the ability to direct it to other purposes.

Hickenlooper is also suggesting a cut to the senior homestead property tax exemption in half – a shift that would allow seniors to claim a tax break on the first $100,000 in their home value, rather than the first $200,000 allowed under current law - which would bring in another $68 million in revenue for schools.

Both proposals would require approval of the Democratic-controlled House and Republican-led Senate.