Editor’s note: this article was cross-posted on PoliticsOfPot.com.
Colorado is getting high, really high – and that’s a good thing.
Six months after legalizing recreational marijuana, Walt Hickey of FiveThirtyeight.com writes about a new report distributed by the Colorado Department of Revenue, which provides an estimate of the size of new, legal market.
Statewide demand is now at 121.4 tons per year, 31 percent more than the previous Department of Revenue estimates and a whopping 89 percent higher than the frequently cited study by the Colorado Futures Center.
As expected, the majority of the increase is the result of resident smokers, but much of the growth of retail sales of pot — predominantly among tourists — is encouraging for those interested in the success of legalization.
Tax revenues from recreational marijuana are considerably higher than from medical marijuana, suggesting that the real success of recreational legalization is a function of state’s capacity to make money from pot taxes. Advocates in Colorado see that as an important early victory and may prove the best proof yet for widespread legalization.
Substantial tax revenues give legalization advocates the hard data they need for persuasive arguments in the legislatures of Alaska, Massachusetts and Oregon.
While residents represent most of the market growth — primarily medical customers — and they become heavier smokers than expected, the Colorado report notes that tourism is another substantial function of retail growth.
According to the report, the latest retail tax statistics from the Department of Revenue found relatively low conversions from medical to retail consumption. In its place, retail marijuana supplies are growing while medical marijuana somewhat levels off.
One indication could be that medical consumers prefer paying the medical registration fees instead of higher retail tax rates, or that medical centers outnumber retail outlets.
As a result, retail demand comes primarily from out-of-state visitors and consumers who previously purchased from black and gray markets in Colorado.
As reported in the Dish, Niraj Chokshi examines exactly who is toking up:
Adult residents either smoke pot (relatively) few times a month or nearly every day—there are few in the middle. More than half of all adult resident users consume the drug in some form fewer than six times a month. (More than 1 in 4 consume less than once a month.) At the same time, about 1 in 5 users are near or at daily consumption. While those roughly daily users account for just a fifth of the user population, they consume two thirds of the product fully.
Jon Walker points out other details:
A particularly interesting finding is where most of the new retail consumers are coming from. Because of the low-tax rate on medical marijuana and greater number of medical marijuana stores, most existing patients are not switching their buying outlets for now.
The report finds, “Using the latest retail marijuana tax statistics from the Department of Revenue, we also found that conversions from medical to retail consumption is relatively low. Instead, retail supply of marijuana is growing, while medical marijuana is relatively constant. This may indicate that medical consumers would rather pay the medical registration fees as opposed to the higher tax rates, or that there are currently relatively few retail outlets compared to medical centers. Therefore, the retail demand is derived primarily from out-of-state visitors and from consumers who previously purchased from the Colorado black and gray markets.”
For example, in Denver it is estimated that 44 percent of recreational marijuana sales are to visitors and the rate is even higher in some ski towns. Clearly, many people are coming the Colorado to enjoy the new freedom.
Earlier in the year, FiveThirtyEight.com examined price differentials in both the Colorado medical and retail markets — and a massive potential problem with revenue. Recreational pot is a much more expensive than medical marijuana across the board, and that price gap could lead to trouble for the long-term success of legalization.
Taxes are still a top priority for the state, and marijuana legalization activists both in Colorado and nationally have a stake in proving legal cannabis is a reliable revenue-generator. Although it is relatively easy for reasonably healthy people to obtain medical marijuana cards, recreational prices forcing individuals to medical pot in the first four months of Colorado legalization may not help the movement’s case.
Also expected, Hickey notes that few residents of the medical market are switching to recreational. That could present good news for legalization advocates since although the change from the medical to recreational has not materialized, the real shift—according to the report—is from the black market and out-of-state markets to Colorado’s legal recreational market.
The main takeaway: the Colorado medical market may not present the feared problems for the case to legalize, as long as tourists and former black-market customers stay with retail and not turn to medical marijuana.