I take the opportunity as history is unfolding to create the case for how to answer "how successful will Colorado's legalization be?"
We are almost at the end of the first quarter. The preliminary figures for the state indicate $2.1 million per month Recreational and about $1.4 million per month for medicinal.
Therefore, , Governor H. et. al., who opposes the purpose or promise, and cautiously enforces the will of the people and law, put out an estimate that the right was quick to glom upon saying that $137million is the revised estimate, not the projected $578million!
Disappointed??
Okay, so lets review the situation from the point of view of a Business Broker.
(A) Dispensaries and Recreational Dispensaries have the unique problem of being required by law to run an all cash business... only now being solved. If taxation requires compliance, but compliance means not opening up a Federally Insured account, then we have a reporting problem by definition!
Business operators famously keep poor records. They are involved in servicing their clients, meeting customer demand, and coordinating vendors. So, why do we expect the skill sets include math, accounting, or record keeping?
My experience reviewing hundreds of business opportunities over the years suggest that of the whole: 80% are well meaning but sloppy or contain some small errors; 10% are well kept; and 10% are just outright sad.
I think you must realize that most business owners are working ten hour days almost every day of every year. No matter how well intentioned, mistakes can be made. I would put bad actors at about 1 ~ 3% depending on how you define "bad."
Now try doing the whole thing as a cash basis accounting, with only cash. That adds burden at least, and for comparison if you legally compelled McDonalds, Verizon or Comcast to have to operate that way they would declare Bankruptcy overnight.
(B) January sales figures? Ever hear of "seasonally adjusted?" We have endless data about how the cold weather this winter has reduced retail activities across the board. This is only mitigated by the pent up demand, but there is also novelty effect to consider.
The pent up demand may skew the figure higher, but number of dispensaries was very limited. The novelty is a wash-- you would have customers who were trying it out to see what happens, and you would have regular clients possibly holding back to see how "safe" the situation appears. Therefore, the Season and travel prohibitions (not to mention that in January most licenses for Rec hadn't been approved.... most places are getting their permits in Summer) take the most weight for the adjustment.
So if adjustments are a push, and the skew goes to "January figures," we include that January will probably in five years time be known in the business cycle of Cannabis that January is typically an average month to the mean.
(C) I was wrong, or right it doesn't matter:
- One store that was permitted in CO on Jan 1, '14, reported off the record that they had sold approximately $250,000 in the first two weeks.
- from that anecdote I estimate ~$500MM in annual tax revenues for CO directly attributable to legalization! Closer to $1BB counting knockons
kilv
Okay, so if there are (A) underreporting and (B) adjustments, then we have to consider the truth of how accounting and valuations work... We wont have the actual final and adjusted January '14 numbers until July of 2015!!!
TIME TO PANIC?
Oh no, this really hasn't worked out... I guess this has just been a disappointing experiment in personal freedom and individual liberty.
I relented, now I ask critics of anti-prohibition to relent and admit that actually in these government projections they have met the threshold (where the first $40 million goes to schools) for revenue to run the program, the powers that be will have surplus to spread around, and once again, because Macroeconomics is so vastly complex and so mundanely precise, is an inaccurate art; that therefore any law that pays for itself, improves freedom and liberty, and pays for other state functions-- by definition in Business is a success!
MY PREDICTION?
I am going to hang my hat on the ~$170million mark as the definition for Rec Sales Tax of success. I will wait until July 2015 to see the whole picture, and then I will ask how the knock-on effects are calculated: employment, employees paying taxes, income generated being sent back into the economy; immigration; and other net benefits to the State.
I will point out that taken as a whole, the fuller effect, the net benefit to the economy will meet my prediction in my tweet, but again I am not that attached to how accurate my prognostication. That isn't my job!
The state probably has included to some effect the above considerations, but the willingness to structure the dialogue of a government program that not only pays for itself, but earns, as one of disappointment and failure is a non-starter for what will inevitably become the very early days of a multi billion dollar legitimate industry!
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