Tax proceeds blooming despite drop in cannabis prices
By Claire Withycombe
Capital Bureau reporter
SALEM — Oregonians are buying more legal pot than expected. That means they also are poised to pay more taxes on it — about $12.5 million more in the current budget than state economists projected several months ago.
The average price of a gram of cannabis on the retail market has dropped from about $10 in late 2016 to just above $4 in mid-2018, according to state figures. But tax collections continue to grow anyway, due to brisk sales.
Altogether, Oregon consumers are projected to pay $176 million in state marijuana taxes during the current budget cycle that ends in mid-2019.
"Since Oregon levies its recreational marijuana tax based on the price of the product, the fact that actual tax collections have exceeded expectations is all the more impressive given the ongoing drop in prices," state economists said in a recent revenue forecast. "For every ounce sold, or every edible purchased, Oregon is receiving less tax revenue per item due to the price decline."
Wholesale prices also have decreased in that period, but less dramatically.
Consumers are turning away from other sources, like the black market and medical marijuana, and toward recreational retail stores, state economists say.
And more Oregonians are using cannabis, according to the forecast. Nationally, the Substance Abuse and Mental Health Services Administration says the percentage of adults who report using marijuana in the past month rose to 7.9 percent in 2017, up from 6.5 percent in 2015.
In August, recreational marijuana consumers bought more than $52.5 million worth of cannabis, according to the Oregon Liquor Control Commission (OLCC), which tracks sales data. The OLCC says in that month alone, recreational and medical consumers in Oregon bought at least 16,000 pounds of usable marijuana, about 400,000 units of edibles and tinctures, and more than 600,000 units of marijuana extracts and concentrates.
Recreational marijuana retailers must charge a 17 percent state tax on sales. Cities and counties can charge additional local taxes of up to 3 percent on sales, too, but state economists focus their projections on state marijuana taxes. Sales to consumers with medical marijuana patient cards aren't taxed.
The tax money, minus administrative costs, goes to a state marijuana fund that is dedicated to K-12 education, mental health services, police, cities and counties.
The state Revenue Department couldn't provide detailed regional data on marijuana sales taxes.
Disclosing the particulars of an individual tax return is illegal, explained Joy Krawczyk, a spokeswoman for the tax agency, in an email.
"Many areas only have a few businesses operating within their limits," Krawczyk said. "Providing information about how much was collected in that area — along with the use of other publicly available information or knowledge held by one of the other taxpayers in that area — could allow for the determination of specifics of individual tax returns."
In the years to come, collections from recreational marijuana are likely to grow, although there are significant risks attendant with the marijuana industry, state economists said.
A significant possible downside: cannabis remains illegal under federal law, leaving the industry open to risk in the event of a federal crackdown. Oregon U.S. Attorney Billy Williams has expressed concerns about the illegal shipment of Oregon marijuana across state lines. Williams also believes the state is producing far more cannabis than its residents can consume.
In the long run, state economists say that cannabis could continue to have an economic impact through "value-added products like oils, creams and edibles, in addition to niche, specialty strains" — a bit like the state's craft beer industry.