On the first day of the New Year, Colorado became the first state to open recreational marijuana dispensaries. Since then the nation has been watching closely to see what would come of legalizing marijuana.

In 2013, after the legislation passed, Colorado projected an annual one-hundred million dollars in tax revenue from recreational marijuana sales. January, the first month of legal sales, did show large sales numbers with The Denver Post reporting that Colorado collected approximately $3.5 million in tax revenue from recreational marijuana sales.  Whether or not the marijuana industry in Colorado can continue to see results like it did in January, will definitely be a factor for other states as they consider legalization.

January’s numbers proved that marijuana can be a very profitable industry.  Prior to the release of the January tax revenue statistics, Colorado Governor John Hickenlooper projected that taxes on recreational marijuana would generate about $125 million throughout the fiscal year from January to December.   However, the state legislature projected a much smaller sum. According to John Ingold of The Denver Post, the Colorado Legislative Council projected only $65 million. Although this is still a significant amount of revenue, it’s nearly half of what the governor projected and with the January numbers in, it seems the legislature’s predictions are more realistic.

Colorado economists say that the governor is being too optimistic about the tax numbers. Ingold also reported that Larson Silbaugh, an economist on the state’s Legislative Council, told the Joint Budget Committee that there are too many variables to make the January statistics accurate predictors of future numbers. The variables include the low number of dispensaries open and the hype around being the first state to legalize the recreational sale of pot in the country. Now that the hype has gone down, sales are likely to go down as well. Silbaugh said, “You can basically use that January number to justify any forecast you want.”

Another reason recreational marijuana sales are likely to go down is medical marijuana patients have no incentive to switch to the recreational market. Recreational marijuana costs about 20% more than medical marijuana, before all the taxes are added on to it. Recreational pot has a 25% retail tax while medical marijuana is subject only to the state’s general 2.9% sales tax. Jacob Sullum of Forbes reported that an eighth of an ounce of recreational marijuana costs about $70 as opposed to $20 – $25 for an eighth of medical marijuana. One can assume that most medical marijuana recipients find it more cost-effective to just keep buying medical marijuana rather than switching over to the recreational market.

How much tax revenue legal pot can bring in the future is unclear. However, it seems as though the January numbers won’t repeat themselves. Unfortunately for pro-legalization activists, marijuana may not be the savior of the economy, as many of them claim.