Pubdate: Wed, 21 Nov 2012
Source: Vancouver Courier (CN BC)
Copyright: 2012 Vancouver Courier
Author: Matthew Claxton


What is really at stake if British Columbia follows Washington State 
and Colorado and successfully legalizes marijuana?

Money, of course, that other green substance. Let's start with the 
estimated value of the illicit pot growing industry here in B.C. It's 
often claimed to be between $6 billion to $8 billion, a fairly rough 
estimate given that none of the principals are filling out any 
corporate tax forms or quarterly earning reports.

Even if it's lower than the estimates, it's a huge industry. By 
contrast, in 2011 the entire forest industry had a value of just 
under $10 billion.

If the local pot growing economy goes legit, we'll see some unusual 
effects, only some of them strictly economic.

Everyone who argues for legalization points out that we can then tax 
the bejezus out of marijuana. How much would that raise?

In B.C., the tax rate for small businesses is 2.5 per cent, 10 per 
cent for big businesses. Let's assume, very conservatively, that we 
get nothing but small Mom and Pop artisanal ganja growers and 
small-scale retailers. Let's also take the lower $6 billion valuation 
of the industry.

That would mean about $150 million in provincial tax revenues off the top.

But wait! The cost of growing pot will drop substantially if it's 
legal, and grown in the open. Maybe it won't be that costly to sell?

Except that it will be taxed at the point of sale, too. So that's 
another few million bucks a year. Sin taxes, plus sales taxes, add up 
quickly. And that's not even considering the federal tax 
implications. Then there are the personal income taxes that would be 
paid by those legally employed in the industry.

So what about effects beyond the purely taxational?

We have no grow-ops in houses, because growing outdoors or in 
greenhouses is cheaper, so there are a few more houses on the market 
than otherwise. Not enough to bring down prices, though.

We have a whole lot of unemployed criminals. Some fraction of them 
will go legit and turn themselves into small farmers and 
storekeepers. Others will not make this transition. I'm thinking of 
the Langley man who stabbed another man to death purely out of the 
suspicion that the other man might have stolen his pot plants. It's 
hard to imagine a rage-filled killer fitting in well at a chamber of 
commerce meeting.

So some gangsters are going to try to move into the remaining illicit 
drugs, like heroin and cocaine. There might be a gang war as the 
crooks fight over the pieces of a smaller pie. While we'll see more 
government tax revenues, this will be somewhat offset.

A significant number of small businesses will close their doors. 
They'll all be places that could plausibly accept a lot of cash 
payments: restaurants, bars, hair and nail salons, corner stores, and 
so on. Because in every community where there are pot growers, there 
is a need to launder money.

In the long term, our society wouldn't look a lot different. Some 
people smoke pot now, some people will never smoke it if it's legal. 
(Like me.) People commit crimes now, they're not going to stop if pot 
is legal. Things could be a bit more stable, both tax-and crime-wise 
in the long term, but it won't turn B.C. into a magical land of 
unicorns and pixies.

But we don't make policy decisions based on false ideas that we will 
create utopias or dystopias. We should make them based on what seems 
like best practices. To me, it looks like things would be better with 
legal marijuana than with the current system.
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