Pubdate: Wed, 13 Dec 2017
Source: Toronto Star (CN ON)
Copyright: 2017 The Toronto Star
Author: Thomas Walkom
Page: A17


The legalization of marijuana promises to provide governments with a
tidy little windfall. That's the dirty secret the country's finance
ministers didn't want to talk about when they were cutting up the cash
this week. But it's true.

To hear the provinces talk, you'd think legalized cannabis would be
nothing but a drain on their revenues. They complain that the legal
pot regime will be more costly to police than the current illegal one
- - without exactly explaining why.

For instance, it's not clear, in the short run at least, that there
will be any more stoners careering along the highways than there are
now. Statistics Canada estimates that roughly 12 per cent of Canadians
over the age of 14 have smoked weed at least once in the past year.

But governments insist that their motives are not sullied by the
desire to obtain filthy lucre from what is predicted to be a booming
new industry.

"Our priority is not revenue," New Brunswick Finance Minister Cathy
Rogers said Monday following a meeting in which Ottawa agreed to give
the provinces 75 per cent of any excise taxes it collects on pot
sales. Provinces will also be able to levy HST or GST. For a while,
governments won't be rolling in riches. Partly, that's because there
will be start-up costs. Ontario, for instance, has chosen to have a
public monopoly on the sale of marijuana. That means it must build or
rent retail outlets.

But largely, it's because governments will be deliberately offering
weed at prices low enough to drive illegal competitors out of
business. Think of it as a form of predatory pricing. Over time,
governments can expect to do well from legalizing this particular
vice. Colorado, the first U.S. state to legalize recreational
marijuana, saw its pot revenues more than triple in three years,

The Parliamentary Budget Office has calculated that tax revenues from
marijuana, while modest initially, will rise for three reasons.

First, the cost of producing cannabis is expected to fall
significantly as new legal growers exploit economies of scale. This
will give governments more room to hike taxes without raising prices.

Second, overall cannabis sales are expected to rise as new, weed-laced
products, such as hash brownies, come on the market.

Third, the market is expected to grow as users opt for the
standardized quality that legal producers can offer. The end of
Prohibition, for instance, put many moonshine distillers out of business.

Ontario Finance Minister Charles Sousa says he expects tax revenues
from cannabis sales to rise "quite substantively" over time. I'd bet
he's right.

Marijuana is unlikely to outweigh, say, personal income taxes as a
source of government revenue. But history suggests that so-called sin
taxes can still produce significant sums. Ontario, for instance,
already nets more than $6 billion annually from gambling, tobacco and

Politically, however, the real advantage of sin taxes is that they
allow governments to play a double game. They can decry an activity
even as they profit from it.

Tobacco smokers are already familiar with this gambit. Marijuana
smokers should ready themselves for it.

Indeed, the entire rollout of the federal government's marijuana
strategy has been an exercise in curious rhetoric.

The strategy began life as a libertarian pitch by Liberal Leader
Justin Trudeau to demonstrate he was hip with the times. Why
criminalize a widespread activity that is arguably no more harmful
than drinking alcohol?

But once Trudeau became prime minister, his pot strategy was
miraculously redefined as a way to protect children from the
depredations of drug dealers.

Just why allowing adults to legally buy marijuana would help to keep
it out of the hands of children was never satisfactorily explained.
But that didn't seem to matter.

Left out of this ever-changing story was the money. The sale of
hallucinogens is a big and profitable business. Companies want the
legal right to exploit it. And governments want a cut of the action.
That's what this week's finance ministers' meeting was about.
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MAP posted-by: Matt