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fuggin_pothead

June 10, 2004 - Vancouver, BC, Canada



Vancouver, British Columbia: Marijuana cultivation and use in Canada is so widespread that Parliament ought to tax and regulate it like any other legal product, concludes a study released Wednesday by The Fraser Institute, an independent economic think-tank in Vancouver.

The study's author - Stephen Easton, an economics professor at Simon Fraser University - estimates that taxing marijuana would generate an additional $2 billion per year in federal revenues.

"Marijuana is too easily produced and exported to be controlled with the tools available to law enforcement in a free society," he writes. "The return on investment is sufficiently great so that for each marijuana growing operation demolished, another takes its place. ... As a consequence, the broader social question becomes less about whether we approve or disapprove of local [marijuana] production, but rather who shall enjoy the spoils. As it stands now, growers and distributors pay some of the costs and reap all of the benefits of the multi-billion dollar marijuana industry, while the non-marijuana smoking taxpayer sees only the costs."

The study estimates that there are as many as 17,500 marijuana grow operations in British Columbia alone.

"Unless we wish to continue the transfer of these billions from this lucrative endeavor to organized crime, the current policy of prohibition should be changed," Easton concluded. "Not only would we deprive some very unsavory groups of a profound source of easy money, but also resources currently spent on marijuana enforcement would be available for other activities."

 

HappyMan

Of course to be fully honest one needs to subtract the public health cost from that $2 Billion. And yes, there is a health cost to using marijuana, and that cost would be paid by Canada's national health system.....

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solutions

Huh, what would these health costs consist of? Considering that legalization will not lead to (any substantial) increase in marijuana consumption maijuana related health costs will not increase either.

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HappyMan

I didn't anything about an increase in health cost. I pointed out medical care cost should be deducted from estimates of revenue. Legalization wouldn't just dump $2billion of the Canadian government's coffers.
Also, money earned through the illgeal sale of Marijuana is taxed. It is taxed in the form of property and sales taxes. Legalization would crater the price of marijuana and reduce cash flow making it harder if not impossible for many growers and dealers to make a living.
But of course if the price per unit of marijuana were reduced, consumers of that product would redirect their spending elsewhere.

fuggin_pothead

Most growers would expand their operation upon legalization. Also dealers would come in the form of coffee shops, or other designated areas for Marijuana to be sold. Most Marijuana dealings would only be done in mass trade, high amounts of Cannabis at a time. I don't think dealers or growers would have any trouble making a decent living, or even just to make some extra cash on the side, and carry on a day job.

 

solutions

I'm not sure if the price would necessarily drop, but I agree that legalization could make it impossible for people now growing and selling to operate in the official circuit.

On one hand legalization would reduce the risk factor for growers and dealers that the consumer eventually pays for, so those costs would decrease substantially. Legalization could also allow growers to produce more efficiently for lower costs.

But legalization might bring some price increasing factors. The most obvious would be direct taxation. In Holland for instance legalization would mean a 19% value added tax would be charged. In addition a government could impose special taxes like the excises we have here on tobacco, alcohol or gasoline, accounting for some 72% of the consumer price of these products. A government might be tempted to artificially increasing the consumer price by adding such an excise to discourage consumption. Of course a smart government would be very careful with this; the higher the price for legal marijuana the bigger the unofficial circuit will remain.

There are some other cost affecting factors to consider. Legalization could be accompanied by a licensing system for growers with strict rules for production like these Good Agricultural Practice guidelines or Good Manufacturing Practice that apply to the licensed medical marijuana growers in the Netherlands. Their direct production and distribution costs are between (US)$ 4 and 4.50. Leading to a much higher consumer price than the illicitly cultivated marijuana in coffeeshops, probably with a lower profit margin. In this instance the rules are extra strict because it is medicine, and the 2 licensed growers have a monopoly (or is that a duopoly?). Marijuana for recreational use would probably fall under some sort of consumer-safety regulations. If too restrictive rules like these could make it close to impossible for small scale growers to operate commercially.