All About the Green: The Potential Economic Benefits of Marijuana Legalization

On October 19th, Canadian voters granted a majority mandate to the Liberal Party of Justin Trudeau. During the 11-week election campaign, Trudeau repeatedly vowed that a Liberal government would legalize and regulate the production, sale and consumption of recreational marijuana, an abrupt change of policy from the staunch prohibition maintained under Stephen Harper’s Conservative Party.

The Liberal Party asserts that the legalization and regulation of marijuana will prevent youth from accessing the drug, decrease crime rates and take money out of organized crime. While the sociological impacts of the Liberal plan have been mired in the usual insecurity, contradiction and politicization surrounding much of the discourse about marijuana legalization, one aspect of the debate is proving to be significantly less controversial than most of the prevailing dialogue: the economic benefits. The legalization of marijuana has the potential to create (and save) an enormous amount of money for the federal and provincial governments.

Let’s briefly explore and compare some of the proposed economic benefits of legalizing marijuana in Canada.

Legalization could generate a lot of money for the federal government.

In a policy paper printed in 2013, the Liberal Party estimated that marijuana regulation would contribute an extra $4 billion of revenue per year to government coffers.

This substantial annual infusion would be supported by a $65 million investment over the first five years, which would be required to implement the new cannabis regulatory scheme. All told, that’s a projected profit of $3.935 billion dollars annually.

If the Liberal government is able to successfully institute a regulatory framework for the sale of cannabis, Canadians can expect the federal government to benefit from a substantial increase in revenue. Perhaps this could trickle down as further tax breaks?

Legalization could also generate a lot of money for the provincial governments.

Under a new Liberal framework, the sale of marijuana will be subject to PST in addition to GST. In British Columbia, individual dispensaries have already paid over $200,000 each in GST, and in total this will translate to millions of dollars in revenue for the provinces. In Colorado and Washington, two US jurisdictions that recently legalized the regulated sale of marijuana, the state governments have generated over $70 million in tax revenue annually. Colorado and Washington have populations similar to the Canadian province of Quebec. The legalization of marijuana is likely to provide enterprising provincial governments with a lucrative source of income.

Legalization could save the government a lot of money.

Under the Conservative system, millions of dollars were spent equipping law enforcement to sustain the prohibition of marijuana. Between 2003 and 2012, 44,522 people in British Columbia alone were detained and charged for crimes related to cannabis. While critics have taken exception to the enforcement of marijuana prohibition for a number of reasons, the Liberal Party has argued that prohibition and detainment places an unnecessary financial strain on the criminal justice system. By legalizing and regulating marijuana, the Liberal government hopes to save as much as $500 million annually on law enforcement and legal expenses. Advocates for the Liberal legalization strategy hope that cannabis regulation will free up government funds that can be diverted to other issues.

The debate about marijuana legislation is clouded in controversy. Despite the assertions and majority mandate of the Liberal Party, many Canadians are unsure of what the proposed legalization of marijuana will mean for the future of Canada. However, if precedent and projections are any indication, Canadians can expect the country to at least benefit from a significant source of new revenue.

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