Move carefully on cannabis taxes

The first legal sales of recreational marijuana in Canada are still months away, but some provincial premiers are already demanding a bigger piece of the action.

Prime Minister Justin Trudeau’s opening offer this week to evenly split a 10-per-cent excise tax on cannabis sales between Ottawa and the provinces was quickly scorned by premiers such as Alberta’s Rachel Notley and Quebec’s Philippe Couillard.

With heady visions of new revenue streams cascading into their provincial coffers, these and other premiers told Trudeau the provinces will bear most of the costs of legalizing cannabis. Hence, they deserve most of the tax dollars that will come with it — not just half.

This grubbing for money is not just unseemly, it’s dangerous.

Trudeau has repeatedly insisted he’s legalizing cannabis it to keep it out of the hands of youngsters and prevent the marijuana industry from being controlled by criminals. The goal is not to enrich governments. Now, as Canada’s political leaders decide how best to tax recreational pot, they must remember this.

Simply put, if taxes are too high and the price of legal marijuana far exceeds the price of illegal pot, the black market will continue to thrive.

And children will still have access to marijuana sold by unscrupulous, criminal dealers.

Governments have learned this lesson the hard way with tobacco: Sales of black market cigarettes have always boomed whenever government taxes got too high. Marijuana would be the same. At first glance, Trudeau’s call for a federal excise tax of $1 on recreational marijuana sales worth up to $10, and 10 per cent on sales above $10 looks reasonable.

But that tax won’t be the only way governments wring cash out of cannabis.

Presumably, there will be sales taxes on recreational marijuana, and in Ontario that would add another 13 per cent.

And, presumably, the growers and producers of recreational marijuana will pay property, corporate and payroll taxes. All this will impact the product’s retail price. So, instead of wanting a bigger share of the marijuana excise tax, or even calling for a tax higher than Trudeau’s proposal, the premiers must first ensure that what consumers pay for legal pot isn’t exorbitantly higher than what they would for the illegal variety.

In doing this, the premiers should provide a fair estimate of the new costs the provinces face with legal pot.

Of course, police will require new training, especially to stop drug-impaired drivers. And, yes, there will be public education campaigns.

But what about the savings in police, court and jail budgets when the state will no longer be arresting, trying and incarcerating people for smoking or possessing recreational pot? Surely this will help, not hurt, provincial budgets. In an era when every provincial government wants more tax dollars but balks at the unpopular solution of boosting income or sales taxes, the prospect of heavily taxing an entirely new substance could be irresistible.

The premiers will have to be strong and aware of the dire consequences of becoming addicted to marijuana taxes.