No simple math setting price point
Learning from past experience is a great lesson. Politicians can certainly use that guideline when it comes to setting policy – and it appears they realize that when it comes to prices on marijuana, expected to be legally available in just over a year.
Setting taxation on items, as governments have learned, requires a fine balance. Political leaders have already acknowledged legal sales of weed won’t exactly be a cash cow. Prices can’t be too high or they won’t succeed in shutting out the black market – ostensibly a main reason for legalizing in the first place.
The other dynamic involved here is the jurisdiction of provinces in setting taxes on certain items – like cigarettes and alcohol. Any wild discrepancies in price, and we know what happens.
To that end, the topic of taxes applied to recreational marijuana sales will be on the agenda next month when federal Finance Minister Bill Morneau meets with his provincial and territorial counterparts.
It’s not hard to see how temptation might enter the policy planning of a provincial government – there’s no such thing as being flush with revenues, they can always use more.
As Morneau reiterates that generating revenue is not the goal, rather the federal government wants controlled sales to keep it away from young people, some interesting figures have been released. A recent report from the C.D. Howe Institute suggests a price of $9 a gram for pot would be enough to wipe out 90 per cent of black market sales.
That sounds encouraging. It certainly means no windfall for coffers. But it will also take some collaboration among jurisdictions to cut out the transporting of product.
Consider the highly publicized case, involving beer and liquor, in which a New Brunswick resident was nailed by police for bringing in a supply from across the border in Quebec, where the retail prices and taxes were lower. The fight is still on, with the argument over the right to freely transport purchases from one province to another headed to the Supreme Court of Canada.
Tobacco has been another thorn in the side for law enforcement – and we hear about the occasional bust of unstamped product. Cheaper smokes from the U.S. or illegal factories make their way into communities. Those are prices a province obviously has no control over, but it’s a good illustration of how the black market can undercut legal sales.
Too low a price creates a problem, too, since theoretically at least governments don’t want to encourage people to use a product that carries health risks. Add to that, we would expect a certain amount of revenue from sales would be dedicated to help people who have bad experiences with the drug or any health- or social-related issues.
This conversation about an appropriate price threatens to be a long, involved one.