Experts Say Cannabis Taxation Can’t Be Too High

While the federal government begins the long process of recreational cannabis legalization, experts are stressing that taxation needs to meet a balance between too low and too high.

ā€œThey can’t raise taxes too much or people will just smoke the illegal stuff,ā€ said Simon Fraser University economist Timothy Easton.

After provinces raised taxes on tobacco in the 1990s, illegal sales jumped to 30 per cent of the domestic market. It wasn’t until a drop in taxes, a 67 per cent decrease in Ontario and a 71 per cent decrease in Quebec, that black marketĀ sales began to decrease.

ā€œYou want to have it high enough to discourage consumption — if, in fact, that’s your goal — but if you set it too high you end up with a continuation of the black market,ā€ saidĀ University of Ottawa associate professorĀ Patrick Fafard.

Tax rates in the U.S., where four sates have legalized sale of cannabis, Washington has a 37 per cent tax rate, while Oregon and Colorado are at 25 per cent. Alaskan lawmakers are still discussing their taxation rate, butĀ have put forward a proposal to charge $50 on every once sold.

In the first seven months of legal sales, Colorado brought in $73.5 million, a similar formula used in British ColumbiaĀ would amount toĀ around $113 million a year forĀ the province.

Fafard said up to $1 billion in justice system savings could also be gained through legalization.Ā 

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