News Article

Should we tax marijuana?

Posted: May 02, 2012

Eight mayors of cities in British Columbia ó Vancouver, Burnaby, North Vancouver, Vernon, Armstrong, Enderby, Lake Country and Metchosin ó argued in an April 26 letter to B.C.'s premier, its Opposition NDP leader and the leader of the B.C. Conservative Party that marijuana should be legalized and taxed. Their argument is persuasive, but have they considered all the ramifications?

Clearly, prohibition has proven to be an ineffective solution. Despite increased spending on law enforcement, the use and availability of marijuana has been increasing across Canada. Not only that, the eight mayors state, 85% of the province's marijuana industry is controlled by criminal groups. As prohibition drives prices up, it puts more money into the hands of these criminal organizations. (Think Al Capone and his boot-legging and smuggling activities in Prohibition-era United States.)

Late last month, the chief medical health officers of three provinces weighed in on the discussion, publishing a paper that compares Canada's illicit drug policies to those of other countries. "For the last decade, Portugal has decriminalized all drug use and [it has] some of the lowest rates of drug use in Europe and some of the least amounts of harm from drug use,î said Dr. Robert Strang, Nova Scotia's chief medical health officer. In contrast, the three reported, drug use hasn't decreased since the US$1-trillion "war on drugsî was declared and aggressive law enforcement began.

There is evidence that the U.S., too, is rethinking its policy in the face of the stark, underlying statistics. Notably, John McKay, the former U.S. district attorney who prosecuted B.C. marijuana activist Marc Emery in a cross-border sting, is calling for the legalization and taxation of pot in Canada and the U.S.

Stop the Violence BC ó a coalition of high-profile academic, legal, law enforcement and health experts which is working to reduce crime and public health problems stemming from the prohibition on marijuana ó recently held a lecture in Vancouver. McKay took the stage, maintaining that the laws keeping pot illegal no longer serve a purpose, but allow gangs and cartels to generate billions in profits. "I want to say this just as clearly and as forthrightly as I can,î he said, "marijuana prohibition, criminal prohibition of marijuana is a complete failure.î To be successful, any prohibition in society requires broad support from the population, he added, and that isn't the case with marijuana.

Jodie Emery, Marc Emery's wife, and former B.C. Attorney General Geoff Plant, also attended the lecture.

McKay went on to say that marijuana, like alcohol, should be produced and sold to adults by the government. That would generate at least US$500 million in revenue annually in Washington State alone. Furthermore and most importantly, he said, ending prohibition would end the violent reign of gangs and drug cartels.

Transpose this model to B.C., where the black market is said to be $7 billion annually, and the revenue generated is staggering. Federally, Canada could eradicate its deficit, relieve its court system and stop placing non-dangerous criminals in jail. Indeed, many law enforcers have become reluctant to prosecute people in possession of personal quantities.

But marijuana prohibition is a federal law. That means Ottawa has to amend the Criminal Code. The Liberal Party of Canada recently voted almost 80% in favour of placing the legalization of marijuana on its platform, but the ruling Conservatives are not so sure. They argue that legalization will hurt trade with the U.S. and lead to longer waits at the border, although Stop the Violence BC and others believe those concerns are unsubstantiated.

There are no clear-cut, easy answers to these questions. But any measure that promises to increase revenue and decrease a major source of funds for organized crime is worth a closer look. Let's go back to Al Capone. Is it, perhaps, instructive that Al Capone was only ever incarcerated for tax evasion?

Greer Jacks is updating jurisprudence in the EverGreen Explanatory Notes, an online research library of assistance to tax and financial professionals in working with their clients.