A new study pegs B.C. users' marijuana consumption at a value of $500 million per year.

A new study pegs B.C. users' marijuana consumption at a value of $500 million per year.

Marijuana tax estimates based on doubling price of pot

Chasing too much of a government weed windfall may keep black market alive, observers say

Taxing B.C. bud could generate hundreds of millions of dollars in provincial government revenue each year, but likely not billions, a new study suggests.

The study, prepared by UBC and SFU researchers and published in the International Journal of Drug Policy, estimates B.C. marijuana users spend roughly $500 million a year on pot.

The Stop The Violence BC campaign to legalize marijuana has used that figure to infer B.C. could reap $2.5 billion in revenue over five years by heavily taxing the drug.

That would mean at least doubling the current price of weed to generate the same amount in tax if it were sold legally in the province – a scenario some observers have warned could keep the gang-controlled black market alive and well.

Washington State, with a similar sized pot-smoking population, has come up with its own estimate of nearly $2 billion in government revenue over five years from taxing marijuana. Voters there approved legalization in a referendum earlier this month.

Its planned 25-per-cent tax would be levied not just once but on each wholesale and retail sale, and other state and local taxes and licensing fees would also apply.

Kevin Hollett, a spokesman for Stop The Violence, defended the idea of tax levels that sharply drive up the price, noting taxes make up 81 per cent of the retail price of tobacco.

But SFU criminology professor Neil Boyd said governments hungry to plunder the pot market should be careful how much money they try to extract.

“The current price on the black market of marijuana is $200 to 300 an ounce,” he said. “If people who are going to tax and regulate it were going to sell it for $600, you’re still going to have a black market.”

Another criminologist, Daryl Plecas, has argued high taxes just keep the door open for organized crime.

He said the main market for gangs would go up in smoke if pot was made legal for anyone to grow and possess and government made no attempt to tax or regulate it, but added that only works if consistent laws are applied across North America.

Boyd said he believes governments could tap a major flow of revenue under legalization without driving too much trade underground.

Alcohol is heavily taxed, he noted, but there’s no significant black market.

He agreed illegal trade will remain a factor as long as there’s a big export market.

A North America-wide scheme would be best, he said, but predicts there’d be “a really significant change” if even half the U.S. states taxed and regulated pot.

The new study’s estimates were based on an average price paid in B.C. of $7.50 per gram, although it cautioned most pot smokers may pay more than that.

Washington’s estimates assumed a $12-per-gram retail price, four times the estimated $3-per-gram cost of licensed marijuana producers.

Past studies suggest B.C. grown marijuana is worth $7 billion a year, with at least 85 per cent going to export.

The number of pot grow-ops in B.C. is thought to have nearly doubled between 2003 and 2010.

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