What is really at stake if British Columbia follows Washington State and Colorado and successfully legalizes marijuana?
Money, of course, that other green substance. Lets start with the estimated value of the illicit pot growing industry here in B.C. Its often claimed to be between $6 billion to $8 billion, a fairly rough estimate given that none of the principals are filling out any corporate tax forms or quarterly earning reports.
Even if its lower than the estimates, its a huge industry. By contrast, in 2011 the entire forest industry had a value of just under $10 billion.
If the local pot growing economy goes legit, well see some unusual effects, only some of them strictly economic.
Everyone who argues for legalization points out that we can then tax the bejezus out of marijuana. How much would that raise?
In B.C., the tax rate for small businesses is 2.5 per cent, 10 per cent for big businesses. Lets assume, very conservatively, that we get nothing but small Mom and Pop artisanal ganja growers and small-scale retailers. Lets also take the lower $6 billion valuation of the industry.
That would mean about $150 million in provincial tax revenues off the top.
But wait! The cost of growing pot will drop substantially if its legal, and grown in the open. Maybe it wont be that costly to sell?
Except that it will be taxed at the point of sale, too. So thats another few million bucks a year. Sin taxes, plus sales taxes, add up quickly. And thats not even considering the federal tax implications. Then there are the personal income taxes that would be paid by those legally employed in the industry.
So what about effects beyond the purely taxational?
We have no grow-ops in houses, because growing outdoors or in greenhouses is cheaper, so there are a few more houses on the market than otherwise. Not enough to bring down prices, though.
We have a whole lot of unemployed criminals. Some fraction of them will go legit and turn themselves into small farmers and storekeepers. Others will not make this transition. Im thinking of the Langley man who stabbed another man to death purely out of the suspicion that the other man might have stolen his pot plants. Its hard to imagine a rage-filled killer fitting in well at a chamber of commerce meeting.
So some gangsters are going to try to move into the remaining illicit drugs, like heroin and cocaine. There might be a gang war as the crooks fight over the pieces of a smaller pie. While well see more government tax revenues, this will be somewhat offset.
A significant number of small businesses will close their doors. Theyll all be places that could plausibly accept a lot of cash payments: restaurants, bars, hair and nail salons, corner stores, and so on. Because in every community where there are pot growers, there is a need to launder money.
In the long term, our society wouldnt look a lot different. Some people smoke pot now, some people will never smoke it if its legal. (Like me.) People commit crimes now, theyre not going to stop if pot is legal. Things could be a bit more stable, both tax-and crime-wise in the long term, but it wont turn B.C. into a magical land of unicorns and pixies.
But we dont make policy decisions based on false ideas that we will create utopias or dystopias. We should make them based on what seems like best practices. To me, it looks like things would be better with legal marijuana than with the current system.
