Marijuana legalization would be tax bonanza, prof says

Economist and professor Mike Moffatt says legalizing marijuana would reduce crime in Canada, and bring in a tax windfall for governments.

Pot as a tax bonanza

9 years ago
Duration 5:26
Economist Mike Moffatt says legalizing marijuana would save money in the justice system and mean a tax windfall

Stodgy economists aren't the likeliest proponents of pot liberalization laws, but a University of Western Ontario professor says legalizing marijuana makes economic sense.

In a recent interview on CBC's The Lang & O'Leary Exchange, economist and professor Mike Moffatt said legalizing marijuana is a good policy for lawmakers in Canada to consider.

Two U.S. states, Washington and Colorado, recently legalized recreational marijuana use for residents. It's still early days for what that's going to mean for people's lives there, but it's already clear that there's a lot of money being made from pot.

Estimates suggest that the state of Colorado raked in more than $2 million in taxes from recreational marijuana sales in the first month after the law was implemented. That works out to about 40 cents for each of the state's 5.2 million residents. 

Extrapolating those numbers elsewhere, the cash-strapped government of Ontario would be looking at $5 million in tax revenue, across 13 million residents. That works out to $60 million a year.

"Over time that could increase to about $1 billion a year [across the country]," Moffatt said.

Legalization could help on the other side of the ledger, too, as the $2 billion a year that Statistics Canada says we currently spend enforcing various drug laws would be significantly reduced, Moffatt said.

Those figures don't include other spin-off economic benefits surrounding the industry, or societal benefits such as a corresponding reduction in crime, as marijuana use moves out of the shadows.

"We would tax marijuana, get it out of the hands of organized crime and have that revenue go to the government instead," Moffatt says.

Click the player above to watch the complete interview, which will air on Wednesday's episode of The Lang & O'Leary Exchange.