Taxes

Few things in life are certain. According to Ben Franklin, besides the inevitability of death, the only thing we can truly count on is being taxed. He had a point. There are taxes on the income that we make from our jobs and businesses. There are taxes on our properties. There are taxes on the goods and services we buy, and additional ‘sin’ taxes on specific goods like cigarettes and alcohol that the government says are bad for you. 

In some jurisdictions, we even pay taxes after we die. In the Canadian province of Ontario, an estate administration tax is levied on the value of an estate of a deceased person. For anyone who leaves behind property, it can be a significant amount. On a $1 million estate (about the average value of a home in Toronto), the tax payable is $14,250. They get you while you’re living, and they get you while you’re dying. 

A cynic might complain that over-taxation chokes the life out of people and sends them to an early grave. When it comes to the cannabis industry, that might not be far from the truth.

Cannabis and Taxes

Cannabis companies on both sides of the Canada-US border are hurting. Over the past five years, share prices for major pot stocks have slid dramatically, in some cases up to 99 percent. Meanwhile, the black market continues to thrive. Sophisticated and well-financed multinational corporations can’t make a buck selling something that sixteen-year-old kids have been doing for decades. Overregulation and over-taxation are suffocating the weed industry, big and small producers alike. 

Weed Taxes in Canada

In Canada, the excise tax on cannabis raises $1.5 billion in revenues annually for the government. The tax is fixed at $1 per gram of cannabis. When it was first formulated, the underlying assumption was that prices would remain around $10 per gram. Instead, prices have decreased significantly, in some cases to little more than a dollar a gram. A 2023 Ernst and Young report found that about 28% of the price of legal cannabis was attributable to taxes. It’s no wonder that black markets continue to thrive.

The excise tax is baked into the selling price and is therefore unseen by the consumer, but definitely felt, especially when compared to the unregulated market. At checkout, an additional sales tax of 13% is added to the final sale price. This tax is payable on most goods and services in Canada, but there are limited exceptions for essential items like prescription medicine and basic groceries. 

Cannabis advocates argue that weed is medicine and should be treated accordingly. It took a lot of convincing, cajoling and many legal battles, but the federal government finally agreed. Or does it? Looking at how cannabis is taxed, it’s hard to tell.

Medical Cannabis

Many Canadians, myself included, possess a certificate from the Department of Health authorizing us to “produce and possess cannabis for medical purposes.” In my case, I’m allowed to grow ten plants for medical purposes, in addition to the four plants that all Canadians can grow for recreational purposes without a certificate (never mind that there isn’t the slightest difference between the ten medical plants and the four recreational plants). 

Health Canada explicitly recognizes that cannabis has medicinal value. If that’s the case, why does Revenue Canada slap it with a punitive excise tax that treats pot as something worse than alcohol and cigarettes combined? Maybe these two branches of government need to start communicating with one another.

The Legal Battles for Medical Marijuana 

The government hasn’t always conceded that pot is medicine. It took many years and legal battles to get to where we are today. A landmark legal decision of the Ontario Court of Appeal – R. v. Parker – invalidated the federal cannabis prohibition and effectively paved the way towards eventual legalization. In that case, Ontario’s highest court acknowledged…

“It has been known for centuries that, in addition to its intoxicating or psychoactive effect, marijuana has medicinal value.” 

In finding the prohibition against cultivation and possession of marijuana to be unconstitutional, the Court further noted that 

“Consumption of marijuana is relatively harmless compared to the so-called hard drugs and including tobacco and alcohol and there is no "hard evidence" that even long-term use can lead to irreversible physical or psychological damage.” 

In other words, cannabis can help people with certain medical conditions, and even if not used for that purpose, it’s still safer than cigarettes and alcohol.

Cannabis versus Alcohol

Alcohol is arguably the most harmful of all drugs in Western society (though opiates are catching up fast), owing in large part to its high degree of social acceptance. My Croatian grandparents might have considered a shot of plum brandy as a cure-all folk remedy for everything from headaches to snake bites, but alcohol has never been widely accepted as actual medicine by medical practitioners. 

The same is not true of cannabis.

Ayurvedic Traditions: Cannabis

For thousands of years, the traditional Indian medical system known as Ayurveda has recognized the medicinal properties of pot. In fact, though the word ganja is widely associated with Jamaica’s Rastafarian community, its origins are in ancient Sanskrit. Cannabis was first mentioned in the Atharva Veda, one of Hinduism’s oldest spiritual texts, where it was recognized for stimulating the nervous system and digestion, as well as acting as a painkiller. It was also believed to have sedative, spasmolytic, diuretic, and aphrodisiacal qualities. 

More recently, cannabis appeared in the United States Pharmacopoeia for the first time in 1850 and was widely utilized as a medicine in the 19th and early 20th centuries. Today, state governments in 38 of 50 American states recognize the medicinal properties of pot.

Get the Memo

It seems the folks who collect taxes didn’t get the memo. Not only is cannabis taxed at an insanely high level, but unnecessary and nonsensical regulations are imposed upon cannabis businesses in the supposed name of public health. 

In Ontario, dispensary shop windows must be covered so that the public cannot witness the apparently illicit and immoral behaviour going on inside. Never mind that governments tolerate and arguably even encourage open consumption of hard drugs in public places, including parks. 

Witnessing someone browsing a cannabis menu, talking to a budtender, choosing a product, paying for a purchase, and receiving a small sealed package risks corrupting the morals of our youth. Better to let them watch people cooking meth instead.

What’s Killing Cannabis

Overregulation and over-taxation are killing cannabis. Governments can’t have it both ways. If they’ve taken that first big step and recognized the medicinal properties of pot, the second step – actually treating it like medicine – should flow naturally. 

Current levels of taxation leave the impression that cannabis is a harmful and dangerous intoxicant. It’s high time for a more balanced and nuanced approach – one that recognizes the incredible healing properties of this wonderful plant.