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Tempting tax take from pot sales could spark legalization debate in Canada

Canadians looking for practical arguments in favour of legalizing recreational marijuana use just got some powerful ammunition from south of the border. The kind governments often can't resist.

Colorado, which along with Washington state legalized pot following 2012 referendums, announced last week it estimates the tax haul from recreational pot (which carries a 25 per cent sales tax) between Jan. 1, the first day of legal sales, and June 30, 2015, will be $117.8 million (all US figures ). Medicinal pot sales will add another $15.8 million, according to the New York Times.

The projection is far above initial estimates and presumably is based on the explosion of sales last month. The state government projected recreational marijuana sales could generate $610 million, with an additional $345 million coming from medical pot, Britain's Daily Telegraph reported.

“It’s well on its way to being a billion-dollar industry,” Michael Elliott, executive director of the Marijuana Industry Group, a Colorado trade association, told the Times. “We went from 110,000 medical marijuana patients to four billion people in the world who are 21 and up.”

[ Related: B.C. pot decriminalization referendum bid falls short but advocates not giving up ]

Gov. John Hickenlooper is proposing almost $100 million go into various programs aimed at treating substance abuse, keeping pot out of the hands of kids and enforcing existing drug laws.

“This package represents a strong yet cautious first step toward ensuring a safe and responsible regulatory environment,” Hickenlooper said in his budget proposal this week, according to the Times.

Over in Washington, where pot sales don't begin until June, budget forecasters estimated sales could produce $190 million in tax revenue over four years beginning in fiscal 2015. That money would also go to health and substance-abuse programs, as well as general state revenue.

“Every governor and legislator in the country will be like, ‘Hey, check out these numbers,’” Reuven Carlyle, who sits on the Washington legislature's House finance committee, told the Times.

They won't be the only ones watching closely. If the projections are borne out, pressure could build in Canada to cash in on an untapped source of tax revenue.

Last year, a bid to force a referendum in British Columbia to suspend enforcement of the law against simple possession fell short of the required number of signatures to conduct the vote. But the organizers of the campaign, Sensible BC, promise to try again.

And if the "Just Say No" Conservatives are displaced in 2015 by the more pot-friendly Liberals or New Democrats in Ottawa, the effort could develop some momentum.

It's hard to see how any government could not be tempted by the potential tax windfall, even if some is put back into anti-drug programs.

[ Related: Legal weed in U.S. could spell trouble for Canadian pot tourists ]

Federal and provincial governments historically have reaped billions in so-called sin taxes off vices from tobacco and alcohol to gambling.

According to Physicians for a Smoke-Free Canada, the provinces and territories last year took in almost $4.7 billion taxes targeting tobacco products, while Ottawa snagged $2.8 billion. Those numbers don't include normal provincial sales taxes or the GST levied on top of that.

Looking at booze, a report done for MADD Canada found all governments received $7.7 billion from alcohol sales in 2004, almost half the total from $16 billion in sales revenue. However, MADD Canada argues the cost of dealing with alcohol-related harm that year was estimated at $14.6 billion.

When it comes to gambling, a 2011 Statistics Canada report found net revenues from lotteries, video lottery terminals, casinos and slot machines in places like race tracks rose from $2.73 billion in 1992 to an astonishing $13.74 billion in 2010. Casinos represented the largest chunk, about 34 per cent, followed by rising revenues from lotteries that made up 27 per cent.

The report calculated that in 2009 gaming sucked an average $515 from every adult man and woman in Canada. The government hands over most of the money to non-profit groups and charities for their good works while reserving some for programs aimed at chronic gamblers.

The point here is that governments aren't averse to capitalizing on our indulgences, even if the cost-benefit arithmetic isn't positive.

They make a pragmatic decision to set aside whatever moral reservations they have when the difficulty in prohibiting an activity is outweighed by the practicalities of not doing so. And that includes low-hanging fruit, tax-wise.

And they'll rationalize it by saying the tax money they glean will go towards reducing the harm, and for things like education and needed infrastructure. You know, stuff we can all get behind.