Pot legalisation would pack Budget cone by $1 billion a year

By Leith van Onselen

The Greens’ call for marijuana to be legalised in Australia for recreational use, with its sale to be regulated through an Australian Cannabis Agency, is estimated to be a big winner for the Federal Budget. The Parliamentary Budget Office (PBO) has estimated that the Greens’ plan could be worth around $1 billion a year to the Budget, through a combination of additional revenue and savings being made by law enforcement agencies such as the Australian Federal Police. From The AFR:

Costings from the independent Parliamentary Budget Office show legal cannabis use with a 25 per cent excise and GST could raise about $3.6 billion over the coming four years and lead to savings for law enforcement agencies, including by the Australian Federal Police…

The PBO says there is a “high level of uncertainty” in the costings, given the market price and take up of a legal product can’t be known…

Sales would grow each year and about 10 per cent of the market would be made up by overseas visitors…

The costing document says the AFP would re-allocate a proportion of the resources currently directed at cannabis law enforcement to strengthen the law enforcement of other illicit substances…

The new agency would charge a $3500 application fee for production licenses, as well as annual grower fees ranging from $1750 per year for tier one licenses of up to 2000 square feet of plant canopies, to $2300 for tier three licenses and up to 10,000 square feet of crop. Retail license application fees would cost $1500, with annual fees for retail outlets set at $1000…

Colorado, which legalised marijuana in 2014, has reaped the revenue benefits with total revenue of nearly $250 million in 2017, most of which has gone towards schools and roads (see below table). There have also been cost savings for law enforcement.

Washington, too, has reaped the Budget benefits of legalising marijuana, with sales and tax revenue topping $80 million in the year to November 2017, which comes on top of the savings in law enforcement costs.

Sadly, the two major parties refuse to look at the evidence and remain strongly opposed to legalising marijuana. Health Minister Greg Hunt labelled the Greens’ plan is “dangerous and medically irresponsible”:

“It can actually have an impact on both physical and mental health issues, and the notion of spreading the use of unregulated, uncontrolled cannabis, people growing it in their own backyard, is utterly irresponsible”…

Whereas Opposition Leader Bill Shorten has referred to it as a “stunt”.

Both parties might want to re-read the testimony from the Australian Drug Law Reform Foundation, which threw its support behind legalising and taxing marijuana last week:

Cannabis arrests have accounted for the largest proportion of illicit drug arrests in Australia. In 2015-16, of the two million Australians who use cannabis every year there were almost 80,000 cannabis arrests

Of these arrests, the overwhelming majority (90 per cent) were consumers while the remainder (10 per cent) were providers. Yet in 2017, 92 per cent of drug users reported in a national survey that obtaining hydroponic cannabis was “easy” or “very easy” while 75 per cent reported obtaining bush cannabis was “easy” or “very easy”…

Drug policy has surprisingly little effect, if any, on consumption patterns but does produce serious harm…

A study comparing residents of more liberal Amsterdam and more punitive San Francisco using the same methodology found less illicit drug use (including cannabis) in Amsterdam and a far greater likelihood that San Francisco residents were also offered heroin, cocaine or amphetamine on the most recent occasion of trying to buy cannabis…

Australia could allocate these funds to improving and expanding alcohol and drug prevention and treatment, an area governments usually find difficult to fund properly.

Regulation would enable governments to mandate plain packaging, like we have for cigarettes. Packages should provide health warnings, help-seeking information and consumer product information (including content of psychoactive ingredients and their concentration).

Proof-of-age restrictions on sale, similar to arrangements for alcohol, could help reduce access to cannabis for underage Australians…

Regulating cannabis would also mean that law enforcement could concentrate on responding to far more serious crimes — especially violent crimes…

Regulating cannabis would also reduce some of the cost of customs, police, courts and prisons and some of the income of major league black-market cannabis suppliers…

Or the two major parties could re-read last week’s testimony from Professor Nicole Lee from the National Drug Research Institute at Curtin University, which noted that there are no known social harms caused by legalising marijuana:

one study found little effect of legalisation on drug use or other outcomes, providing support for neither opponents nor advocates of legalisation. Other studies have shown no increase in use, even among teens.

The research to date suggests there is no significant increase (or decrease) in use or other outcomes where cannabis legalisation has occurred.

Or they could examine the 395-page report by the National Academies of Sciences, Engineering and Medicine, which last year completed the world’s most comprehensive study into marijuana and found that unlike tobacco, “the evidence suggests that smoking cannabis does not increase the risk for certain cancers (ie. lung, head, and neck) in adults”, while also finding many therapeutic benefits from marijuana use.

As MB keeps arguing, there are strong arguments in favour of legalising marijuana, namely:

  • It would bring marijuana into line with alcohol and tobacco, which are both legal and regulated despite being more dangerous to health;
  • It would guarantee purity of supply;
  • It would reduce profits to organised crime; and
  • It would provide a useful revenue stream for the government, as illustrated by states in the US that have recently legalised marijuana.

Public policy should be based on objective evidence, which overwhelmingly supports marijuana legalisation.

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Unconventional Economist
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  1. Imagine the media release on Budget night. Instead of a cigar and a smug grin, the Treasurer and Finance minister, passing a joint and giggling. A big bowl of cereal for the Treasurer midway through the Budget speech in Parliament.

  2. – I don’t believe it will bring extra revenues for the government. Because it will come at the expense of other spending.

    • It’s not meant to attract new users — it’s meant to take a slice of the revenues currently going directly to drug dealers and growers.

    • A lot of people already buy it and account for the expenditure in their personal budget now. A portion of that spending would go to the tax office if legalised. How will other spending be hit?

  3. Is weed allowed to be advertised in those American states? If not, why allow alcohol advertising?

  4. “Public policy should be based on objective evidence, which overwhelmingly supports marijuana legalisation.”

    Agreed. But there is a big disconnect between what we think and what any emprical studies may show.
    I agree smoking and alchohol are way bigger health issues in this country and cost us all billions.
    I also expect Pot will inevitably become legal, it should certairnly be decriminlised and you should not get a criminal record for having it for personal use.
    And we should be fast tracking the research on canabis oil for medical use.
    I still have concerns that we are going to screw a section of the community if it becomes freely available.

    Research presented at a Berlin psychiatric conference shows teenage cannabis use hastens onset of schizophrenia in vulnerable individuals

    • Stephen Morris


      I have seen vulnerable teenagers destroyed by cannabis. It is a tragedy to see a potentially fulfilling life slowly disintegrate.

      As with those US States which have legalised it, let us hope that the sales tax is hypothecated to education and treatment of drug dependency.

      I suspect, however, that it will not be. Are gambling taxes in Australia hypothecated towards anti-gambling education or the treatment of gambling dependency? Tobacco and alcohol taxes?

      • By keeping it illegal are you really going to prevent vulnerable people from ruining their lives? It seems it will happen anyway and at least the Govt has the ability to control the quality/strength of the pot. There’s unquestionably some really nasty and dangerous stuff out there that must surely contribute to any psychological damage that is being done.

      • Stephen Morris

        @Dominic, I’m not suggesting that it remain illegal. I’m suggesting that if it is legalised then the sale taxes should be hypothecated at least in part to programs aimed at minimising the damage.

        This is what has happened in those democratic US States where the citizens were able to guide the policy.

        In Australia I suspect nothing will happen until some politically powerful lobby group wants it to, and any sales taxes will then be hypothecated to reducing tax rates for the rich.

  5. Gateway drug lol. If Shorten is so sure it’s a stunt, then put it to a vote and surely it would get voted down.

  6. We need legalised dope to ease the pain of the Lib/Lab/Green’s population replacement program being imposed on us. A win for the govnuts from legal pot is that there will be even less resistance to the population ponzi as locals get even more switched off and live in a dumbed down world.

  7. I’m generally for decriminalization but there are some serious caveats with pot. Many pro-pot activists tend to be old hippy types who smoke some leaf every now and then. There’s probably not that much harm in that.

    However, the pot available today is many times more potent than the kif of the 60s. It has been cultivated over many generations since then with each generation picked and bred for increased potency. Users often smoke it through bongs which is also stronger than a joint.

    Then there are the health implications. There is evidence high pot use leads to depression, anxiety, paranoia and even schizophrenia. In terms of physical health there is an increased risk of many cancers and other serious lung conditions like emphysema. The anti-smoking lobby has been hugely effective against cigarettes. If pot were legalized they’d go into overdrive.

    The financial argument may have made sense in the past when governments were less greedy. But really, the government charges people $25 for a packet of 25 cigarettes. Would it really be fair to let them rip off generally poorer, working class people even more? Pot is probably cheaper as it is.

    Decriminalization may be ok but I’m not sure about legalization.