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Opinion Canadian government must keep its eyes on marijuana’s black market

You can only have 13 people in a room talking about selling pot for so long before they start working out how to divvy up the proceeds.

So no wonder the feds put the deal on the table when the premiers were in Ottawa on Tuesday: The federal government will levy a 10-per-cent excise tax, and split the proceeds straight down the middle. Everybody gets a piece of the action.

The sum itself shouldn't shock us. In percentage terms, it's not that different to the excise taxes on a bottle of liquor and a carton of cigarettes.

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But the rhetoric around the table should worry Canadians that their first ministers are taking their eye off the ball: the goal of displacing organized crime and black-market sellers from the marijuana trade.

Globe editorial: Why marijuana prohibition failed, and how legalization can succeed

Prime Minister Justin Trudeau and several of the premiers insisted that no one in the room was talking about all this because they wanted revenues. But it still didn't drown out the unmistakable sound of premiers saying it's not enough – not enough to cover the massive costs that will come with not arresting and jailing people for possession.

But good news! The federal proposal – a 50-50 split on a tax of $1 a gram or 10 per cent on pot that costs more than $10 a gram – is just a proposal. They're willing to negotiate. Maybe there will be more!

That's the danger. One of the reasons to legalize marijuana is to try to cut a funding source for organized crime.

Already, the federal government's cautious plans will mean only some success come next July, because legalization won't include the cornucopia of edibles, oils, vaping cartridges and so on, many of which are already available in crisply branded, brightly coloured packages at a shop in your neighbourhood.

But price matters, too, especially at first: A successful reform must give a signal to marijuana users that it's not just legal, but they might as well buy it legally. Not getting a ticket will be some motivation, but the marijuana also has to be available, and the price has to be close enough.

What's too much? PEI Premier Wade MacLauchlan said he thinks it's too soon to start talking about excise taxes, and the price is important. In dispensaries, pot often sells for $9 or $10 a gram; Mr. MacLauchlan told reporters that pot sells for $6 a gram in PEI. "We will be in competition with the black market," he said.

Legal pot doesn't have to be the same price, but it has to be close, especially at first. At $6 a gram, a $1 tax starts to make a difference. Then there are sales taxes, and extra costs legal producers pay to comply with regulation.

Ottawa and the provinces were always going to collect revenue from legalization. If $1 a gram puts a cap on it, then maybe the market can bear it. But it doesn't sound like that's all.

The provinces didn't like the idea of a 50-50 split. "I hope that doesn't surprise you," Quebec Premier Philippe Couillard said. Premiers said they will face the "lion's share" of costs, suggesting they will be big, and grow. Ontario Premier Kathleen Wynne said municipal officials keep telling her they will face "enforcement costs [and] other costs" that they have to bear.

So don't count on the $1 levy being enough to satisfy the provinces.

Where are those massive costs coming from? There are costs to retrain police, and buy equipment to do roadside stops for drugged driving. But the feds just promised them $274-million for that. There will be new public-health campaigns, and other things, but let's not pretend legalization will suddenly mean marijuana is being smoked in Canada for the first time, and we'll have to spend gazillions more.

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Perhaps not enforcing the law could actually save the provinces a few bucks. Some plan to sell pot in provincial stores, which should profit. And if legal marijuana entirely displaced the black market – an estimated $7-billion a year – then half of that $1 a gram tax would amount to about $350-million a year. There's money there. There's also danger in the premiers' suggestion there should be more of it: that can derail a key goal of marijuana reform.

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