Baloney Meter: Horgan wrong to say pot tax revenue sharing a new idea

OTTAWA — “For the first time that I’m aware of, the federal government is looking at a revenue-sharing model. That’s not something we’ve contemplated before.” B.C. Premier John Horgan as he left a first ministers’ meeting on Oct. 3.

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During this week’s first ministers’ meeting, Prime Minister Justin Trudeau presented premiers with a proposal to levy a 10 per cent federal excise tax on recreational marijuana once it becomes legal next July, with the revenue to be shared 50-50 with the provinces.

While other premiers groused about what they considered an inadequate provincial share of the tax revenue from pot sales, British Columbia’s John Horgan expressed surprise that the federal government would pocket any of the money at all.

“That’s not something we’ve contemplated before,” he said as he exited the meeting.

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“I believe provinces are concerned that there’s a whole bunch of costs being imposed on us in terms of distribution, in terms of regulation, in terms of making sure that the distribution chain is fee of the criminal element and so on. But now we’re going to have to share whatever modest revenue there might be.”

Is that true?

Spoiler alert: The Canadian Press Baloney Meter is a dispassionate examination of political statements culminating in a ranking of accuracy on a scale of “no baloney” to “full of baloney” (complete methodology below).

This one earns a ranking of “full of baloney” — Horgan is simply wrong in asserting that revenue sharing is a new idea sprung on the premiers by Trudeau at Tuesday’s meeting.

That said, it’s understandable that Horgan — who was only sworn in as premier in mid-July — may have been unaware of earlier federal-provincial discussions on revenue sharing that took place in the midst of the political chaos that followed B.C.’s photo-finish election in May.

THE FACTS

Federal and provincial finance ministers spent considerable time discussing marijuana taxation during a meeting on June 19.

The agenda for the meeting shows that federal Finance Minister Bill Morneau intended to engage his provincial and territorial counterparts on “the development of principles for a co-ordinated approach to the taxation of cannabis.”

A quote attributed to Morneau on the agenda read: “Our government’s goals are clear: we want to keep criminal elements out and we want to keep cannabis out of the hands of children. This will mean keeping taxes low and working together on an ongoing basis to ensure a co-ordinated approach.”

Had no one contemplated the federal government reaping a share of the revenue from pot sales, there would have been no need to discuss a co-ordinated approach to taxing it.

And statements from provincial finance ministers at the time show they fully understood that they’d have to share tax revenue with the feds, although how big a share each level of government would get has always been a matter of some debate, then and now.

“We’re going to be asking for fairness and flexibility so that when there are some possible revenues that come from this that it’s properly shared,” said Ontario’s finance minister, Charles Sousa.

“We want to have equitable sharing of tax revenue, whatever that revenue is,” echoed Quebec’s Carlos Leitao.

“We’re not there yet in terms of having very precise discussions on prices and on rates of taxation. We want to make sure whatever system is put in place is equitably distributed among the provinces.”

Trudeau’s proposal Tuesday was new insofar as it put some specifics on the table — a federal excise tax of $1 per gram on sales up to $10 and a 10 per cent tax on sales over $10, with provinces to get half the revenue.

However, federal officials privately say even that wasn’t entirely new. Since the finance ministers’ meeting in June, federal and provincial officials have been discussing possible approaches to pot taxation in ever increasing detail and the 50-50 revenue split proposed by Trudeau was a well known federal preference, they say.

Nova Scotia Premier Stephen McNeil alluded to that Tuesday after hearing Trudeau’s proposal: “I think it’s also important to recognize this was a proposal put forward, this conversation happened with finance ministers before.”

Trudeau has said he’s open to provincial arguments that they deserve a bigger share of the revenue.

Be that as it may, a federal excise tax isn’t necessarily the end of the story on marijuana taxation. There will likely be additional provincial and federal sales taxes.

Until all the taxes and the base price at which provinces choose to sell marijuana are known, it’s impossible to say if governments will keep the price of pot sufficiently low to achieve their goal of driving black market dealers out of business.

In the U.S. states where marijuana is already legal, some have been forced to reduce their initial tax rates of as much as 37 per cent because prices were too high to be competitive with the black market. The most recent proposals involve rates of between 10 and 25 per cent, according to the Tax Foundation.

THE VERDICT

At the time of the finance ministers’ meeting in June, Horgan was not yet premier. B.C. was still 10 days away from the defeat of Christy Clark’s unstable, minority Liberal government and Horgan’s NDP, propped up by the Green party, was not sworn in as government until mid-July.

It’s therefore not that surprising that he might be unaware of revenue-sharing discussions among finance ministers on June 19. Less explicable is the fact that he was apparently not briefed on the matter, since taking power in July or even in preparation for Tuesday’s first ministers’ meeting, when marijuana legalization was clearly going to come up.

Nevertheless, it’s simply not the case that sharing revenue from cannabis taxes had never been contemplated before Trudeau dropped his surprise proposal. That assertion earns a rating of “full of baloney.”

METHODOLOGY

No baloney — the statement is completely accurate.

A little baloney — the statement is mostly accurate but more information is required.

Some baloney — the statement is partly accurate but important details are missing.

A lot of baloney — the statement is mostly inaccurate but contains elements of truth.

Full of baloney — the statement is completely inaccurate.

SOURCES

http://www.fin.gc.ca/n17/17-058-eng.asp

http://www.fin.gc.ca/n17/17-059-eng.asp

https://taxfoundation.org/individual-consumption-taxes/excise-taxes/marijuana-taxes/

Joan Bryden , The Canadian Press