The that the potential government revenue gained

The idea to legalize Marijuana in Canada has become increasingly more popular over the last few years.

This support stems from the Canadian Government’s ineffectiveness to police and prevent the illegal use of marijuana accompanied by the possible economic benefits that would arise from government regulation of the substance. There is also a great deal of opposition to legalizing marijuana due to the health issues and possible subsequent economic burden from increased public health care costs that come with its legalization. However Marijuana in terms of health risks and overdoses is significantly lower than that of many other illicit drugs and for this reason it would seem that the potential government revenue gained from legalizing marijuana greatly outweighs the costs and for this reason has become an attractive option for the canadian government and its citizens.

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With respect to the economic benefits of legalizing marijuana, the government’s regulation of it would allow the Government to control the market for marijuana bringing the economy far greater tax revenue. This will occur because the government is de-incentivising the distribution of weed through means of underground markets that are are already in high demand. These underground markets cause leakages in the economy, meaning lost GDP and government revenue. Thus legalizing and controlling this market will eliminate any leakages and underground activity whilst reaping the benefits of significant increase in revenue generated in the economy. Proof that this economic benefit will accompany the legalization of the drug is the success of Colorado’s legalization of the drug in 2014. Colorado received over $135 million in tax revenue within the first year of legalization.

Additionally, the government will save millions on law enforcement that is responsible for policing the use of marijuana.  Fiscal PolicyFiscal Policy does have an effect on the legalization of marijuana and its long term economic impacts. There are two types of fiscal policy, Expansionary and Contractionary Fiscal policy.

Expansionary fiscal policy is when the government increases spending and decreases taxes with the goal of bringing the economy out of a recession and stimulate growth by giving people more money to spend on other things that will promote growth and spending in the economy. Contractionary policy on the other hand is when the government decreases spending and increases taxes in order to combat inflation. In this case the relevant government fiscal policy that will be affected by the decision to legalize marijuana would be Contractionary fiscal policy, as the government will cut spending on law enforcement, while simultaneously increasing taxes for marijuana in order to gain revenue and de-incentivise the use of marijuana.

This will lead to stunted growth in the economy. This is not however a bad thing as in the long term the price for marijuana will decrease due to decreased demand because of higher taxation as well as help the canadian government combat inflation in the economy. Monetary Policy Monetary Policy relates, and directly affects the legalization of marijuana in canada. Monetary policy is a macroeconomic policy that involves the government changing the supply of money in the economy through the Central bank as well as changing interest rates.

Expansionary fiscal policy is when the government increases the supply of money in the economy and lowers interest rates with the aim of bringing the economy out of a recession through promoting spending and growth. This affects the legalization of marijuana because if the Canadian government implements expansionary fiscal policy there will be an increased amount of money for consumers to spend on the newly legalized weed. Thus this policy would increase Aggregate Demand for marijuana which will boost economic growth including a rise in GDP.


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