Stand For Craft has released a white paper highlighting the Canadian government’s financial hindrances on small craft cannabis producers. The report criticizes the federal excise tax or “sin” tax, disproportionately affecting smaller craft farmers.
The man behind Stand For Craft, Dan Sutton, shared the white paper with all levels of government. He tweeted, “Current policy disproportionately harms small producers, inhibiting them from building survivable businesses. We ran deep financial analysis reflecting on now 3 years of data to show that income remains inhibited at $1m, $5m, $10m, or $20m of annual revenue.”
Stand For Craft White Paper
The Stand for Craft white paper pulls no punches. Blaming the current excise tax regime for “systemically inhibit[ing] craft cultivators from generating survivable income.”
The white paper continues, “Current policy materially inhibits competition, centralizing economic benefit to a small number of large beneficiaries. These firms are resourced to wait out price compression and watch their competitors fail, ultimately resulting in continued and accelerated oligopolization of this nascent market.”
It’s a theme that we’ve covered here at Cannabis Life Network since the very beginning. While many in the culture supported Justin Trudeau’s 2015 campaign to legalize cannabis, falsely believing he would legalize BC Bud, the rest of us had greater insight. Namely, to quote Beatles drummer Ringo Starr, “Everything government touches turns to crap.”
And that includes cannabis. The Stand For Craft white paper uses three years of legal sales data to show this.
Industry Roundtable To Save the Day?
Dan Sutton of Stand For Craft notes that the most recent federal budget promised a cannabis industry roundtable. But as other craft associations have pointed out, if the government is consulting the same people who benefit from the current system, what good is the industry roundtable?
A better question is: how necessary is the roundtable? As the Stand for Craft white paper notes, federal and provincial governments have not shared any progress on the excise tax front. If they aren’t interested in listening now, then why later? What will have changed?
The Stand for Craft white paper compares Canada’s excise tax regime to some of the legal cannabis regimes in the United States. Namely, Arizona, Massachusetts, Michigan, New Mexico, Vermont and Washington. These states collect excise taxes from retailers instead of on cultivators. This way, excise taxes never exceed 15 percent of a product’s selling price. Compared to the 25%+ faced by Canada’s craft farmers.
In other words, each US state is responsible for its cannabis laws. The places that resemble Canada’s system of taxing cultivators, like Alaska and California, have similar problems. So follow Canada’s example if you want to squeeze out craft growers and empower a large corporate conglomerate.
Stand For Craft White Paper Reveals How Much Governments Take
The Stand for Craft white paper reveals how much governments take in excise taxes. In 2021, cannabis excise taxes contributed 0.05% of total federal tax revenues. However, as minuscule as it looks, that’s higher than taxes raised from wine sales. But a pale comparison to taxes raised from beer sales.
As Dan Sutton tweeted: “We looked at similar Canadian industries such as beer, wine, and spirits, who have spent decades reforming their tax policy to better facilitate small business. Tools like graduated taxation and rebates based on production volumes led to ‘rural renaissance’ or localized impact.”
Furthermore, the white paper describes how excise taxes work for other industries in Canada. It states: “For domestic agricultural production with thin margins, a supportive excise regime can help make or break an industry. Without viable domestic production from licensed operators, alternative product supplies will inevitably take their place.”
Designed to Fail?
Stand For Craft leader Dan Sutton tweeted: “The top 5 largest producers all have sufficient cash for 2+ years of runway at current burn rates. When that is depleted, they have all demonstrated that they have no problem raising exceptionally dilutive equity at any price. They aren’t going anywhere.”
So the fact is large LPs can afford to keep operating at a loss. But the excise tax is disproportionately affecting small craft producers. Some might think this is just government incompetence. But everyone who has studied this closely knows this isn’t some unintended consequence of bumbling bureaucrats.
In conclusion, there is a concerted effort to ensure Canadian cannabis never reaches its true potential. That’s why legalization looks the way it does. That’s why they left BC Bud out from the beginning. It’s not about your intrinsic liberty to grow and consume a natural plant. It’s about money, power, and control.
Governments banned cannabis for decades. Now we expect them to regulate it effectively? Based on what?