Revenue from tax on legal marijuana in Canada should go in part towards public education to teach young people about the risks of drugs, says Liberal MP Bill Blair.

"Revenue generated from this should be reinvested in research, in prevention, in public education, in treatment and rehabilitation. Those are the appropriate investments for this," Blair told Metro Morning on Monday.

"We are trying to bring in a system that will do a better job of protecting our kids. We are trying to bring in a system that is competitive with organized crime so that we might displace them from the market," he said.

"And perhaps most importantly, there are costs associated to this. We believe it's important that the revenue that is generated can be put against those costs," Blair said.

An estimated 30 per cent of young adults in Canada use recreational marijuana regularly and the federal government has a responsibility to ensure they do safely, says Liberal MP Bill Blair. (CBC) Blair, MP for Scarborough Southwest and Liberal point man on legalizing marijuana, revealed the federal tax proposal for legal marijuana on Friday. He said governments could raise roughly $1 billion a year from imposing tax on legal marijuana.

According to Statistics Canada 30 per cent of young adults in Canada, aged 20 to 24, use recreational marijuana.

Blair said the government has a responsibility to ensure they, along with younger and older Canadians, know the risks.

That means some of the tax revenue raised should cover the costs of public education, he said.

He said young adults buy marijuana from the same dealers regularly and have been doing so for some time, but he believes most will switch to legal marijuana once the government legalizes it.

"Canadians, when given a choice that is competitive in price and quality, but it is legitimate, the vast majority will choose that product which is tested and of known potency and purity, and they will choose to operate within the legal system. For those who don't, there's consequences," said Blair.

Under the federal plan, the government would apply an excise tax of $1 per gram of marijuana or 10 per cent of the final retail price, whichever is higher. (Eric Engman/Fairbanks Daily News-Miner/Associated Press)

Under the federal plan, the government would apply an excise tax of $1 per gram of marijuana or 10 per cent of the final retail price, whichever is higher.

Revenues are to be divided equally between Ottawa and the provinces and territories. The government is holding public consultations on its tax proposal until Dec. 7.

Federal and provincial sales taxes would be applied on top of the excise tax, with the final price tag varying across the country because provinces have different sales taxes.

Liberal MP Bill Blair says it will take time for Canada to rid itself of the black market because it didn't develop overnight. 'I look at this more as a process rather than an event.' (David Horemans/CBC) The proposed tax would apply to all cannabis products available for legal sale, including fresh and dried cannabis, cannabis oils, seeds and seedlings for home cultivation, and medical marijuana.

Blair said the government arrived at the $1 excise tax per gram after doing extensive research.

"It was after very careful examination of the existing market because one of our strongest public priorities is to eliminate that illicit market," he said.

"We wanted to make sure the price of cannabis remains competitive with that market. We also looked at other jurisdictions and saw what tax levels that they had imposed."

"This is frankly a little below that, but I think it's very consistent with our aim of keeping this competitive with the illicit market in order to eliminate it."

Getting rid of dispensaries will be 'a process'

Blair said the government consulted U.S. states, including Colorado and Washington, that have legalized marijuana to find about price, taxation levels and production costs and to learn how long it might take to displace the black market.

He said it will take time for Canada to rid itself of the black market because it didn't develop overnight.

"I look at this more as a process rather than an event," he said.

Washington state, for example, believes it displaced about 50 per cent of the black market one year after marijuana was legalized there, he said.

After three to four years, about 75 to 80 per cent of the black market has been displaced in the state, he explained.

"I think that's a reasonable target for us," he said.

Blair said under the new federal regime, it will still be a criminal offence to produce, traffic, import and export cannabis illegally after marijuana is legalized.