7/30/2004

Marijuana taxes may lead to legalization

I know this doesn't have a lot to do with macro but I thought many of you may find it interesting based on the post about legalizing marijuana earlier this month. This post at http://vicesquad.blogspot.com/ discusses the fact that many US states officially tax marijuana and explains how this is the first step to legalization. The author points out that taxation of illegal activities has led to the legalization of prostitution in Nevada and to the repeal of prohibition laws in Mississippi (the last state to give up its statewide alcohol prohibition).

25 comments:

Senator Miller said...

I'm not sure how I feel about the legalization of marijuana, but I think an analysis needs to be done to see whether it's worth it. I'm sure many agree that if it would benefit our economy to ban alcohol people would do it, but they've tried it before and it didn't work. The cost of upholding such laws cost the US a lot, and they lost a lot on taxable purchases in the black market. It obviously must not have been worth the cost to society in drunk drivers, ruined lives etc... If the same issue exists for marijuana that the legalization of the product would help more than hurt, than it probably should happen. How would you determine this though?

Kid said...
This comment has been removed by a blog administrator.
Boris said...

The trends of past legalization issues definitely point towards a future marijuana legalization. However, I agree with Jack on the fact that there are a lot of issues the cannot be predicted. If they could, the idea of legalizing marijuana would be not existant. Either it would be legal already, or we would have given up on the idea by now. As far as the economy is concerned, yes, we would realize a growth in GDP, but what about all of the associated costs that would come up? I think this is an argument that will continue for a long time...

Dr. Tufte said...

It is true that state's tax illegal drugs. But, I have never heard of this being a back door to legalization, and I doubt that it is in this case either.

Generally speaking, the drug stamps are a way to get at the ill-gotten financial wealth of drug dealers. The idea is that the stamps are cheap, but dealers are afraid to just go out and get them (the Kansas law is not typical). But, the penalty for being caught in possession of drugs without the appropriate stamps is very high. So, if you bust a known dealer, you may not have enough evidence to get him on serious criminal charge, but he can be fined for failure to have the appropriate stamps. Basically, you hit them in their wallets. There was a big case in St. George in the fall involving failure to have the appropriate stamps.

As to the macroeconomic consequences, legalization of any drug would cause some new things to be added into GDP, and some bad things too (like rehabilitation costs). So, I don't think anyone would seriously argue that it will do something to make your macroeconomic situation better.

Tennistud said...

How in the world do you put a tax on something that is illegal? It might as well be legal if there's a tax on it. Wouldn't that be saying that it's okay to sell marajuana, as long as they pay the tax? This reminds me of giving driver's licences to illegal immigrants. I think it's absurd. I would think that if they knew of any illegal activity, that they would be arresting people for it, not making money off of it.

Dr. Tufte said...

Tennisstud's comment is typical when people first hear of drug stamps. The trick to the stamps is that it creates one more level of crime to the drug trade, and therefore one more way to get at the criminals.

Having said that, it is bizarre that Kansas allows people to buy these stamps anonymously. My understanding in other situations is that the people who buy the stamps usually turn out to be collectors.

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