Would Legalizing Marijuana Create a Tax Bonanza?
Reason‘s Jacob Sullum runs the numbers and finds that legalizing marijuana would yield very little tax revenue because “almost all” of the profit that makes marijuana the nation’s biggest cash crop “can be attributed to the ‘risk premium’ associated with prohibition.”
UPDATE: This isn’t to say that legalization would be bad policy, just that one of the arguments often advanced for it doesn’t pan out. Even on the economic front, DC Loser observes in the comments that, “The savings from the law enforcement and prison costs could be substantial.” Sullum touches on this point later in his piece:
From the government’s (and taxpayer’s) point of view, the real fiscal benefit from abandoning the war on marijuana would come from no longer arresting, prosecuting, and jailing pot smokers, sellers, and growers. Drug law enforcement costs something like $40 billion a year, and marijuana accounted for 43 percent of drug arrests in 2005. That doesn’t mean legalizing marijuana would save two-fifths of the money spent on the drug war, since marijuana offenders are much less likely to be imprisoned than other kinds of drug offenders. But the savings certainly would be substantial. And that’s not counting all the indirect costs, such as marijuana offenders’ legal expenses, loss of freedom, forgone income, and so on.