Should the U.S. Legalize Marijuana?

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With today's lagging economy, it is an attractive prospect to think we could introduce a new industry which would harmlessly usher in billions of new tax dollars annually.  If it were only so easy.

It is unclear where the $12 billion figure comes from above, but it is clear that marijuana legalization, keeping costs low while charging an excise tax on commercial sales, would result in substantial increases in marijuana use and subsequent problems (see my other sections on the almost universal view of the medical and scientific community that smoking marijuana is damaging to the lungs and is related to mental illness, notwithstanding the effect on motor skills and judgment). 

The writer introduces the Netherlands example but leaves out the fact that when marijuana commercialization thrived in that country, marijuana use tripled among young adults.  Furthermore, even if we went around judicial rulings on "commercial speech is free speech," we would be left with a substantial problem since such a low entry cost to marijuana smoking would introduce more users. Cheap drugs would put a joint of marijuana well within the reach of a child’s daily allowance. Additionally, it would dissuade users from stopping (thus giving them a greater chance to become addicted) because of the cheap price. The American tobacco experience shows us that the price of drugs greatly influences a person’s decision to use.

If we went the other way and taxed marijuana heavily, we would be left with the same black market we have today -- which would only compound our current problems. Expensive drugs would ensure that an already well-established black market would remain largely in tact.   Especially if drugs were still illegal for kids (no one has seriously proposed legalizing marijuana for children), a black market would still have reasons to linger. This is precisely what occurred in Canada when they imposed steep taxes on cigarettes (Gunby 1994).

In the U.S., illegal drugs actually cost $160 billion a year in lost social costs. That number would no doubt increase under legalization, and then have to be distributed to the new number of total drug users. Experience with taxing alcohol and tobacco show us that any attempt to pay for lost costs through taxes would be futile. Indeed the social costs of legalization outweigh any possible tax that could be levied against the drug. In 1999, state and federal governments gained about $11 billion from alcohol taxes -- but direct health care costs amounted to four times that much, notwithstanding the costs to the criminal justice system, federal entitlement programs, and loss of productivity (U.S. Census Bureau 1999 and 2000; CASA 1996). Tobacco was worse -- the $13 billion in federal and state tobacco tax revenue in 1999 was one sixth of the $75 billion in direct health care costs attributable to tobacco (U.S. Census Bureau 1999 and 2000; CASA 1996).