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July 23, 2018

"The Budgetary Effects of Ending Drug Prohibition"

The title of this post is the title of this notable new paper authored by Jeffrey Miron published by the Cato Institute. Here is how it starts:

In the past several years, the national movement to end drug prohibition has accelerated.  Nine states and Washington, DC, have legalized recreational marijuana, with at least three more states (Connecticut, Michigan, and Ohio) likely to vote on legalization by the end of 2018.  Dozens of others have decriminalized the substance or permitted it for medicinal use.  Moreover, amid the nation’s ongoing opioid crisis, some advocates and politicians are calling to decriminalize drugs more broadly and rethink our approach to drug enforcement.

Drug legalization affects various social outcomes.  In the debate over marijuana legalization, academics and the media tend to focus on how legalization affects public health and criminal justice outcomes.  But policymakers and scholars should also consider the fiscal effects of drug liberalization.  Legalization can reduce government spending, which saves resources for other uses, and it generates tax revenue that transfers income from drug producers and consumers to public coffers.

Drawing on the most recent available data, this bulletin estimates the fiscal windfall that would be achieved through drug legalization.  All told, drug legalization could generate up to $106.7 billion in annual budgetary gains for federal, state, and local governments.  Those gains would come from two primary sources: decreases in drug enforcement spending and increases in tax revenue.  This bulletin estimates that state and local governments spend $29 billion on drug prohibition annually, while the federal government spends an additional $18 billion.  Meanwhile, full drug legalization would yield $19 billion in state and local tax revenue and $39 billion in federal tax revenue.

In addition, this bulletin briefly examines the budgetary effects of state marijuana legalizations that have already taken place in Colorado, Oregon, and Washington.  This study finds that, so far, legalization in those states has generated more tax revenue than previously forecast but generated essentially no reductions in criminal justice expenditure. The bulletin offers possible explanations for those finding.

I cannot help but being a bit suspicious of parts of this paper because the very first sentence is a little off:  it is not at all "likely" that Connecticut or Ohio will have marijuana legalization votes in 2018.  Michigan will be having an initiative vote in November, and it is possible that Missouri, North Dakota and Oklahoma voters all could also have a chance to vote for full legalization, too.   This state-vote accounting snafu notwithstanding, the other forms of accounting in this paper still seem to me worth checking out, and the paper also seem to provide a good excuse to link to a few related recent posts from Marijuana Law, Policy and Reform:

July 23, 2018 at 05:19 PM | Permalink


One reason, I do not harass you on your Marijuana blog is that the question of legalization is settled in every way, clinically, economically, and legally. Full recreational marijuana should be legal. Its quality should be regulated. Its cost should be taxed. Prof. Berman is doing a good job of reporting marijuana law developments, with a quiet bias in favor of legalization. I agree with Prof. Berman, and I disagree with Bill Otis on this subject.

Opiates for practical purposes are also ubiquitous and mostly immunized. So opiate use should be legalized. There are, tragically, positive effects of the overdose deaths associated with its prohibition. Prohibition is a major factor in the deaths of 45000 people. These deaths may make crime come close to disappearing. The lawyer hierarchy is responsible for this mass murder, but it is not all bad.

Should cocaine, amphetamines and hallucinogens be legal? I do not know.

Everyone knows this, and it has been widely known for 50 years. Nothing comes close to the killings of 400,000 people a year by tobacco, and 100,000 a year by alcohol. These are direct natural deaths by the substances themselves. Then, half the murderers are drunk. Half the murder victims are drunk. Half the suicides are legally drunk. These fractions are likely to be even higher in domestic abuse and battery cases. These two substances stand alone in damage.

The lawyer has successfully squeezed the rate of smoking from 40% to 15% of the population. That model may be applicable to these other troublesome substances, as the most productive, least expensive approach.

Posted by: David Behar | Jul 23, 2018 9:39:44 PM

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