Why We Should Tax Pot

Barack Obama has given us no indication that he will take a leadership role in the decriminalization of marijuana, but that didn't stop a hearty discussion of the possiblities in the last week as we marked the 75th anniversary of the day we repealed the prohibition of alcohol.

With state budgets hurting, a new decriminalization law ready to take effect in Massachusetts and a liberal president, we've heard a lot of talk about the benefits of decriminalization. Today I want to talk a bit about the potential boost to state budgets by legalizing pot.

L.A. Times columnist Patt Morrison talked to a RAND Corporation economist last week and wrote  that "the unintended consequences of legalizing marijuana in 2009 might match the unintended consequences of outlawing liquor in 1919."

RAND's Rosalie Pacula might as well have emailed Morrison a link to Reefer Madness on YouTube. Morrison left the conversation worried that "pot is more addictive than was thought" and that there would still be a black market, like the black markets for alcohol and tobacco. Now there's a huge problem that I've entirely ignored on this blog, the dangerous alcohol and tobacco black markets. She then goes on to question the amount taxes would actually raise.

Of course there would still be a black market if pot were legal, but it would be miniscule compared to today's international (and actually dangerous) drug trade. There is no doubt in my mind that marijuana could raise significant tax revenues if legalized. Harvard economist Jeffrey Miron says states and the federal government would see $6.2 billion in annual revenue by taxing pot.

But the windfall would go beyond tax revenue. We would save all of the money we spend to arrest and incarcerate people for marijuana-related crimes. Miron estimates this at $7.7 billion a year for state and federal governments. Add onto that the productivity added to our workforce by bringing thousands of citizens back into society. And the intangible value of not breaking up families and incarcerating non-violent people for using a drug that is almost definitely less harmful than alcohol.

Then, from the other side of the argument, there are those who say we shouldn't tax any plants from the green Earth. Sorry, but I disagree there, too. Taxes pay for the infrastructure we all enjoy as Americans, and the public tends to put up with 'sin taxes' - they're willing to pay a little more for something that might be bad for their health. Marijuana users are already paying exorbitant prices to dealers, they'll rejoice if they can pay half as much to the government for safe, quality-controlled pot. I would even be happy to see  the government charge the same exorbitant price that the black market exacts. We could solve some budget problems and pot would be legal and readily available - just not cheap.

There's the argument that more people will smoke more marijuana if we legalize it. I disagree with this, too.  Nearly everyone who wants to smoke pot already does so, and we're missing an opportunity to tax them.