A Reader Asks How Much Money Could We Save By Ending The Drug War?
April 20, 2010, 05:00 AM
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04/11/10 - A Nevada Reader Wonders If Harry Reid Is Of "Sound Mind"

From: [Anonymous]

Re: Donald A.  Collins's article Murder and Mayhem on the Mexican Border Exposes Futility Of Drug Prohibition

Have you done the following exercise?

  •  How much does the US make each year taxing alcohol sales?

  • If the US taxed drugs at the current estimated per annum sales, how much tax revenue would they generate?

  • What is the delta between expenses on the drug war and income from taxes on drugs?

Several arguments could be made: Taxes on drugs could be higher than the regular sales tax. There would need to be significant money spent at the outset to be sure that those that operated outside the system now operate inside the system (legally).

VDARE.com note: Law Enforcement Against Prohibition, mentioned Donald A. Collins's column, has in fact commissioned a study on these questions from Harvard University economist Jeffrey Miron  in December2008. Professor Miron's conservative estimates are online here.

Edwin S. Rubenstein writes:

 A few points pertaining to this letter:

  •  The federal government collects $9 billion per year in alcoholic beverage excise taxes. Total expenditures on alcoholic beverages are running at $168 billion per annum, according to Dept. of Agriculture—implying an effective alcoholic beverages tax rate of 5.4%. ($9/$168)

  • Illegal drug sales are estimated at $65 billion. Applying the same 5.4% rate to drugs yield $3.5 billion in annual revenues.

Of course, drug prices would plummet under legalization. I would think a 50% or 75% reduction is possible—cutting revenues to the range of $875 mil. to $1.75 billion.

If it costs $100,000 to fund one Border Patrol Agent (salary, equipment, overhead, etc.) this amount could fund from 8,750 to 17,500 additional agents, easily doubling the current allocation of 9,500 agents along the southern border.

An increase in (now legal) drug use would raise revenues proportionately. I do not think there would be a big post-legalization surge, however. Indeed, much the allure is precisely because drugs are illegal—forbidden fruit.

One caveat: even a 5.4% tax on legal drugs could keep Mexican drug smugglers in the game—just as relatively minor differences in state tobacco taxes generate smuggling from low to high tax states.