Sunday, March 1, 2009

A New Cash Crop?

As economic conditions worsen, California State assemblyman Tom Ammiano, among others, has suggested his state could raise as much as $1.3 billion if it legalizes marijuana and taxes it. This, of course, is not a new argument. Unfortunately, no matter your views on drug legalization, it's still a silly one.

Taxes don't magically create wealth for the government, they just transfer it from consumers and producers.* There's not no benefit to society from a tax. If the government's goal is revenue generation, there's no better reason to legalize drugs to tax them than there is to just tax things people can already do, such as buying bubble gum or potato chips. For that matter, there are plenty of other currently illegal things you could justify legalizing by using the the rationale that we could raise money by taxing people that want to do them. So, while we certainly could raise money by legalizing drugs, it's not really a reason in and of itself -- economically speaking, at least -- we should do it.**

*And leads to deadweight losses.
** If you're interested in reading more, Steven Landsburg goes over a comphrensive cost-benefit analysis of legalizing drugs in his book Armchair Economist: Economics of Everyday Life.

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