Budgetary benefits of cannabis regulation

Tuesday, April 20, 2010


In the United States the discussion on the pros and cons of regulating cannabis is well advanced. The national television news programme CNBC has dedicated a website, Marijuana & Money, to the issue. “Many Americans support legalization and many states already permit medical use,” the site says. “An end to prohibition would generate billions in tax revenue and relieve the criminal justice system. But is it the right thing to do?”

Among other things, just as a working group of Dutch civil servants looked at the budgetary implications of regulating use and supply of cannabis, the CNBC site also looks at the The Cost-and-Benefit Arguments Around Enforcement and the Tax Potential For Government.

Jeffery_MironIn the 2010 edition of The Budgetary Implications of Drug Prohibition, Harvard University Professor of Economics Jeffrey Miron estimates that regulating cannabis would save US$13.7 billion per year in government expenditure on enforcement of prohibition. “Legalization eliminates arrests for trafficking and possession," Miron says. “Second, legalization saves judicial and incarceration expenses. Third, legalization allows taxation of drug production and sale.”

Miron also estimates that legalization would yield tax revenue of US$6.4 billion annually if cannabis were taxed at rates comparable to those on alcohol and tobacco. Though alcohol and tobacco are not taxed at the same rate, he estimates that the sin or excise tax rate would be 50 percent. “I’ve tried very hard not to assume a tax rate that looks as though its just going to drive the market back underground, because then of course then you’re just going to get zero,” Miron says.

The site also offers a State by State Guide to marijuana laws, enforcement statistics, medical marijuana programs and costs.