To understand the future, sometimes we have to look in the rearview mirror. The current prohibition on marijuana consumption exactly parallels the 1920s alcohol prohibition.
Every year, a widely consumed illegal substance makes potential criminals of millions and actual criminals of hundreds of thousands. And like booze during Prohibition, this substance, marijuana, is the easy revenue of organized crime, contributing tens of billions of dollars to growers, who commit a variety of bad acts both at home and abroad.
How much money is made from this single illegal substance? In fairness, nobody knows for sure. "Illegal" means that hard data are hard to come by. However, we do know that there are anywhere from 25 million to 60 million U.S. consumers (depending on how likely survey respondents are to tell the whole truth), and at an average cost of $5 per cigarette, factoring in one per day for each user, total spending on marijuana may add up to $45 billion to $110 billion a year.
What about possible tax revenue? From Canada we’ve learned that the production cost of (government-sponsored) marijuana is roughly 33¢ a gram. Currently, U.S. marijuana consumers pay at least $10 per gram retail for illegal marijuana. If the cost of retailing and distribution is the same as for legal tobacco cigarettes, about 10¢ a gram, then selling the (legal) product at exactly the same prices as on the street today ($10 per gram) could raise $40 billion to $100 billion in new revenue. Not chump change. Government would simply be transferring revenue from organized crime to the public purse.
It is a proven technology. We did it in 1933 when Prohibition ended. Should we get back to the future?
Gee, how about collecting taxes from legalized marijuana as a way of helping to deal with the deficit? Sounds great. Doesn’t work.
There are about 170 million users of alcohol in the U.S. and 16 million users of marijuana. This 10-to-1 ratio is because alcohol is legal and marijuana is not. If we legalize marijuana, everyone (even anti-prohibitionists) agrees we will have far more users. Ooooh, just think of all that revenue. Except we already have a working model for a legal intoxicant we collect taxes for. Let’s see how well that works:
The latest studies show that the U.S. collects about $8 billion yearly in taxes from alcohol. The problem is, the total cost to the U.S. in 2008 due to alcohol-related problems was $185 billion, and the government pays about 38% of that cost (about $72 billion), all due to consequences of alcohol consumption, according to the National Institute on Alcohol Abuse & Alcholism. For every dollar the government collects in alcohol taxes, it expends about $9 (for such things as Medicare and Medicaid treatment for alcohol-related health troubles, long-term rehabilitation treatment, unemployment costs, and Welfare). Does that seem like a model for emulation?
The legalization of alcohol is grandfathered in, and it is unlikely that major changes will be made. The last thing we should do is replicate this irrational business model. True, even though studies show both drugs are similar, many believe alcohol is worse. But even if we only see half the damages with marijuana, we cannot ignore the math: $4.50 for every $1 we collect is not a good business model.
Please send us your ideas for new Debate Room topics. If you're an academic, association officer, or other industry expert and would like to write a Debate Room essay, send us a query. Questions? See the