Wednesday, March 11, 2009

California investigates legalizing (and taxing) drugs

California Assembly member Tom Ammiano recently introduced the Marijuana Control, Regulation and Education Act (AB 390). The bill may be found at the California Assembly website, the introduction to AB 390 reads:

Existing state law provides that every person who possesses, sells, transports, or cultivates marijuana, concentrated cannabis, or derivatives of marijuana, except as authorized by law, is guilty of one or more crimes.

This bill would remove marijuana and its derivatives from existing statutes defining and regulating controlled substances. It would instead legalize the possession, sale, cultivation, and other conduct relating to marijuana and its derivatives by persons 21 years of age and older, except as specified.

It would set up a wholesale and retail marijuana sales regulation program, including special fees to fund drug abuse prevention programs, as specified, to commence after
regulations concerning the program have been issued, and federal law permits possession and sale consistent with the program.

It would ban local and state assistance in enforcing inconsistent federal and other laws relating to marijuana, and would provide specified infraction penalties for violations of these new marijuana laws and regulations, as specified.

James Saft, a Reuters columnist, lays out some of the pros and cons of drug legalization in this recent column.

There is [approximately] $100 billion in annual illegal drug sales in the U.S. [in addition to sales] of cannabis, which might produce another $25 billion annually in revenue [in addition to taxes on cannibas]. The U.S. Federal government alone spent $13 billion on the drugs war in 2002, not counting prison costs.

Then there are other costs of the American drug interdiction efforts internationally, not least in Afghanistan, where opium revenue fuels the Taliban. The U.S. spends more than $1 billion a year there on anti-drug efforts, but opium money undoubtedly raises the total costs for the U.S. by much more.

The stream of income from all of this extending into the future is very valuable indeed and would go a way towards paying the price of fixing the banking system.

This brings us to another point of weakness for the U.S.; namely its ability to fund all of the costs it has already taken on and is likely to have to shoulder in the next several years. Moody’s credit rating agency did what everyone has pretty much taken for granted for a while not long ago, acknowledging that the U.S.’s AAA credit rating is being “tested” and falls into a category below those on the top shelf like Canada and Germany.

It’s not all wine and roses though. Cheaper legal drugs may lead to a spike in use, which might hit productivity and impose lots of costs, such as higher health and other welfare costs. All of those prison, military and law enforcement jobs are a huge source of stimulus, and the cut backs implied by legalization would raise transitional problems.

Moreover, drug legalisation, just like for alcohol, is essentially a moral and political decision about which reasonable people can disagree. It’s also, to put it mildly, not very likely.

Still the war on drugs rolls on, costing billions, creating huge incentives for violence and crime, imprisoning hundreds of thousands and seemingly never much closer to victory. The waste and misery involved must make it rival the sub-prime bubble as a misallocation of resources. |A revenue and legalization lesson from FDR - The Great Debate| (emphasis added)

When I was a sophomore in high school I did a report for my Economics class on drug legalization and I thought the case for legalizing drugs on strictly economic grounds was compelling. Nothing I've learned since then has changed my mind.

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