Weed Wars

Dispatches from the California Marijuana Front

September 28, 2010
Cato Institute urges 'drug war' savings, avoids stand on Prop 19

A new Cato Institute study, casting the nation's war on drugs in a dim financial light, says California spends nearly $1 billion a year in state costs try to keep people from using marijuana.

And the study by the libertarian think tank says the Golden State could save a total of $6.3 billion a year by legalizing and taxing illicit drugs.

An announcement for Cato study asserts that the "drug criminalization structure" nationally "squanders a total of $88 billion a year - $41.3 billion spent to prosecute the 'war on drugs' and $46.7 billion in lost potential revenue from the taxation of legal drug sales."

The report, entitled "The Budgetary Impact of Ending Drug Prohibition," is authored by Harvard economist Jeffrey A. Miron and Katherine Waldock, a doctoral candidate at the Stern School of Business at New York University.

While the document clearly advocates potential tax benefits of drug legalization, it notably doesn't take sides on the Proposition 19 initiative to legalize marijuana in California for recreational use and allow local governments to tax and regulate pot sales.

Here is an excerpt from the report:

This potential fiscal windfall is of particular interest because California,which is facing a budget shortfall of $19.9 billion for fiscal year 2011, will vote in November 2010 on a ballot initiative that would legalize marijuana under California law. Advocates of the measure have suggested the state could raise "billions" in annual tax revenue from legalized marijuana, in addition to saving criminal justice expenditure or re-allocating this expenditure to more important priorities.

And should the California measure pass and generate the forecast budgetary savings,other states would likely follow suit.

The fact that legalization might generate a fiscal dividend does not, by itself, make it a better policy than prohibition. Legalization would have many effects, and opinions differ on whether these are desirable on net.

To see the full report, click here.

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