•Government prohibition of marijuana is the subject of ongoing debate.
•One issue in this debate is the effect of marijuana prohibition on government budgets. Prohibition entails direct enforcement costs and prevents taxation of marijuana production and sale.
•This report examines the budgetary implications of legalizing marijuana – taxing and regulating it like other goods – in all fifty states and at the federal level.
•The report estimates that legalizing marijuana would save $7.7 billion per year in government expenditure on enforcement of prohibition. $5.3 billion of this savings would accrue to state and local governments, while $2.4 billion would accrue to the federal government.
•The report also estimates that marijuana legalization would yield tax revenue of $2.4 billion annually if marijuana were taxed like all other goods and $6.2 billion annually if marijuana were taxed at rates comparable to those on alcohol and tobacco.
•Whether marijuana legalization is a desirable policy depends on many factors other than the budgetary impacts discussed here. But these impacts should be included in a rational debate about marijuana policy.
Friday, October 07, 2011
How Much Tax Revenue Could Legalizing Marijuana Raise?
This question came up in class this week and a student sent me a link about it. See The Budgetary Implications of Marijuana Prohibition by Harvard economist Jeffrey A. Miron. Here is the Executive Summary: