How Much Could the Government Make Off Pot?

In our third installment in our “Sin Tax” series, we take a look at the potential revenue impacts of regulating and taxing marijuana. The U.S. spends about $12 billion dollars per year prosecuting marijuana offenders, which are 47% of all of all drug arrests, with roughly one-third of all crimes being non-violent and drug related.  Additionally, another $150 million is spent per year on policing drugs each year. In the midst of the worst recession since the Great Depression, many have pointed to increased legalization or decriminalization of marijuana as being an untapped resource for taxation, and a source of new small business growth and employment. It is estimated that nearly $1 billion per year could be generated in marijuana production upon nationwide legalization with a flat 10% tax on producers. This, of course, coupled with a significant drop in the cost of policing and prosecuting the use of marijuana could lead to net savings.

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Comments (7) Leave your comment

  1. Way cool! Some very valid points! I appreciate you writing this write-up and the rest of the website is also really good.

  2. 1st there’s already a ranking system, I highly doubt that will change any time soon. 2nd not only does it cost tax payers money it also takes innocent lives by making it illegal its a big fat Christmas present to drug Cartels and if anyone things they don’t communicate with each other then they don’t know the meaning of the word cartel. 3rd It will only be legal when our government is no longer being bought off by big Pharmasudical companies(sorry for the spelling). If you ask me I believe most people in power wan’t it legal too but if they made marijuana legal then they would loose money and as it is they can use it and not go to prison plus make billions of dollar’s at our expense. I’m surprised that they havn’t out right said we’re profiting on the drug war because it funds itself. Lastly anyone who thinks most of the marijuana we have in the U.S comes from out of the country has been watching too much border wars, the best weed is grown in the U.S so why would consumers seek sources outside the U.S, its the equivilant of saying hey Australlia I don’t like these oranges I grew in my back yard can you send me some

  3. It doesn’t matter how much money it’d make, the fact of the matter is that prohibition goes against natural rights, the rights you should have as a human being, and the constitution. The majority of Americans support the legalization of marijuana, and so it should be made legal. The government was not established to tell us what we can or can not do, it was established to enforce the policies that we the people ask for. That is how a democracy is intended to work.

  4. Itsnot Important-

    If you believe that the 1 time costs of implementing a “potalizer” test and setting up regulation for marijuana would outstrip the continuous, daily, hourly taxation of marijuana, you’re a moron.

  5. i agree that street price would drop.
    but how does that really matter ?
    less tax revenue,where there was none
    previously. the enforcement,global of usa
    marijuana policies stops costing joe taxpayer
    hard earned, better spent elsewhere, dollars.
    1000s of mexicans get to live.
    etc. etc…………

  6. Nobody is going to legalize weed outright, instead it will be a controlled substance like alcohol or cigarettes. There are costs in controlling these things as well as benefits. A proper “potalizer” test would need to be made for drivers. There would need to be some sort of THC regulation among dealers and that all costs money too.

    There are many great reasons to legalize cannabis but making tax money off of it is not one of them. The national debt is many trillions, a few extra billion is a drop in the bucket.

  7. The $12B saved in not prosecuting would outstrip any potential tax revenue.

    Remember the unintended consequence of legalization. With no risk of confiscation or jail time, the street price would drop, as much as 80% by some estimates.

    Disclaimer – I am not expressing a moral judgment on this topic, just a supply-demand based observation.

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