Legalizing Marijuana to Balance the Budget Deficit

Legalized but taxed. This is the recipe suggested by a group of activists in the U.S. And for the first time in decades, the proposal is being seriously taken into consideration. The economic upturn might have already begun for the country, but at a local level the individual States still have to deal with gigantic budget deficits, the collapse of internal revenue, and the end of the stimulus package. In other words, the purses are empty and the only two paths to follow are cutting costs and raising taxes. Yet, nobody feels like raising taxes, unless it’s on consumer vices such as alcohol, cigarettes, and gambling.

Ohio’s Governor Ted Strickland, for example, sensationally backpedalled on his previous ban on gambling by taking a stand in favor of casinos, when he realized that the tax revenue they could generate would allow him to avoid painful spending cuts: “My economic advisers put up a white board and started running through the State’s financial report. We went point by point, but when we came to scrapping the program that provides oxygen to the chronically ill, I realized that we had to stop. We’ve gone as far as we’re going to go.”*

The supporters of “legalized but taxed” marijuana are riding the wave of this extraordinary socio-economic moment, in the belief that the time to pass this bill is now or never. In 13 States marijuana has been legalized but only for medicinal purposes, hence in most cases it is not taxable or it is taxed at very low rates. The partial legalization of marijuana however, and the fact that people are slowly getting used to the idea that marijuana is not the dangerous drug that they were made to believe, has created a favorable background for the next step. In fact, the liberalization movement can count on a broad support, from Democrats to Republicans, mothers to police officers, judges to politicians; it has been called the only true bipartisan movement of the last few years.

Former California’s Supreme Court Judge James Gray, a conservative, pointed out that legalizing marijuana would not only have financial benefits – at a national level, tax revenue should add up to $40 billion to $100 billion – but it would also ensure huge savings on law and order: a third of the prisoners in American prisons are arrested not for violent crimes, but for drug related offences, and in most of the cases the crimes were related to marijuana and not more dangerous drugs. Moreover, as Judge Gray underlines, 42 per cent of US citizens admit having smoked joints at least once, meaning that prohibition does not work.

For his part, former New Mexico Governor Gary Johnson maintains that relieving police officers of the task of controlling marijuana consumption would allow them to crack down on hard drugs and trafficking. According to him, liberalization is better than decriminalization because it is going to be much easier to control drug consumption once it is legalized — especially among teenagers.

Johnson takes as a model the prohibition of alcohol in the ‘20s, which caused a rise in illegal consumption, the explosion of organized crime and a loss of tax revenue for the government. After the end of Prohibition in 1933, the consumption of alcohol dropped while tax revenue quickly increased: managed directly by the government, alcohol sales became subject to law and taxes, while its legalized production led to the creation of jobs, generating a strong stimulus for the economy and more revenue for the government. The recently released [book] entitled “Last Call: The Rise and Fall of Prohibition” by Daniel Okrent, provides an extraordinarily lucid and lively view of those years.

The consumption of alcohol (and cigarettes) by people under 21 years of age is strictly forbidden in the U.S., and while it’s true that some teenagers manage to get around the ban, all public places in the country strictly respect the law to avoid paying heavy fines.

We’ll have to wait until November to know whether the appeal by the “legalized but taxed” marijuana advocates has passed or not. Initiatives to legalize marijuana have already qualified for ballots in California, Colorado, and Rhode Island and, in California at least, the results are promising. Governor Arnold Schwarzenegger must deal with a $22 billion budget deficit, and 56 per cent of public opinion is in favor of legalizing marijuana and taxing it, just like cigarettes and alcohol.

*Editor’s note: The above quote, correctly translated, cannot be verified.