New Cato Report: Marijuana Prohibition Costs Almost $18 Billion A Year

Sep 28, 2010 , , , , , ,

The United States could improve its national budget by nearly $18 billion annually if we taxed and regulated marijuana like alcohol, according to a newly released study from the Cato Institute.

The Budgetary Impact of Ending Drug Prohibition,” by Harvard economist Jeffrey A. Miron and Katherine Waldock, a doctoral candidate at the Stern School of Business at New York University, estimates the amount of money state and federal governments could both save from reduced expenditures and make from tax revenue, if marijuana and other drugs were made legal, taxed, and regulated.

The report concludes that, between savings and tax revenue, government budgets would improve by $17.4 billion annually if we regulated marijuana, and approximately $88 billion annually if we regulated all drugs.

Those are some pretty big numbers. But this part of the conclusion is what really caught my eye:

“About half of the budgetary improvement from legalization is due to reduced criminal justice expenditures. But for this component of the impact to show up in government budgets, policymakers would have to lay off police, prosecutors, prison guards, and the like. Because such a move would be politically painful, it may not occur. It is certainly true that reduced expenditure on enforcing drug prohibition can still be beneficial if those criminal justice resources are re-deployed to better uses, but that outcome is difficult to achieve.”

Politicians might not have the stomach for it, but luckily we live in a country where many states can enact laws through ballot initiatives, such as Prop 19, the marijuana legalization measure Californians will vote on this November. According to the Cato report, making marijuana legal in California could raise $351.88 million in tax revenue, and save about $959.75 million in government expenditures. That’s more than $1.3 billion annually.

In July, the California Board of Equalization estimated that the state could collect up to $1.4 billion by ending marijuana prohibition.

21 responses to “New Cato Report: Marijuana Prohibition Costs Almost $18 Billion A Year”

  1. Politicians in Wisconsin have the stomach to tackle marijuana reform! Ballot initiatives alone will not do it. We need sensible leaders wanting to use Industrial Hemp, Medical Marijuana and Recreational Cannabis as part of the healing and protection process for their states and ultimately the country.

  2. A huge savings not mentioned above is in the cost of tobacco $igarette addiction related diseases– $200B?– which might be drasticly impacted by cannabis legalization bringing with it de facto legalization of vaporizers and one-hitters, i.e. explicit visible Harm Reduction equipment replacing the easy-to-hide, easy-to-dispose-of “joint” which burns hot, destroys much of the cannabinoid the user has paid for, and inflicts “dopy” health and behavior symptoms which are popularly blamed on the cannabis.

    What happens next, when millions of nicotine addicts, seeing cannabis users flaunting this “conservative” equipment, begin to try it out and wind up weaning themselves away from the hot burning overdose $igarette format which accounts for most of their disease and mortality? Will Mike and other brave campaigners on this website get a share of the Nobel Prize for Medicine when cannabis legalization has the “unexpected” effect of solving the tobacco morbidity holocaust?

    Note that $igarette addiction is positively correlated with a poor education and low income. Well-educated individuals are more able to concentrate their minds on a difficult intellectual highpaying job, whereas a less well educated person may be more tempted to self-medicate with nicotine in an attempt to compensate for his difficulties mastering that same job. When he gets (a) hooked on a $3000/year $igarette habit and (b) ill beyond his financial ability, the taxpayer is forced to cover the costs. So by threatening to destroy the $igarette industry profit margin, cannabis legalization is threatening to save the US government most of that aforementioned $200B a year.

  3. Prop 19– is it 25 square feet per person or household? Time to lay-off many little pigs. LOL
    Obama is a lying POS. In 2012 get rid of this liar.

  4. I don’t see why there would need to be layoffs. The focus should be on shifting these resources to fight actual violent crime.

  5. it amazes me that all these studies are only concentrated on recreational use…why don’t they figure in the profits and jobs created with industrial hemp also?

  6. @# 7

    esspecially boarder patrol, gang violence, back to school to learn to be detectives to solve capital crimes. The end of prohibition shouldnt be a death nail in law enforcement, it should usher in a new era of dedicated and compitent police officers. The clock punchers will be pissed, but I’m sure alot of officers would jump at the chance to be real cops on real cases, not pot nannies.

  7. @ #9, propot: That’s such a good point. The development of industrial, medical, and nutritional uses of cannabis will have a much bigger economic impact than recreational use. Cannabis was banned in the first place thanks to the influence of oil and timber industrialists seeking to protect their profits.

  8. Or the government should just continue persecuting private citizens for personal behavior just to retain all those prison and law enforcement jobs.

  9. I remember the Town Hall Meeting. Obama was asked if he thought that legalizing marijuana would help the budget. He laughed about it and said no.

    After that happened and then we saw him put more police out on the streets busting pot dealers. Let’s see, we have 3 million dollars worth of pot here busted. 4 mil there, 40 tons here, 40 tons there, all of that adds up to one thing. The publics desire to want marijuana is there and always will be there. Since people are seeing the numbers of people getting busted, the money that the pot is worth, they see the Obama Administration lying their butts off.

  10. This issue is all about billions in gov’t money to the D.E.A.. This issue is all about the billions pissed away in the prison system. This issue is all about controll of our lives and America has had enough. Soon whan prop 19 passes,the gov’t could send all covicted cannabis users to California to spend their time growing more cannabis.

  11. Wow, and I thought the Iran/Iraq war was expensive! Oh yeah, let’s spend our money on this, we have so much of it to spare! This seems like a lot of money to prohibit something! I’m sure our government will find a way to build more prisons, still! Way to go, US!

  12. “Joel { 09.28.10 at 7:25 pm } Vote YES on Proposition 19, and let freedom and prosperity grow to new heights.”

    I agree Joel, But I am very afraid of the sentance that states
    Tax like alcohol! View the various taxes on alcohol. Some states simply put it as a “Sin Tax”!

    I do not think Medical MJ use is a Sin, and I don’t believe my use will keep me from Heaven.

    When given the powers, The powers that be could be very tax happy. If that is the case, then what have we gained?

    The Feds need to pull their head out and set up a coast to coast regulations, for some reason I pray that they will be fair about it.

    Just my opinion…Peace, Love, and FREEDOM!

  13. Crunch those numbers, Maxwood. Crunch those numbers. What could we do with 200 B-b-b- billion.
    Think we could pay for
    health care ( pun intended ) and not drive up the deficit at the same time? Yeah!!!! How ironic?

  14. Cliff,
    Just to let you know that all Presidents work within parameters . Their called Congress. Don’t blame the president. He only gets to vote when it gets on his desk. Blame Congress which is the opposite of progress at this time. Doesn’t it strike you funny that it is always the Republicans ( All ) that always vote no together. None of them have the balls to stand up on their own and vote what they think is right because of politics. It’s call politics. What ever your political party says you do or you will be ostracized and blamed if the other party is right because you voted your conscious. You can’t please everyone. The President is a figurehead/scapegoat to blame if Congress is wrong. Congress needs to agree on a law or bills on their merit. Not on whatever their political party is. The whole political system needs to be overhauled. Forget about political parties and let them vote on secret ballots so their job doesn’t depend on it. And let the majority rule. If 200 vote no and 201 vote yes. Count the votes . The yes’s win. Simple math. Forget about this 2/3rds shit. Cut and dry. And the President will and has to agree with the majority and sign it into Law. Then they can stop the bickering and get something done. Better yet. First get rid of congress and hire the best rational minds to decide what needs to be done. Let them hash it out . Then we work it like American idol and let these people perform ( Pick a subject and tell us what they think is right or wrong with it )and let us make up our own minds and vote( we the people ) on it. Let the majority decide. So if a million vote no and a million and one vote yes. The million and ones win . Simple and real. They work for us. We are the majority.

  15. The problem is that is no matter a secret ballot or not, alliances will form based on people having similiar ideas, then they will get who they want into the office of president and pass whatever the hell they want regardless of what the voters want. What needs to be regulated is the lobbyists and special interest groups, then you can have term limits in place. This will allow intelligent citizens who’ve had private industry success to become decision makers and the out of touch, life long politicians will be a thing of the past. Corruption is rampant in government and the less of it we have the better off we the people will be.

  16. The Realist,
    Close enough. Yes, intelligent people that know what they are doing. Not politicians. Let the people decide what they want and then vote on it. Like on the reality shows.
    Call it . You Vote For It.
    Each have a code number and one vote per subject. Be it health care,the economy, whatever. Majority wins be it by one vote or a million.There is nothing wrong with alliances. If they want to put themselves out there to others that’s on them.The majority still wins. Be it by one vote or a million votes. No party vote. Only individual votes.Have a results show and then it is done and decided quickly. Let the advertiser’s pay for it. Not the tax payers.

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