Legalizing Marijuana – The Fiscal Case – 2 of 2

More than 850,000 people are arrested for marijuana-related violations per year. Of these 850,000+ arrests, 86% are for possession meaning that marijuana accounts for 46% of all drug possession prosecutions in the US.

Think about the money all levels of government spend to rack up those numbers. At a time where conservatives of all stripes are calling for spending cuts, legalizing marijuana would accomplish that with the added benefit of increased revenue.

Marijuana legalization is not only a social (or moral) issue but a fiscal issue as well – one that all fiscal conservatives should seriously consider before throwing it away.


Dr. Jeffrey Miron, an economist from Harvard, has been writing about the Drug War for the majority of his career. In Drug War Crimes: The Consequences of Prohibition, Miron estimated that the U.S. government (from the local to federal level) spends $30 billion annually on the Drug War as a whole. That is $30 billion cut from all levels of government if all drugs were legalized. If we isolate these numbers to marijuana alone, legalizing marijuana would save local and state governments $5.3 billion while the federal government would save $2.4 billion (that is an annual savings of $7.7 billion in total). On top of that, marijuana legalization would generate $6.2 billion of tax revenue annually if it were taxed “at rates comparable to those on alcohol and tobacco” (personally I don’t have a problem with sin taxes).

The numbers have only increased since Miron published those numbers in 2004 and 2005 respectively. Miron’s 2010 report, estimated that marijuana legalization alone would save $13.7 billion of government spending from the federal to local level, while bringing in $6.4 billion of tax revenue every year. While the potential revenue gained from marijuana legalization has not increased sharply, the potential savings have. For full disclosure, Miron stated that legalizing only marijuana would “fail to achieve many [of the] benefits of broader legalization.” Yet the numbers are impressive even when limited to marijuana.

In only five years, the money spent on enforcing the marijuana prohibition increased by $6 billion.

The majority of this spending is done at the local and state levels. This helps put into perspective CO and WA’s willingness to put legalizing marijuana for recreational use on the ballots in November. The old news is that the initiatives passed in both states despite some awkward tensions between recreational use being legal while growing & selling remain illegal in WA for example.

However, CO and WA aren’t the only states to change their marijuana laws. Currently there are 18 states with legalized medical marijuana and 15 states where marijuana is decriminalized. Decriminalization means that a state treats first (sometimes second) possession offenses as minor infractions. For example, the state I live in (CT) has decriminalized marijuana. In Connecticut possessing less than half an ounce for personal use results in a ticket and a fine. States are starting to creep down the path towards marijuana legalization in these smaller ways and it is pretty likely some states will follow CO and WA’s lead on legalizing recreational marijuana.

This discussion isn’t pie in the sky anymore. Or moon pie. Or pizza pie.

These are numbers and factoids that many people have likely heard before. “Yeah, I’ve heard the statistics from the hippies about how much money legalizing marijuana would save and bring in. So what?” For what it’s worth, it’s not just hippies and Harvard economists: Milton Friedman came out in support of drug legalization in a Newsweek article published in 1972 (only four years before he won his Nobel Prize). Friedman even signed a petition with over 300 other economists that called for marijuana legalization.

This issue is turning up in current events again too. In December, Obama said in an ABC News interview that enforcing overriding federal laws in CO and WA would not be a “top priority” for his administration. But bear in mind that the Marijuana Policy Project declared that Obama is “arguably the worst president on medical marijuana” back in 2011, alienating many of his own supporters. When pressed for more information, the DEA avoids providing it.

In fact there has been an 114% increase in DEA FOIA rejections under the Obama administration.

On March 5th, eight former DEA chiefs called on the Justice Department to nullify CO and WA’s laws from the federal level. Attorney General Eric Holder is expected to release a statement about marijuana any day now. Given the Obama administration’s willingness to supersede state marijuana laws with sweeping crackdowns during its first term, there is no way to really gauge what Holder is going to say about the second term.

So where does this leave the fiscal conservative?

Step outside one’s “ethical bias” (for lack of a better term) if only briefly. Consider the conservative push to cut spending during this economic downturn. Think about the amount of money spent on enforcing marijuana laws rather than taking in potential tax revenue. There are broader consequences to muse about as well, given that Mexican drug cartels get 70% of their US profits from marijuana alone.

If more states legalize marijuana, would it neutralize some of that issue?

If anything, at least it’s clear that this is one way to increase liberty and tax the populace on a per use basis for revenue (instead of having to reach into our pockets via income taxes to fund prohibition).

Marijuana legalization isn’t just a libertarian position. Arguably, it is a conservative one as well.