The cost benefit analysis of drug law reform may sound attractive, but international evidence shows that it is a flawed pipe dream.
The myth pushed internationally by drug advocates is ‘Let’s tax it and use the money to provide addiction services and build schools and hospitals and houses and (insert a great cause here)…’. But the marijuana industry is quick to overestimate large amounts of revenue from marijuana sales, but it rarely fully recognises the societal costs of legalisation,
Other societal costs not referred to by drug supporters include: greater other drug use, greater marijuana use among underage students, property and other economic damage, controlling an expanded black market, sales to minors, public intoxication, and other burdens. No policy is without its costs. Legalisation also results in administrative and enforcement costs, similar to alcohol regulation.
Alcohol and tobacco have already warned us that tax revenue from marijuana sales will fall well short of the costs. A report published the Ministry of Health in 2016 estimated that the total cost of smoking to New Zealand’s health and welfare systems was $2.5 billion in 2014. Tobacco excise tax currently raises approximately $1.5 billion gross per year. A 2016 Treasury report stated that excess healthcare costs for smokers over non-smokers in New Zealand are almost $2 billion.
Alcohol-related harm in New Zealand has been recently estimated to cost approx. $5 billion per year. This equates to a cost of $14.5 million every day. Excise tax revenue from alcohol in 2016 was $661 million.
Trends have already surfaced in Colorado & Washington state, suggesting that costs outweigh revenues. Over half the pot money promised for drug prevention, education & treatment in Washington State never materialised. Bureaucracy consumes a significant portion of Colorado marijuana tax revenue.
Researchers say that the alleged reduction in law enforcement and justice expenditure have not been realised overseas, with crime increasing and an increase in the costs of added regulation for non-compliance. Furthermore, the budget estimates do not cover the additional health and education on cannabis harms and the fact that the illegal drug trade will inevitably continue to thrive under more regulation and taxation. Drug dealers and other criminals who derive huge profits from the drug trade will not cease criminal activity in the face of legalisation.
In 2010, Gil Kerlikowske, President Obama’s Drug Czar, said: “The tax revenue collected from alcohol pales in comparison to the costs associated with it… Tobacco also does not carry its economic weight when we tax it… It is clear that the social costs of legalising marijuana would outweigh any possible tax that could be levied. In the United States, illegal drugs already cost $180 billion a year in health care, lost productivity, crime, and other expenditures. That number would only increase under legalisation because of increased use.”
As Helen Clark correctly said earlier this year, ‘The perfect day will be when we don’t collect a cent from tobacco tax because nobody is smoking.’ That ideal day also applies to marijuana and other drugs. Drug Free 2025 is the goal.