"Legalize and tax it" is the theory behind the social acceptance of vice, including gambling and drugs. Since "people are going to do it anyway," according to the theory, then government should take its cut of the money.
There are two fallacies to this theory:
- Legalizing vice increases the social acceptance and increases the use and abuse of these very unhealthy habits. Most people do obey most laws regularly. If the drug is illegal, many people will not use the drug simply because it is illegal. Once legalized, the taint on the drug disappears and many more people participate. Increased use leads to increased addiction.
- Vices cause societal problems and government will spend much more money to deal with the increased problems, which include mental illnesses, homelessness, vagrancy, and crime. Addictions to mind-altering Schedule 1 drugs do not produce stable and productive employees, so the pool of workers shrinks. The taxpayer and the community do not get a net financial gain by legalizing and taxing these vices.
The majority of American states have legalized marijuana and the market is now flooded with pot. Unlike all of the other commodities today, marijuana prices have sharply declined because of the increased supply. In California, the price of pot this year dropped 23 percent from last year. Cheaper marijuana means more buyers, including children. And here is the rub: illegal pot is cheaper than the taxed legal pot. The greedy bureaucrats are not getting the surplus income they promised us.
Canada has had fully legal marijuana for four years and one-third of its sales today are illegal and less expensive than legal marijuana. Currently, the Canadian pot tax is 20 percent, so it is very easy for the sellers of illegal marijuana to undercut the price.
My home state of Missouri has a proposition on the November ballot for legalizing recreational marijuana. Not only do taxpayers lose because this is not a healthy revenue stream, but society loses with increased social ills that always require more government services.