Yesterday, Congress voted to legalize marijuana. President Obama said he will sign the bill into law, which creates a federal agency, the Cannabis Agency, to oversee the production and sale of marijuana. By legalizing marijuana after being in office a little over two months, Obama is following in the footsteps of Franklin Roosevelt who legalized beer after being in office a few months.
The legalization of marijuana is not only good news for the legions of its smokers in the U.S., but the depressed economy. A September 2007 study by Jon Gettman, senior research fellow at George Mason University’s School of Public Policy estimated the cost to local, state, and federal governments of marijuana being illegal to be $41.8 billion.
The taxes from marijuana sales will help the government, which is trillions of dollars in debt. A study for the Frasier Institute calculated the amount of tax revenue the Canadian government could gain by legalizing marijuana. The study noted that legalizing marijuana in Canada would create billions of dollars worth of tax revenue.
“The broader social question becomes less whether or not we approve or disapprove of local production, but rather who shall enjoy the spoils,” the report’s author, Stephen Easton, said.
A 2005 report by economist Jeffrey A. Miron titled, The Budgetary Implications of Marijuana Prohibition, examined the costs of legalizing marijuana. The report estimated that legalization would save the government $7.7 billion, and create $6.2 billion in tax revenue if marijuana was taxed at comparable rates to those on tobacco and alcohol. According to the bill passed by Congress, marijuana will be taxed at rates similar to tobacco and alcohol.
“It’s kind of small potatoes compared to the ($319 billion) federal budget deficit, but it’s not nothing,” said Miron.
The late Milton Friedman was among 500 economists in 2005 who publicly endorsed Miron’s report, arguing that there should be a debate about the legalization and taxation of marijuana.
A few weeks ago Ethan Nadelmann, executive director of the Drug Policy Alliance, predicted the momentum was in place to legalize marijuana. “There is momentum of the sort I haven’t seen since I’ve been involved in this.” Nadelmann attributed it to “the economic crisis.”
In an editorial last month, Dale Gieringer, director of California NORML, the National Organization for the Reform of Marijuana Laws, pointed out that a legal marijuana market “could generate substantial additional economic benefits in legal employment, business and payroll taxes, and spin-off industries.”