IPFS Brock Lorber

More About: Drug War

Cannabis Tax & Deregulation – Cutting out the Middle Man

For decades illicit drug producers and suppliers have enjoyed government protection from competition.    Politicians, bureaucrats, and government unionists have gleefully enforced protectionist measures, as long as they got a generous cut of the profits.

Now, as tax revenues have fallen off a cliff, the biggest of big government types are taking the first tentative steps towards changing their handshake arrangements, closing some dealerships, and siphoning funds directly from the cannabis distribution chain.

Many drug policy activists are ecstatic.  They see this as an opportunity to trade taxation and regulation for prohibition.  Nothing could be further from the truth.

What they're actually talking about talking about is moving back along the Laffer Curve of regulation from outright prohibition, lowering the cost of compliance with government dictates.  The guns, tanks, and supposed authority of the prohibition apparatus will, of course, remain.  All of the taxation schemes currently proposed follow the alcohol and tobacco models, where normal sales and income taxes are paid as well as an additional sin tax.

This newfound willingness of petty tyrants of all stripes to consider having a conversation is the first step in many millions needed to move the regulation from prohibition - through de facto prohibition - to anything resembling legalization.  If the momentum wanes at any point in the de facto prohibition range, the likely result is a steady march back to prohibition, now enhanced with "we tried legalization" talking points (see Alaska).

But, even if the regulation is rolled back to the point where government-approved ditchweed can be (legally) purchased at a state-run ABC store, the situation is still in an entirely different universe from growing your own White Russian or buying Purple Haze at 7-11.  Now, though, the prohibition apparatus will be funded both by asset seizure and tax revenues from cannabis sales.

As enticing as low-grade cannabis grown by convicts serving out drug sentences on state-owned farms sounds, it is not a step forward.  It is not a step forward, because it "fixes" the part of cannabis distribution that isn't broken.  Namely, the distribution.

Under the status quo, the cannabis distribution system works perfectly.  Users buy what they want, suppliers supply what users want, and farmers grow what suppliers will buy.  The ill effects of marijuana cultivation, distribution, and use come completely from the prohibition.

Prohibition removes access to legal arbitration for contract disputes, leaving physical violence as the only recourse.  That's a prohibition ill.

Prohibition discourages medical treatment for drug dependencies.  That's a prohibition ill.

Prohibition restricts supply.  The beneficiaries of the resulting artificially-inflated prices are the market's most violent and ruthless actors.  That is most certainly a prohibition ill.

It should be painfully obvious that the only way to "fix" prohibition is by severely restricting or eliminating prohibition.  That can't be done by tinkering with regulations, it requires dismantling the prohibition apparatus.  In fact, you can leave prohibition laws on the books if you like – the ill effects go away with the apparatus.

Tax and deregulate will only help a few non-discriminating cannabis users.  Everyone else will be harmed; that's not a bird in the hand, that's a kick in the butt.  The fact that some politicians see themselves as the new drug kingpins should be a flashing, neon clue.