The cost of the war on drugs

November 6, 2012

Memo to our new president: Federal, state and local governments face increasing challenges as they look for more revenue and try to reduce costs. Reducing public employee headcounts and postponing capital projects have been good ways to reduce budgets, but bolder approaches are needed.

Public policy approaches to the “war on drugs” have been debated over the years, but really not often enough using dollar figures. By ending the prohibition on some or all illegal drugs and taxing and regulating their distribution instead, U.S. governments at all levels could save over $50 billion per year, according to various studies.

The aggressive criminalization of drug use began under President Richard Nixon, and the momentum of the war on drugs increased rapidly with arrests that increased quickly over time, according to a report by the Beckley Foundation (page 2):

Figures show that drug arrests have more than tripled in the last 25 years, reaching a record of some 1.8 million in 2005 (Mauer & King 2007); in 1980 there were 581,000 drug law arrests, climbing to a total of 1,846,351 in 2005. 81.7% of these arrests were for possession offences, and 42.6% of arrests were for marijuana offences. Of the 450,000 increase in drug arrests during the period 1990-2002, 82% of the growth was for marijuana, with 79% for marijuana possession alone (Boyum & Reuter, 2005).

What is the cost of spending precious police resources chasing down drug users? A 2010 Harvard study says:

Legalizing drugs would save roughly $48.7 billion per year in government expenditure on enforcement of prohibition. $33.1 billion of this savings would accrue to state and local governments, while $15.6 billion would accrue to the federal government. Approximately $13.7 billion of the  savings would results from legalization of marijuana, $22.3 billion from legalization of cocaine and heroin, and $12.8 from legalization of other drugs.

And what is the cost of imprisoning drug offenders? A 2007 report from the Bureau of Justice Statistics tells us it costs about $6 billion per year at the state level:

The average daily cost per state prison inmate per day in the U.S. is $67.55. State prisons held 253,300 inmates for drug offenses in 2007. That means states spent approximately $17.1 million per day to imprison drug offenders, or $6.2 billion per year.

When it comes to illegal drugs, public opinion may be on the side of taxing and even decriminalizing them. The website asked readers if taxing illegal drugs would be good or bad. 79% of respondents were in favor of decriminalizing and taxing drugs. One reader wrote:

I believe that taxing and legalizing drugs would help in reducing the number of people who are into selling drugs. If drugs were legal and taxed, it would discourage some of the criminal element from smuggling drugs into our country. Those who sell drugs to make big money might not be so enthusiastic if they had to pay tax on their income. Also, I believe if drugs were taxed and legalized, there would be more control over where they can be sold and used, just as there is now over sale of alcohol.

There is certainly revenue to be made by taxation of currently illegal drugs. In fact it could be a lot of money. The California State Board of Equalization analyzed California Assembly a bill that proposed this (Bill No: AB 390) in July of 2009:

Based on the estimated 16 million ounces of annual consumption [of marijuana] in California and several assumptions (which are summarized in the Qualifying Remarks section), the revenue effect of the bill [California AB 390] is an estimated total annual revenue gain of $1.4 billion, as follows:

• $990 million from the proposed $50 per ounce levy on retail sales of marijuana

• $392 million in sales tax revenues

Hard fiscal times cause suffering – the hard costs include the personal devastation that incarcerating drug users and sellers imposes on many communities, including African-Americans – but at some point we should rethink conventional wisdom. Examining the “war on drugs” is the first place we should start.

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