Libertarian Think Tank Estimates $106 Billion in Revenue if US Legalized Marijuana — and Cocaine and Heroin, Too

Legalizing drugs could generate more than $106 billion a year for federal, state, and local government budgets, according to an analysis by a libertarian think tank in Washington, D.C.

Jeffrey Miron, Cato Institute’s director of economic studies and undergraduate director at Harvard University’s Department of Economics, published “The Budgetary Effects of Ending Drug  Prohibition” as a tax and budget bulletin to influence lawmakers. In the report, Miron finds that that drug legalization would allow both federal and state governments to reduce spending and save resources for other uses. Furthermore, tax revenue would be generated for public funds instead of going to illegal drug producers.

Miron published a similar report in 2010, but used more recent data to update his analysis with “exciting new conclusions.” Those conclusions amount to an annual gain of $106.7 billion in federal, state and local governments budgets.

The analysis identified two primary sources for the budgetary gains: decreases in drug enforcement spending, and increases in tax revenue. Miron estimated that the federal US government spends $18 billion on drug prohibition a year, only to be outspent by state and local governments, which spend a combined $29 billion annually.

Miron estimated that full drug legalization would produce $39 billion in federal US tax revenue and $19 billion in state and local tax revenue.After combining the total spending and potential earnings, the report found that drug legalization could raise tax revenues by as much as $58.8 billion, and estimated that drug prohibition enforcement has been spending $47.9 billion annually.

Further, Miron examined the budgetary effects of marijuana legalization in Colorado, Oregon, and Washington and found that each state earned more revenue than forecasted.

Miron highlighted three sure-to-be discussed conclusions in his estimates of  expenditures and tax revenue:

1. The combined savings and additional revenue that drug legalization would total $106.7 billion annually.
2. Legalizing heroin and cocaine would account for nearly 60 percent of the budgetary gains.
3. The fiscal benefits would be roughly split between state and federal governments.

As politicians begin to back marijuana legalization and debate turns to public health and criminal justice questions surrounding cannabis decriminalization, Miron insisted that “policymakers and scholars should also consider the fiscal effects of drug liberalization.”