The Budgetary Impact of Ending Drug Prohibition

62 Pages Posted: 19 Nov 2010  

Jeffrey A. Miron

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Katherine Waldock

New York University (NYU) - Leonard N. Stern School of Business

Date Written: September 27, 2010

Abstract

State and federal governments in the United States face massive looming fiscal deficits. One policy change that can reduce deficits is ending the drug war. Legalization means reduced expenditure on enforcement and an increase in tax revenue from legalized sales.

This report estimates that legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition. Of these savings, $25.7 billion would accrue to state and local governments, while $15.6 billion would accrue to the federal government.

Approximately $8.7 billion of the savings would result from legalization of marijuana and $32.6 billion from legalization of other drugs.

The report also estimates that drug legalization would yield tax revenue of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco. Approximately $8.7 billion of this revenue would result from legalization of marijuana and $38.0 billion from legalization of other drugs.

Suggested Citation

Miron, Jeffrey A. and Waldock, Katherine, The Budgetary Impact of Ending Drug Prohibition (September 27, 2010). Available at SSRN: https://ssrn.com/abstract=1710812 or http://dx.doi.org/10.2139/ssrn.1710812

Jeffrey A. Miron (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Katherine Waldock

New York University (NYU) - Leonard N. Stern School of Business ( email )

44 West 4th Street
New York, NY NY 10012
United States

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