Crack Taxes and the Dangers of Insidious Regulatory Taxes

67 Pages Posted: 28 Aug 2020 Last revised: 15 Sep 2021

See all articles by Hayes Holderness

Hayes Holderness

University of Richmond - School of Law

Date Written: August 1, 2020


An unheralded weapon in the War on Drugs can be found in state tax codes: many states impose targeted taxes on individuals for the possession and sale of controlled substances. These “crack taxes” provide state officials with a powerful means of sanctioning individuals without providing those individuals the protections of the criminal law. Further, these taxes largely escape public scrutiny, which can contribute to overregulation and uneven enforcement.

The controlled substance taxes highlight the allure to lawmakers of using tax law to regulate behavior, but also the potential dangers of doing so. Surprisingly, the judiciary has an underappreciated role in creating the allure of regulatory taxes. Because courts apply less scrutiny to taxes than to other types of laws, regulatory taxes get a blank check when challenged, incentivizing their use. Courts must reconfigure the way they approach regulatory taxes to remove the judicially-created incentive for insidious regulatory taxes like controlled substance taxes.

Keywords: Taxation, Regulation, Regulatory Taxes, Controlled Substances, Judicial Scrutiny, War on Drugs

JEL Classification: K34

Suggested Citation

Holderness, Hayes, Crack Taxes and the Dangers of Insidious Regulatory Taxes (August 1, 2020). Southern California Law Review, Forthcoming, Available at SSRN: or

Hayes Holderness (Contact Author)

University of Richmond - School of Law ( email )

203 Richmond Way
University of Richmond School of Law
Richmond, VA 23173
United States

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