DRCNet Reponse to the
Drug Enforcement Administration
Speaking Out Against Drug Legalization

CLAIM IV:

Any Revenues Generated by Taxing Legalized Drugs Would Quickly Evaporate in Light of the Increased Social Costs.

DEA Statement

Response
A favorite argument in support of legalization is that education, health care, road building and a wide array of other worthwhile causes would benefit from the taxes that could be raised by legalizing drugs and then taxing them. It would certainly be better than sending the money to the drug lords in South America.
The conference participants were extremely skeptical about the claim of a large tax windfall, and challenged advocates to prove that the amounts of revenue potentially generated by legalization would counterbalance the increased social costs that would result from making drugs legal. When asked for specifics, the advocates have no answers. Are they taking into account the erosion of the tax base as more and more citizens are unable to work because of drug addiction? Add to this loss the cost of health and welfare benefits for the unemployed.

 

 The Federal Government's Financial Analysis of Legalization considers these problems and shows that legalization would produce a $37 Billion annual savings.
Health and societal costs of drug legalization would increase. The panel predicted that drug treatment costs, hospitalization for long-term drug-related disease, and treatment of the consequences of family violence would further burden our already strapped health care system.

 

 The panel obviously did not do any serious analysis of the figures.
There is also real reason to believe that liability suits would be brought against manufacturers and distributors of drugs as damages to individuals increased, thereby increasing the cost of products. This is as opposed to the current situation, where someone injured by these drugs has no one to sue.

Alcohol and tobacco firms face the same liability problems. We are only recently dealing with the problems caused by tobacco in a realistic manner -- and government is recovering tremendous amounts of money from tobacco companies to help pay for the problems of tobacco use. Under the current system, we will have no such recompense from the South American drug dealers.
Ask legalization proponents if the alleged profits from drug legalization would be enough to pay for the increased fetal defects, loss of workforce productivity, increased traffic fatalities and industrial accidents, increased domestic violence and the myriad other problems that would not only be high cost items, but extremely expensive in terms of social decay. How much are they willing to pay?

 

 The Federal Government's Financial Analysis of Legalization considers these problems and shows that legalization would produce a $37 Billion annual savings.
Some facts which help to confirm the observations of the forum participants may be used in debates:

 

  
Dr. William Olson, former Deputy Assistant Secretary of State for International Narcotics Matters, outlined the magnitude of the social costs borne now by U.S. taxpayers because of drugs. In his 1994 essay, "Drug Legalization: Getting to No," he provided the following:  
  • 25-60 percent of the homeless are addicts, whose homelessness is in large part the result of addiction and their inability to manage money or make rational, reasonable decisions. They are increasingly supported at public expense.

 

 He fails to mention that alcohol addiction is the single biggest problem here -- and further fails to provide the references to back up his statement.

 
  • 75-80 percent of the 1.2 - 1.5 million teenage runaways are substance abusers, and not because prohibition made them use drugs or run away.
If a teenager is a runaway, then it should be self-evident that they will have multiple behavioral problems, probably as a result of mistreatment at home. The solution to the problem is to address the issues which cause large numbers of teens to run away from home and to abuse drugs, not to imprison them after they have these problems.
  • 30-50 percent of mental patients are chemical abusers, 50-60 percent of these crack and cocaine. They are largely on public support.
Mental patients have all sorts of aberrant behavior. The DEA is implying that cocaine made them mental patients, which is clearly not supported by the evidence they have presented here.
  • As many as 11 percent of young mothers use drugs during pregnancy.
The DEA fails to mention that the biggest problems here are alcohol and tobacco. Again, they mislead by failing to distinguish drugs.
  • 2.5 percent of all live births, some 100,000 babies, are born addicted to cocaine. They have lifelong learning disabilities and emotional problems.
This is a bald-faced lie. The DEA cannot present any credible evidence that this is true.
  • $50 billion is devoted annually to dealing with the health care costs of drug addiction and its collateral costs. These will not disappear with legalization.
No, but it will be spent more effectively, and thus achieve greater results in reducing the harm done by drugs. See, for example, the studies of the cost-effectiveness of drug treatment versus prison, on the Rand Corporation web site.
  • There are approximately 500,000 heroin and 2 million other substance abusers. Their care is increasingly a demand on society.
The same figures that the DEA uses to show a drop in casual use of drugs also show that, during the same period, there was no appreciable reduction in the number of substance abusers. Therefore, by the figures the DEA cites themselves, tough enforcement did not reduce the number of abusers.
  • There is no way to predict how much revenue would be generated by the United States Government taxing legalized drugs
 Yes, there is. See the Federal Government's Financial Analysis of Legalization
  • Such a scenario depends entirely upon the parameters of legalization, and what the policy means vis a vis sources of drugs.
 The DEA blithely ignores this point when they say that legalization would result in increased use.
  • If U.S. farmers were given subsidies to produce drugs (as they are given subsidies for tobacco) the U.S. taxpayers would be responsible for paying for these subsidies. If foreign sources of drugs (opium or coca) were allowed to supply the raw material for these products, an elaborate system of tariffs and trade preferences would need to be established.
This is as opposed to the current situation, where there are no regulations, taxes, or tariffs. The trade is ruled entirely by drug lords who pay no taxes and follow no rules.
  • Taxes would likely push the cost of the product up.
 Not anything like prohibition does. The current policy is simply a price support system for drugs, with all the proceeds going to criminals.
  • Taxing the drugs would make them more expensive at the checkout counter.
 With cocaine at $100 per gram on the street, there would be plenty of room for taxation.
  • The drug cartels do not provide a share of their receipts to their respective governments.
Exactly. That is, the government gets no tax revenue to address the social problems.
  • They are all business. Anyone going into competition with them, including the U.S. Government, would have to be all business too, prepared to cut prices, if necessary, to stay in the game.
 This wouldn't be any more difficult to control than it was with alcohol.
  • Legalized gambling has not put illegal gambling out of business.
 A better example is alcohol Prohibition. Ending alcohol prohibition did effectively put illegal alcohol production out of business.
  • In fact, legalized gambling has produced a whole new group of people who cannot control their need to gamble.
 That wouldn't make it a good idea to address the problem by throwing people in jail for their addiction to gambling.
  • Many states have gone into the gambling business to raise funds for public purposes, with some success, although as more jurisdictions get into it the profits decline.
 The DEA seems to be concerned that legal profits would not be as high as illegal profits -- therefore, we presume, it must be in our best interest to have higher illegal profits going to drug lords in South America.
  • Meanwhile, bookies ply their trade as they always have. The reason is the payoff they offer is better than the legal gambling schemes.
 This is simply not true. Nevada is the best example.
  • For every million dollars wagered, that is, they return a higher percentage to the winners. Again, it's a matter of overhead. The bookies are not trying to build schools, so they don't have to earmark a percentage of the profits for such endeavors. So long as that is so, they will always have a market that is loyal to them. The same situation could logically occur if drugs were legal.
A better comparison is the comparison to alcohol prohibition. The black market in alcohol all but disappeared with the end of alcohol prohibition.

Previous
Next

Travel back to the DRCNet Response to the DEA Home Page

Travel back to the Table of Contents

Travel back to The Ten Claims