“But legalizing marijuana will cost society more than it earns in taxes” – debunked!

In the face of growing calls to tax and regulate marijuana, the prohibitionists are left with few tools in their rhetorical arsenal.  One talking point they’ve trotted out lately goes something like this:

Why not tax pot and alleviate the financial burden of our cities and states? We tax alcohol sales and it earns billions. “The latest studies show that the U.S. collects about $8 billion yearly in taxes from alcohol.” However, this is not the end of the story. “The problem is, the total cost to the U.S. in 2008 due to alcohol-related problems was $185 billion, and the government pays about 38% of that cost (about $72 billion), all due to consequences of alcohol consumption, according to the National Institute on Alcohol Abuse & Alcoholism.”

In other words, if we “legalized” marijuana, the damage caused by all the rampant stoners would cost us more than the pot taxes would bring in.

Of course the argument is silly on its face; alcohol use causes serious health problems, violence, and auto wrecks, so it naturally costs society more than it brings in.  Cannabis use is relatively safe and as I’ve argued before, 22 million of us are using it now, so if there is any social cost, why not at least bring in some tax revenue instead of none?

So today I was very happy to see Paul Armentano’s latest piece on the NORML Blog regarding a Canadian study of social costs of cannabis vs. alcohol and tobacco, which concluded:

In terms of costs per user: tobacco-related health costs are over $800 per user, alcohol-related health costs are much lower at $165 per user, and cannabis-related health costs are the lowest at $20 per user. On the enforcement side, costs for cannabis are the highest at $328 per user—94% of social costs for cannabis are linked to enforcement. Enforcement costs per user for alcohol are about half those for cannabis ($153), while enforcement costs for tobacco are very low.

Now that’s Canada, so our US numbers may vary a bit, especially when we’re talking about health care costs.  But in the title of his post, Paul asked me to “do the math”.  So here it is:

• Prohibited Cannabis: Total Cost to Society = (22,000,000 Annual Users * $20) + (22,000,000 Annual Users * $328) = $7,656,000,000

When cannabis is relegalized, that doesn’t mean the $328/user enforcement costs go completely away.  I don’t think they’d be as high as alcohol but not as low as tobacco.  Let’s split the difference and say it ends up costing $75/user in cannabis enforcement costs.

• Relegalized Cannabis (Low Estimate): TCS = (22M * $20) + (22M * $75) = $2,090,000,000

Let’s also imagine that cannabis enforcement does cost as much as alcohol, unreasonable as that may sound:

• Relegalized Cannabis (High Estimate): TCS = (22M * $20) + (22M * $153) = $3,806,000,000

For David H. Kerr and the other prohibitionists’ theory about legal cannabis costing society more than prohibited cannabis, there has to be enough increase in use and users to make up between $5.6 and $3.8 billion dollars in cost.  In the Low Estimate, a cannabis user costs society $95/user; in the High Estimate, $173/user.  So between 22 and 58 million more people would have to smoke cannabis in the US, at rates comparable to the current usage rates, for legal cannabis to cost as much as what we spend on prohibiting it.  That means a 100% to 263% increase in annual user population, or 44 to 80 million annual users, or between 18% and 32% of all US adults.

Now currently, only about 9% of US adults use cannabis annually.  So imagine a room with 25 adults in it.  Right now, about 2 of those adults will smoke pot this year.  Under relegalization, about 2 to 6 more would have to start smoking pot for the TCS to break even.

Then we’d have to consider what happens under a substitution effect; that is, would alcohol and tobacco users lower their use of those substances if they have the choice of legal cannabis?  The alcohol user costs us $318 per year and the tobacco user costs us $800 per year.  Under the Low Estimate, three drinkers are worth close to ten tokers and two smokers are worth close to seventeen tokers; under the High Estimate, the ratios are about 1:2 and 2:9.  If just 1% of the 162.5 million annual drinkers and 70 million annual smokers quit and took up cannabis instead, that’s a savings of over a billion dollars in health and enforcement costs, or another 3.9 to 10 million new tokers we could afford over the 2.3 million new ex-smoker/drinker tokers we’ve added.

In other words, in order for legal cannabis to cost society more than illegal cannabis, a whole hell of a lot more people will have to be smoking it, and that’s even under grossly inflated estimates of legal marijuana’s enforcement costs.