Reason Foundation

http://www.reason.org
http://www.reason.org/news/show/state-governments-have-a-drug

Reason Foundation

State Governments Have a Drug Habit: Crack Taxes and Drug Stamps

Feds gave up taxing drugs, but 21 states seek income from illegal drug taxes

February 15, 2007

Los Angeles (February 15, 2007) – Tennessee's "crack tax" brought in $1.77 million last year and has added nearly $3.5 million to the state's coffers since it was first collected in 2005. The Tennessee law, which an appellate court has ruled unconstitutional, requires anyone possessing certain amounts of illegal drugs to buy tax stamps for the drugs' packages.

A new Reason Foundation report finds 21 states are taxing illegal drugs today. Eight other states have had to repeal their taxes on illegal substances, most after having the laws declared unconstitutional.

"States are basically looking for another way to squeeze revenue out of the war on drugs," said Adrian Moore, vice president of research at Reason Foundation. "Governments aren't making money selling the stamps, the big money comes from fines charged to people who are busted on drug charges and then charged additional fines for not having the stamps."

"It's clear that taxing illegal drugs does nothing to discourage either the sale or use of illegal drugs," said Paul Messino, the Reason study's author. "In fact, doing so is hypocritical. By taxing an activity that is unlawful, states are trying to have their cake and eat it too. States are hungry for that extra dollar and they're willing to skirt the Constitution to get it."

The 21 states taxing illegal drugs are: Alabama, Connecticut, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Massachusetts, Minnesota, Nebraska, Nevada, North Carolina, Oklahoma, Rhode Island, South Carolina, Tennessee, Texas and Utah.

The eight states where illegal drug taxes have been repealed in recent years are: Arizona, Colorado, Maine, Michigan, Montana, New Mexico, North Dakota and South Dakota.

In 2004 a federal court struck down Wisconsin's drug tax, and while the state no longer uses the law, it has yet to repeal it. Prosecutors in Wisconsin said the law had negligible impact and they wouldn't miss it because the state was actually collecting such a tiny amount of the fines assessed. Several other states, unlike Tennessee, report very small revenues from the taxes and subsequent fines as well.

The Reason study says nearly every drug tax law faces legal and constitutional challenges. Courts have found numerous drug tax and stamp laws unconstitutional under the Fifth Amendment, because the laws punish offenders twice for the same crime and/or infringe a defendant's right against self-incrimination.

Full Report Online

The full report, Taxing Illegal Drugs: How States Dabble in Drugs and Why They Shouldn't, is available online at www.reason.org/ps357.pdf.

About Reason

Reason Foundation is a nonprofit think tank dedicated to advancing free minds and free markets. Reason produces respected public policy research on a variety of issues and publishes the critically acclaimed monthly magazine, Reason. For more information, please visit www.reason.org.

Contacts

Adrian Moore, Vice President of Research, Reason Foundation, (661) 477-3107
Chris Mitchell, Director of Communications, Reason Foundation, (310) 367-6109



Print This