Cost/Benefit Analysis Paper

Legalization of Marijuana

By Emma Ervolina

Mr. Curran

Economics R

4 April 2011
 Since its criminalization in the early 1900’s, the legal status of cannabis sativa

(marijuana) has been a major topic of interest in both state and local politics. While many

arguments concern health and morals, the economic debate is significant as well.

One of the most considerable attempts at legalization of marijuana was

California’s Proposition 19, which “legalizes marijuana under California but not federal

law, permits local governments to regulate and tax commercial production, distribution,

and sale of marijuana.” Not only does it require marijuana establishments to obtain a

license, but they must pay all federal, state and local taxes. It also grants the government

permission to establish new general, excise, or transfer taxes, as well as benefit

assessments and fees, on marijuana-related activities deemed legal. This tax will without

a doubt be a small boost to our crippled economy. If marijuana were legalized, it is

estimated to somewhat parallel the economic effects of tobacco. According to the Tax

Policy Center, in 2008 the total United States tobacco tax revenue was $16,575,613.

RAND Objective Analysis Corporation found that one government analysis estimated

that taxing marijuana at $50 per ounce would generate $1.4 billion annually in revenues.

In an interview conducted with Jeffrey Miron, Harvard Economist and Senior

Fellow at the Cato Institute, when asked why Proposition 19 failed in California, Miron

replied that the Federal Government had threatened to interfere with legislation. Since

medical marijuana is in fact legal in California and the Federal Government has been

tolerating it, residents decided to “quit while they are ahead,” per say (The Economic

Impact).

The economic benefits of legalizing marijuana extend far past revenue. Even just

decriminalizing marijuana would save the United States billions of dollars in law
enforcement, allowing those freed resources to be put towards more serious crimes and

drugs. The total cost of all adult prison sentences for one year costs between $50 and $85

billion, depending on the level of security (The Economist, Rough Justice in America,

2010). The maximum penalty in New York for possession of 1oz marijuana is 4 months,

and the maximum penalty for sales of 1oz marijuana is 5 years in prison (norml.org,

Maximum Penalty). To elaborate, the drug control budget amount for 2004 was $11.7

billion, according to the White House Drug Policy’s National Drug Control Budget 2011

Funding Highlights. 2011 National Drug Control Requested Budget is $15.5 billion. A

breakdown yields $3.91 billion for Domestic law enforcement and $3.72 billion for

Interdiction. For further breakdown, see attached data sheet. Jeffrey Miron stated that the

net budgetary impact of marijuana on the current economy is approximately between $20

and $30 billion, with police making the arrest, prosecutors and judges conducting trials,

and incarceration. He estimates that if marijuana were legalized, tax revenue would be

approximately $10 to $15 billion per year (The Economic Impact).

In addition, income associated with all types of marijuana related activities will be

removed from the hands of criminals and illegal gangs, and directed into the free market.

According to Opposing Views, drug cartels bring in an estimated two billion dollars per

year through both smuggling and sales.

A common concern with the legalization of marijuana is that the number of users

would sky-rocket. However, since marijuana has been legalized in the Netherlands and

Portugal, there has been no significant change in number of users, as well as a surprising

improvement in health and a decrease in crime (The Economic Impact).

 One of the most significant arguments against the legalization of marijuana is that

of the United States Federal Drug Enforcement Administration. In their publication

“Speaking Out Against Drug Legalization,” one of their main concerns was that drugs

and violence go hand in hand. They state that six times as many homicides are committed

by people under the influence of drugs, as by those who are looking for money to buy

drugs.

Many question the effects of marijuana on health. Another argument of the

government is that “illegal drugs are illegal because they are harmful.” However, many

medical studies have proven that marijuana is not nearly as bad for the body as other

legal substances. See attached graphs for evidence.

While marijuana legalization will most likely always be a controversial topic, I

believe that the numerous benefits outweigh the costs. Not only will it help to stimulate

the United States Economy, but it will provide economic freedom.

2011 Requested Budget
Breakdown of Domestic Law Enforcement:
• Organized Crime Drug Enforcement Task Force, Department of Justice: $579.3
million
• DEA Diversion Control Efforts, Department of Justice: $291.8 million
• High Intensity Drug Trafficking Areas (HIDTA) Program, Office of National
Drug Control Policy: $210.0 million
• National Guard Counter drug Support, Department of Defense: $177.7 million
Breakdown of Interdiction:
• U.S. Coast Guard Interdiction, Department of Homeland Security: $1,208.1
million
• Caribbean Basin Security Initiative, Department of State: $31.2 million
• Western Hemisphere Regional, Department of State: $37.5 million
• Customs and Border Patrol: Border Security and Trade Facilitation at Ports of
Entry, Department of Homeland Security: $805.9 million
• Joint Inter-agency Task Force-South, Department of Defense: $50.5 million

Source: Jack E. Henningfield, PhD for the National Institute on Drug Abuse (NIDA), Reported
by Philip J. Hilts, New York Times, Aug. 2, 1994 "Is Nicotine Addictive? It Depends on Whose
Criteria You Use." Source: http://drugwarfacts.org/addictiv.htm
 Works Cited

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"List of Figures - NORML." Marijuana Law Reform - NORML. Norml.org, 7 Mar. 2005.

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<http://www.justice.gov/dea/demand/speakout/index.html>.

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2011. <http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=403>.

"What Did RAND Study Say About Cartels and Marijuana?" Opposing Views: Issues,

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