Drug Penalties: New York Governor Proposes Tax Stamps -- $200 a Gram for Cocaine

As part of a massive just unveiled state budget, New York Gov. Eliot Spitzer (D) is proposing to require anyone who buys, sells, transports, or possesses "all marijuana and controlled substances" to have a "tax stamp" for the illegal substance. Spitzer's provision proposes a $3.50 per gram tax on marijuana, but a whopping $200 per gram tax for cocaine.

Iowa drug tax assessment, submitted anonymously by a Chronicle reader -- click to enlarge in separate window

Under the proposal, the tax would be paid in advance of purchase by the "dealer," who would buy stamps from the state Department of Taxation and Finance, which he must then affix to the packages of drugs to show the tax has been paid. In the foreseeable event that dealers do not rush down to the tax office to pay up, the bill requires state police agencies and prosecutors to report any dealers who haven't paid their drug taxes to the department, unless reporting them would jeopardize a pending criminal investigation.

The governor's office said the tax would generate $13 million in the 2008-09 fiscal year, and $17 million a year after that. The revenues would be deposited in the state general fund. To be enacted, the move must be approved by the legislature.

In a Wednesday press release, Ethan Nadelmann, executive director of the Drug Policy Alliance, said he had his doubts about the bill. While Spitzer's proposal might be superficially appealing, New Yorkers would be better off taxing and regulating marijuana, he said.

While the idea of taxation is reasonable, he continued, "these tax stamp bills and laws smack of the gratuitous piling on of punitive sanctions that permeates the overall drug war." In addition to arrest and imprisonment, drug violators already face all sorts collateral consequences, and imposing the drug tax as yet another burden would "end up causing more harm than good," he said. Nadelman went on to point out that Spitzer could save far more money for New York taxpayers by following through on his campaign commitments regarding reform of the Rockefeller drug laws.

And he took the opportunity to push for fundamental reform of the marijuana laws. "[Q]uite frankly, New Yorkers would most benefit from a serious proposal to tax, control and regulate marijuana more or less like alcohol is today," he said. "Even though New York decriminalized marijuana possession in the 1970s, it still arrests people for that offense more frequently than most states that never decriminalized it. New Yorkers spend many tens of millions of dollars per year for this foolish excess, when instead the state could earn even greater amounts from taxing this ever popular consumer product. Overall consumption would likely rise only modestly given the widespread and easy availability of marijuana today notwithstanding its illegality. Virtually all New Yorkers -- both those who like marijuana and those who have no interest in it -- would benefit."

Bizarrely, Sen. Martin Golden, a former NYC police officer and a Republican from Brooklyn, criticized the drug tax from the opposite direction. Golden told the New York Post, "another pie-in-the-sky idea that really has no legitimacy, and hopefully is not a first step toward legalizing drugs."

Verenda Smith, government affairs associate at the Federation of Tax Administrators, told the New York Times that states need to create an at least theoretical opportunity for drug sellers to pay the tax legally, such as anonymous purchase, for it to be constitutional.

According to the Spitzer administration, 29 states have already passed laws imposing drug taxes. But several of those laws have been challenged, most recently in Tennessee, where a state appeals court ruled last September that the state's drug tax law was unconstitutional because the state cannot tax something it declares illegal.