Skip to main content

Drug Taxes

MMJ leaf and stethoscope KY ODCP_151.jpg
MMJ leaf and stethoscope KY ODCP_151.jpg

Medical Marijuana Update

A new study punctures some myths about medical marijuana in California, Connecticut's dispensaries finally open for business, the Illinois program is moving along, and more.

Alabama Tax on Illegal Drugs Goes from Weapon to ‘Headache’

Alabama’s illegal drug tax dates back to the late 1980s, when state governments were looking for new ways to crack down on the drug trade. In 1998, according to state documents, Alabama collected $161,947 in taxes on illegal drugs. In 2010, collections were just $1,275. Charles Crumbley, director of the Investigations Division at the State Department of Revenue, said, "Enforcing it was just more trouble than it was worth."



2,772 People Could Be Eligible for 'Crack Tax' Refunds in TN

Tennesseans, in a slow trickle, have requested and gotten refunds from the state since the Tennessee Supreme Court struck down the so-called crack tax law in 2009. The state Department of Revenue has refunded $3.7 million to 161 people, but 2,772 people who paid the tax have not gotten any money back. "Most of them just don't know, and the state doesn't have any intention of letting them know, that they're eligible for a full refund," said Columbia attorney John Colley, who is leading a class-action lawsuit that would allow attorneys to identify and notify all people who paid the tax while it was still on the books.

Drug Legalization Could Reduce Government Costs and Raise Tax Revenues

In a forthcoming study for the Cato Institute, Jeffrey A. Miron, senior lecturer on economics at Harvard University and a senior fellow at Cato, and Katherine Waldock, professor of economics at New York University, estimate that legalizing drugs would save the government approximately $41.3 billion annually on expenditures related to the enforcement of prohibition. Just as important, drug legalization would translate into higher tax revenues generated by the sale of these newly-legalized products in the open commercial marketplace. Drug legalization would yield tax revenues of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco, they said.