Oregon and Drug Legalization

I don’t like illegal drugs and I’ve never consumed any, not even marijuana. But that’s because of my staid preferences, not because politicians made them illegal.

That being said, I oppose the War on Drugs. In part, this is because of libertarian sensibilities. If people want to risk their own health by taking drugs, that should be their right.

But there’s also a cost-benefit angle to this issue. As I wrote in 2018, “I think the social harm of prohibition is greater than the social harm of legalization.”

The black market is a very obvious  example of the social harm caused by prohibition, as illustrated by the accompanying flowchart. Or this one.

But what about the social harm of legalization? Won’t we have more societal harm if drugs are more accessible?

That does not seem to be the case in states where marijuana is now legal.

But harder drugs may be different, at least if what’s happened in Oregon is any indication.

Voters approved a decriminalization referendum (Measure 110) a few years ago, but Mike Baker of the New York Times reports that the state legislature is reversing that outcome.

Here are some excerpts.

Three years ago, …Oregon voters approved a pioneering plan to decriminalize hard drugs… Overdoses soared… And while many other downtowns emerged from the dark days of the pandemic, Portland continued to struggle, with scenes of drugs and despair. Lately, even some of the liberal politicians who had embraced a new approach to drugs have supported an end to the experiment. …On Friday, a bill that will reimpose criminal penalties for possession of some drugs won final passage in the State Legislature… The abrupt rollback is a devastating turn for decriminalization proponents… Several prominent Democrats have expressed support for a rollback, including Mike Schmidt, a progressive prosecutor in the Portland area. …“We have been hearing from constituents for a while that this has been really detrimental to our community and to our streets,” he said.

Is Oregon evidence of failure? Were libertarians wrong?

Jacob Sullum of Reason has a different perspective. He blames ongoing criminalization.

It is not surprising that opioid-related deaths continued to climb after Measure 110 took effect in February 2021, because the initiative did nothing to address the iffy quality and unpredictable potency of black-market drugs. That problem is created by drug prohibition and aggravated by attempts to enforce it. The government’s crackdown on pain pills replaced legally produced, reliably dosed pharmaceuticals with illegal drugs of unknown provenance and composition. The deadly impact of that shift was magnified by the emergence of fentanyl as a heroin booster and replacement—a phenomenon that also was driven by prohibition, which favors highly potent drugs that are easier to conceal and smuggle.

He also argued that Measure 110 did not produce more users or drug tourism.

Critics of Measure 110 argued that it encouraged drug use. Yet an RTI International study of 468 drug users in eight Oregon counties found that just 1.5 percent of them had begun using drugs since Measure 110 took effect. And contrary to the claim that decriminalization had attracted hordes of drug users to the state, the subjects’ median length of residence in Oregon was 24 years.

Meanwhile, Robert Gebelhoff of the Washington Post opined that people began to oppose Measure 110 in part because it made problems more visible.

A “disaster.” A “radical experiment in lawlessness.” A “five-alarm fire of drug abuse, addiction and death.” This is a taste of the hyperbolic reaction to Oregon’s three-year-old law that decriminalized drug possession. The criticism was so intense that the state legislature voted last week to roll back the law, known as Measure 110. …For most Oregonians, the biggest problem with the law was how they believed it manifested in their lives: drug paraphernalia and human excrement littering the sidewalks; intoxicated individuals loitering outside businesses; bus shelters converted into smoking dens. Reasonable people found such behavior uncomfortable — harrowing, even — and assumed Measure 110 was behind it all… Frustrated voters are upset not so much because the problem has gotten worse but because it’s become more visible. …But make no mistake: Even if you don’t see the carnage of the overdose epidemic, it’s still there.

For what it’s worth, I’m very sympathetic to the normal people. I wouldn’t want to deal with junkies and their detritus.And I’d be super agitated if my family was exposed.

I still think legalization is the logical approach. But I confess there’s no easy answer for how to deal with people who ruin their lives with drug use.

P.S. The same thing is happening in Portugal, where there is now a backlash. Though when I wrote about that nation’s legalization experiment back in 2017, I did warn that “…redistribution programs enable reckless behavior. In other words, people may decide it’s okay to be stoners because they can rely on handouts to stay alive instead of staying clean and having a job.”

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Reassessing the War on Drugs

I disapprove of marijuana, cocaine, and other drugs. But I have libertarian views on legalization because people should have the right to do potentially stupid things to their own bodies.

And I hold to that view even though I fear decriminalization will have some negative consequences.

Indeed, I’ve never claimed legalization is a zero-cost policy. Instead, as I wrote in 2018, “I think the social harm of prohibition is greater than the social harm of legalization.”

That way of thinking seems especially relevant given the very somber tone in a recent report about Portugal’s experience with decriminalization in the Washington Post.

Written by Anthony Faiola and Catarina Fernandes Martins, the article suggests that the country is reconsidering its approach.

Portugal decriminalized all drug use, including marijuana, cocaine and heroin, in an experiment that inspired similar efforts elsewhere, but now police are blaming a spike in the number of people who use drugs for a rise in crime. …now there is talk of fatigue. Police are less motivated to register people who misuse drugs and there are year-long waits for state-funded rehabilitation treatment even as the number of people seeking help has fallen dramatically. …Is it time to reconsider this country’s globally hailed drug model? …“These days in Portugal, it is forbidden to smoke tobacco outside a school or a hospital. It is forbidden to advertise ice cream and sugar candies. And yet, it is allowed for [people] to be there, injecting drugs,” said Rui Moreira, Porto’s mayor. “We’ve normalized it.” …A newly released national survey suggests the percent of adults who have used illicit drugs increased to 12.8 percent in 2022, up from 7.8 in 2001, though still below European averages. …even proponents of decriminalization here admit that something is going wrong. …Porto’s mayor and other critics, including neighborhood activist groups, are not calling for a wholesale repeal of decriminalization — but rather, a limited re-criminalization in urban areas and near schools and hospitals.

This is a decidedly grim assessment, much less optimistic than what I wrote back in 2017.

Though I did warn in that column, “…whether redistribution programs enable reckless behavior. In other words, people may decide it’s okay to be stoners because they can rely on handouts to stay alive instead of staying clean and having a job.”

Is that happening in Portugal? Based on the limited information in the story, there’s no way of answering that question.

Regardless, nothing in the Washington Post‘s report changes my assessment about the futility of the War on Drugs.

Speaking of which, C.J. Ciaramella writes about the failure of America’s Drug Enforcement Agency in a column for Reason.

The DEA is celebrating its 50th anniversary this year, marking half a century of abject mission failure. During five decades as a bottomless money pit that has destroyed countless lives while targeting Americans for personal choices and peaceful transactions, the agency’s annual budget has ballooned from $75 million to $3.2 billion. The DEA currently operates 90 foreign offices in 67 countries. …Since 1986, it has arrested more than 1 million people for manufacturing, distributing, or possessing illegal drugs. Yet in 2021, the Centers for Disease Control and Prevention (CDC) counted more than 107,600 drug-related deaths—an all-time high. The DEA’s own data show a steady, gradual decline in price and rise in purity for most street drugs since the 1980s. …Democrats and Republicans ensured the drug war was not cheap, but the human tragedies continued. …tough-on-crime bills pushed by Biden and like-minded legislators bore their rotten fruit. The total incarcerated population in the United States skyrocketed from roughly 500,000 in 1980 to more than 2.3 million at its peak in 2008. …Five decades should be long enough to admit we’ve made a terrible mistake and relegate the DEA to a museum.

P.S. A downside to legalization is that politicians get a new source of tax revenue.

P.P.S. Keep in mind that the War on Drugs has led to other bad policies such as anti-money laundering laws and civil asset forfeiture laws.

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The Wrong Way to Legalize Drugs

In discussions about drug legalization, skeptics worry about addiction. I think that’s a legitimate concern, but the focus is too narrow.

Yes, legalization may lead a few more people to get hooked on drugs, but we also need to pay attention to the politicians who are so addicted to tax revenue that they are enabling black markets to continue.

In other words, voters are saying legalize and politicians are engaged in a grab for money.

In an article for the Wall Street Journal, Zusha Elinson  and Jimmy Vielkind report on how New York and California have botched legalization.

The illegal marijuana trade is booming in California, seven years after the state legalized its possession, cultivation and distribution. Unlicensed sales totaled $8.1 billion last year, dwarfing legal sales of $5.4 billion… New York legalized cannabis possession in small amounts in 2021. Two years later, just five shops sell marijuana legally in New York City, while 1,400 bodegas, smoke shops and other outlets without licenses do, according to an estimate by the city sheriff. …The persistence of the illegal pot business in the face of state legalization reflects a variety of forces. …high taxes on legal sales fan the embers of illicit ones. “When you start seeing tax rates that are approaching 30 to 40 percent on products, it’s really going to be difficult to compete against the remnants of an illegal market,” said Mason Tvert… In California, the historic cannabis basket of America, many growers find it easier and more profitable to supply illegal shops or to ship their product elsewhere than to comply with licensing requirements. …Curaleaf Holdings Inc., a large, publicly held company, is shifting its focus to states where taxes and regulations are less onerous. …legal shops thought they could succeed… But they have to add a 10% city cannabis tax, a 15% state excise tax and a 9.5% sales tax not exclusive to cannabis.

California has been the poster child for bad policy on marijuana taxation, but the Empire State is trying to catch up.

J.D. Tuccille takes a closer look at New York’s mistakes in an article for Reason.

Empire State officialdom still hasn’t learned its lessons, as evidenced by the heavy regulatory hand stifling sort-of-legalized marijuana…the legislation intended to bring the booming underground market into the open was hobbled from day one. “New York’s law…is surprisingly permissive in some respects but includes high taxes and other provisions that compromise the interests of consumers,” Reason‘s Jacob Sullum warned… Last year, as taxes and regulations added up, and licenses were issued based on social justice grounds, it became increasingly obvious that the state was creating a “legal” market “so hobbled that it will offer uncompetitive prices to consumers and daunting barriers to vendors,” as I noted… Unsurprisingly, the “unlicensed and illicit sale of cannabis” has been barely challenged by tax- and rule-hampered legal-ish competitors. …New York officials might have learned from their own cigarette policies. Those so burdened tobacco with taxes and rules that they managed to (this sounds familiar!) hand the majority of the market for a legal product to illegal vendors.

I’ll add one final point, which is that the greed for tax revenue is not just a fiscal issue.

By propping up the black market, politicians are enabling greater levels of violent crime.

P.S. Portugal is a role model on drug policy.

P.P.S. Keep in mind that the War on Drugs has led to other bad policies such as anti-money laundering laws and civil asset forfeiture laws.

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Government Thuggery: A Continuing Series

Hard-core libertarians sometimes point out that thieves and tax bureaucracies have a lot in common. Both use the threat of force and punishment to take money from unwilling victims.

There’s a lot of truth to that comparison. I give money to the IRS every year for the same reason that I would hand over my wallet to a gun-toting criminal.

I don’t want to surrender my earnings, of course, but the consequences of non-compliance are very high.

However, I don’t rely on this comparison when debating tax policy because a clever leftist will point out that it implies anarcho-capitalism (i.e, if all taxes are theft, that means no government).

That being said, sometimes there truly is no difference between the behavior of thieves and the behavior of bureaucrats.

Jacob Sullum’s column in Reason reveals a nauseating example of theft-by-government, which involves a sheriff’s department in California brazenly stealing the revenue of legal marijuana businesses.

San Bernardino County sheriff’s deputies stopped Empyreal vans three times in November, December, and January. They seized cash during two of the stops, making off with a total of more than $1 million, which was transferred to the FBI so the Justice Department could pursue forfeiture under federal law. If the government prevails in those forfeiture proceedings, the sheriff’s department will get to keep up to 80 percent of the money under the Justice Department’s “equitable sharing” program. The earnings of state-licensed marijuana suppliers are not subject to forfeiture under California law. …Empyreal argues that the traffic stops were pretextual: ostensibly justified by minor traffic violations but actually aimed at generating revenue for the sheriff’s department. Sheriff’s Deputy Jonathan Franco claimed the November 16 stop, which resulted in the seizure of $712,000, was justified because the Empyreal van was following a tractor-trailer too closely. When the same deputies pulled over the same vehicle, driven by the same employee, on December 9, according to the lawsuit that Empyreal filed on January 14, they claimed the driver “slightly exceeded the speed limit and prematurely activated his turn signal.”

The article gets into some of the legal details, such as the armored-car company (Empyreal) trying to get a restraining order against the thieving bureaucrats.

All of which is important, I’m sure, but I can’t help but focus on the utterly venal actions of the San Bernardino County Sheriff (as well as the FBI, the Justice Department, and anyone else involved).

I understand that some people don’t like that there are legal marijuana suppliers in California. But that doesn’t mean that a local law enforcement bureaucracy has the right to engage in (quite literally) highway robbery.

So what’s the bottom line?

Because I believe in the rule of law, nobody should be subject to civil asset forfeiture (a.k.a., “policing for profit“), a reprehensible practice that allows governments to steal property without a finding of guilt.

Even real criminals shouldn’t be punished until and unless they are convicted. But it’s even more disgusting when people engaging in completely legal behavior are targeted.

P.S. Here’s an amusing example of the shoe being on the other foot.

P.P.S. It’s worth noting that the first two directors of the Justice Department’s program on asset forfeiture have since come out against the practice. Redemption is good for the soul.

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The Odious and Abusive Practice of Civil Asset Forfeiture

When people ask me why I’m a libertarian, I rarely mention high taxes and wasteful spending. Nor do I make philosophical arguments about the non-aggression principle. And it’s also unlikely that I’ll cite Ayn Rand.

Instead, I point out that all decent human beings should be libertarian because unconstrained government has the power to abuse people and wreck their lives.

Consider “civil asset forfeiture,” as described in this video.

When I read about some of the real-world cases involving asset forfeiture, it gets my blood boiling.

No wonder I’ve described it as “Venezuelan-style thuggery” and written that the practice is “disgusting, nauseating, reprehensible, and despicable.”

And, if that doesn’t get my point across, I have used other phrases to characterize asset forfeiture.

• “Morally offensive“
• “Egregious scam“
• “Stealing by government“

Let’s look at two odious examples of asset forfeiture that took place this year.

First, the Wall Street Journal editorialized earlier this year about a case in California, in which the FBI decided that it had the right to steal assets from safe deposit boxes simply because the financial institution was charged with crimes.

…the FBI raided U.S. Private Vaults in Beverly Hills in March, it did so after the business had been indicted for conspiring to launder money, sell drugs and other crimes. But the FBI also took control of $86 million in cash and valuables it found in the safe deposit boxes of people who haven’t been accused of a crime. Some of these folks have sued… The Institute for Justice is representing seven plaintiffs in this case. Their argument is that they have done nothing wrong and should not have to go through the cumbersome civil forfeiture process to prove that their cash, jewelry or precious metals are legitimately theirs. …the Fifth Amendment guarantees the right to due process before property can be taken. …The FBI forfeiture list on the contents of the seized boxes reports 14 that each held more than $1 million. Perhaps some of this comes from illegal sources, but the mere possession of cash is not proof of guilt. If the FBI and U.S. Attorney have proof of wrongdoing, bring it on. But the burden for depriving an American of property is on the government to prove guilt, not on the targeted to prove innocence.

Amen, America’s Founders gave us a Constitution to protect against this kind of abuse.

Second, we have a report from yesterday’s Washington Post about how cops stole $87,000 from a veteran.

Stephen Lara…was on his way to visit his daughters in Northern California…he had “a lot” of cash in his car. As he stood on the side of the road, police searched the vehicle, pulling nearly $87,000 in a zip-top bag from Lara’s trunk and insisting a drug-sniffing dog had detected something on the cash. Police found no drugs, and Lara, 39, was charged with no crime. But police left with his money… “I left there confused. I left there angry,” Lara said in an interview with The Washington Post. “And I could not believe that I had just been literally robbed on the side of the road by people with badges and guns.” It was only after Lara got a lawyer, sued and talked with The Washington Post about his ordeal that the government said it would return his money.

The article cites some of the critics, including the freedom fighters at the Institute for Justice.

…the case shows how the federal government abuses its asset forfeiture authority, by requiring those whose property is taken to prove their innocence to get it back. …“This is an inherently abusive power that state and local law enforcement should not have,” said Wesley Hottot, a lawyer representing Lara with the Institute for Justice, which advocates against civil asset forfeiture. “What we see almost exclusively are people like Stephen who — perhaps had quirky banking practices — but they’re not guilty of any crime. And yet, in the nation’s airports, on the nation’s roads, they’re treated by police as though a large amount of cash by itself is criminal. And that power is too dangerous to give every police officer on the street.” …Former U.S. attorney Joyce Vance said…“You can’t just take people’s stuff because you happen to find them with cash,” Vance said. “We still live in a country where people are innocent until they’re proven guilty.”

By the way, this is an issue where the Obama Administration moved policy in the right direction.

Attorney General Eric Holder curtailed use of the practice in the Obama administration, but Attorney General Jeff Sessions restored it under President Donald Trump. Though Attorney General Merrick Garland has rolled back many Trump-era changes at the Justice Department, he has not taken action on asset forfeiture.

By contrast, there’s nothing positive to say about what happened under the Trump Administration.

If you want to understand how bad Trump was on this issue, watch this video.

I’ll close with a bit of good news.

Several states have curtailed the abuse of civil asset forfeiture.

Even more promising, there are hopeful signs that the Supreme Court may rule that the practice is unconstitutional.

P.S. Just like intrusive and ineffective money-laundering laws, wretched asset forfeiture laws are largely the result of the foolish War on Drugs. One bad policy generates another bad policy. Lather, rinse, repeat.

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Policy Lessons from Marijuana Legalization

Like most libertarians, I favor drug legalization for the simple reason that people should have control over their own bodies, even if they’re doing something stupid.

But I’ve never claimed legalization is a zero-cost policy. Instead, as I wrote in 2018, “I think the social harm of prohibition is greater than the social harm of legalization.”

These two flowcharts both make the same point about why the War on Drugs is foolish.

 

Apparently, voters and politicians are beginning to get the message. More and more states have moved in the direction of legalization.

Have the results been positive?

In an article for National Review, Aron Ravin has a very critical assessment of legalization.

…the old-fashioned, party-pooper folk with whom I find myself sympathizing tend to fall back on one point: Weed is unhealthy. Since 2002, the proportion of Americans twelve and older who reported having used marijuana in the last year has increased by over 60 percent. …Pot smoke can cause lung cancer in the same way tobacco can, and secondhand marijuana smoke may have even more carcinogens than cigarettes. Marijuana smoke can also compromise the immune system, and there’s a growing amount of scientific literature indicating a significant correlation between any form of cannabis consumption and psychosis.

As a non-user, I’m very sympathetic to the health argument.

Regularly drawing any kind of smoke into one’s lungs simply can’t be healthy.

That being said, regularly eating big mounds of french fries also can’t be healthy, but that’s not an argument for criminalization.

Ravin then asserts that legalization is a failure because there are still black markets.

Advocates claimed that legalization would cripple the black market and weaken Mexican cartels. They argued that legalizing weed would reduce children’s access to it, as licensed distributors would have a greater incentive to card than criminal dealers, and that users would actually be healthier, as the government would be better able to regulate and inspect the stuff they were smoking. …Top that all off with the Cato Institute’s promises of billions of dollars in new tax revenue and billions more in law-enforcement expenses saved, and you’d have to be silly to disagree. But the libertarians got it wrong.

And he has some good evidence about the continued presence of illegal sales.

…the predicted benefits rested on one assumption: that legal weed would render criminal dealers obsolete much in the same way that repealing prohibition weakened bootlegging mobsters. But that has not happened. It has been nearly a decade since Colorado became the first state to legalize recreational marijuana, and the state is dealing with a larger black market than ever before. …Upwards of 80 percent of all of California’s marijuana sales go through the black market. Massachusetts (70 percent) isn’t faring much better, and Nevada is growing desperate. …Legal dispensaries simply cannot match the low prices offered by their criminal competition when they’re being stifled by so much regulation and taxation, legalization advocates say. Yet weren’t generating tax revenue and protecting users major arguments for legalization in the first place?

I will admit that Ravin makes one very strong point. If libertarians were arguing that legalization would simultaneously deliver lots of tax revenue and also eliminate the black market, that doesn’t make sense.

Simply stated, excessive taxation means illegal sellers will stay in business because their prices will be much lower than their legal (but highly taxed) competitors.

That being said, at least one libertarian (ahem, me) explicitly pointed out that generating additional tax revenue was actually an argument against legalization (I included this issue in my collection of Libertarian Quandaries).

Let’s look at another perspective on legalization.

Jacob Sullum has a largely upbeat assessment of what’s happened, though he agrees that excessive taxation is a problem.

Here are some excerpts from his Reason column.

…when it comes to taxes, New York legislators do not seem very keen on helping the industry—or consumers. …The THC levy may amount to a tax as high as 30 percent, depending on costs, THC content, and product type. That’s on top of a 13 percent marijuana sales tax, which is in addition to general state and local sales taxes that can run as high as 8.9 percent. New Jersey plans to impose an excise tax ranging from less than 3 percent to more than 30 percent, depending on the average retail price per ounce… The state also will allow local governments to collect multiple taxes from growers, manufacturers, wholesalers, and retailers… New Mexico’s marijuana sales tax is simple and modest by comparison: 12 percent initially, rising gradually to 18 percent by July 2030. States such as Alaska, Illinois, Maine, Massachusetts, and Michigan tax marijuana even more lightly. These states seem to recognize that heavy taxes make it harder for licensed retailers to compete with black-market dealers. It’s a lesson that some politicians will have to learn all over again.

A 2018 Bloomberg article is a good primer on the issue of pot taxation.

What’s the optimal tax rate on legal marijuana if the goal is to eliminate the black market? …There are signs that California, with its longstanding pot culture and thriving black market, is taxing weed too much, while Washington state has already moved to lower its rate. …Lawmakers debating the issue are typically trying to balance two goals: generating revenue to boost state coffers while also creating a legal market that will put street dealers out of business. …The economics of elastic demand hold that consumers will buy less of a product as it gets more expensive, and the theory is being tested in the various legal markets around the U.S. …Oregon and California…have struggled to eliminate the black market, in part because high tax rates and regulatory red tape have made it attractive for some producers, sellers and customers to stay underground. …Light taxation and liberal licensing under Colorado’s adult-use law slashed the black market to 33 percent of cannabis sales last year, Adams said. In contrast, illicit sales were 78 percent of California cannabis sales and were even higher this year under adult-use laws that imposed extraordinary taxes and regulatory hurdles.

For those interested, I’ve written a few times (here, here, here, and here) about California’s over-taxation of marijuana.

I also have two columns (here and here) about Colorado’s experience.

So what’s the bottom line?

I fully expect that politicians in most states will continue to set tax rates too high, which means black market sales of marijuana will remain strong.

Why will they make this mistake? For the same reason they have excessively high tax rates on income, on sales, on property, on booze, and everything else.

Greedy politicians can’t resist the temptation to over-tax anything and everything in hopes of getting their hands on more money to buy more votes.

That’s America’s real (and bipartisan) addiction problem.

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Everything You Need to Know about Bad Government in California

California is a fascinating state for people who follow public policy. It has some immense advantages, such as climate, coastline, and natural resources.

But it also has high taxes, absurd regulations, a bloated bureaucracy, and a costly welfare state.

The net result of all these factors is mixed. There are some sectors that are still thriving, such as high tech, but there’s also evidence that the Golden State is losing ground.

And the comparative data will probably get worse over time because many taxpayers and businesses are now fleeing to lower-tax states.

Since I specialize in public finance, I’m tempted to say bad fiscal policy is California’s biggest problem. And that may actually be the case.

But if someone asks me for an example of what’s wrong with the Golden State, I’m going to direct them to this story in the Los Angeles Times.

The California Legislature on Monday approved a $100-million plan to bolster California’s legal marijuana industry, which continues to struggle to compete with the large illicit pot market nearly five years after voters approved sales for recreational use. …State officials initially expected to license as many as 6,000 cannabis shops in the first few years, but permits have been issued only for 1,086 retail and delivery firms. In 2019, industry officials estimated there were nearly three times as many unlicensed businesses as ones with state permits. …The $100 million would go to local agencies with the most provisional licenses for growing, manufacturing, distribution, testing and retail operations. Some of the money can be used by cities offering equity funding to cannabis businesses owned by people of color.

Yes, you read correctly.

The state did a smart thing (removing legal prohibitions on marijuana), but did it in the worst possible way (burdening the sector with high taxes and red tape).

As a result, there’s still a very robust black market.

Here are some additional details about how politicians and bureaucrats have made it difficult to operate a legal business.

Many cannabis growers, retailers and manufacturers have struggled to make the transition from a provisional, temporary license to a permanent one renewed on an annual basis — a process that requires a costly, complicated and time-consuming review. …some face two to four years to get through the licensing process. Many would face the prospect of shutting down, at least temporarily, if they don’t get a regular license by current state deadlines, Kiloh said. …Supporters of legalization blame the discrepancy on problems that they say include high taxes on licensed businesses, burdensome regulations… A key requirement to convert from a provisional license is to conduct a CEQA review to indicate how pot farms and other cannabis businesses will affect the surrounding water, air, plants and wildlife, and to propose ways to mitigate any harms. However, Kiloh said, some cities are just setting up ordinances and staffing to process licenses, meaning many businesses cannot meet the looming deadline. …industry officials note the money will go to a small fraction of California cities, and only those that have already decided to allow cannabis businesses. …said Kiloh, owner of the Higher Path cannabis store in Sherman Oaks. “The real problem is CEQA analysis is a very arduous process,” he added. “I think it would be good to have more reform of the licensing system instead of just putting money to it.”

Wow, provisional licenses, permanent licenses, CEQA analysis, taxes, regulations, reviews, and ordinances.

Sounds like my regulatory obstacle course. No wonder so many buyers and sellers of pot prefer the black market.

And Mr. Kiloh is correct. The solution is to deregulate, not to dump more money into the system.

No wonder California is a mess.

P.S. The late (and great) Walter Williams joking speculated whether California should set up East German-style border controls to prevent taxpayers from escaping.

P.P.S. There is a pro-secession group in California, though they should be careful what they wish for.

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The Best and Worst of 2020

One of my traditions, which started in 2013, is to share the year’s best and worst policy outcomes of the past 365 days.

For instance, last year I celebrated Boris Johnson’s landslide victory in the United Kingdom and also was very happy that Colorado voters preserved TABOR. But I bemoaned Trump’s protectionism and fretted about the ever-rising burden of government spending.

So what can we say about 2020?

The big news of the year was the pandemic, of course, but my best-and-worst list focuses on public policy.

In other words, this column will highlight the positive or negative actions of politicians (or voters) rather than the vindictiveness of Mother Nature.

So let’s look at major developments in 2020, and we’ll start with the good news.

Illinois voters preserve the flat tax – The only good feature of Illinois fiscal policy is that the state’s constitution mandates a flat tax. The big spenders in Springfield despise that policy, but they can’t get rid of it without permission from voters. So, led by the state’s hypocritical governor, they put an initiative on the ballot to allow discriminatory tax rates. Fortunately, the people of Illinois rejected the class-warfare measure by a comfortable 53.3 percent-46.7 percent margin.

An acceptable Brexit deal – The people of the United Kingdom wisely voted to leave the European Union back in 2016, but a genuine escape from Brussels did not seem likely until Boris Johnson’s landslide victory in 2019. Even then, it wasn’t clear that the European Union’s spiteful officials would agree to unfettered trade in a post-Brexit environment. Fortunately, there is now an agreement that – while far from perfect – does allow the U.K. to escape the sinking ship of the E.U.

Voters reject the War on Drugs – I’ve never liked drugs and I recognize that there will be social harms with legalization. That being said, the social harm from prohibition is much greater, so I’m pleased that voters all over the nation approved ballot initiatives to give people more freedom to get high.

Now for the bad news of 2020.

Washington’s bungled response to the pandemic – As indicated above, the existence of the coronavirus doesn’t count as bad policy, but the federal government’s incompetent response certainly belongs on this list. We learned, over and over and over and over again, that bloated bureaucracies do not deliver good results. Heck, we’re still learning that lesson.

China clamps down on Hong Kong – As a long-time admirer of Hong Kong’s market-driven economic vitality, I’m saddened that China is increasing its control. So far, Beijing is focusing on ways of restricting Hong Kong’s political autonomy, but I fear it is just a matter of time before economic freedom is negatively impacted. For what it’s worth, I’m also distressed that economic policy seems to be moving in the wrong direction in Mainland China as well.

Chilean voters put the nation’s prosperity at risk – One of the world’s biggest success stories during my lifetime has been Chile’s shift from authoritarian statism to capitalist prosperity. Poverty has dramatically declined and Chile is now the richest nation in Latin America. Sadly, voters approved an initiative that could result in a new constitution based on the welfare state vision of “positive rights.”

I’ll close with a bonus section, so to speak.

2020 election – If you care about trade and spending, then Biden’s victory may turn out to be good news. If you care about taxes and red tape, then Biden’s victory may turn out to be bad news.

But I thought the biggest election takeaway is that the left did not do well in congressional races or state races.

And I suppose I should add that it’s good news that Democratic voters ultimately opted not to nominate some of the awful politicians who ran for president, most notably Bernie Sanders and Elizabeth Warren.

And I’m tempted to add that they also wisely rejected Kamala Harris, but that backfired since she’s now going to be a heartbeat away from the presidency.

P.S. I’ve already cited my 2013 and 2019 editions. If you’re curious, here are my best and worst for 2018, 2017, 2016, 2015, and 2014.

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Once Again, Everything You Need to Know about Government in a Single Story

Ronald Reagan hit the nail on the head when he warned that government is usually the problem rather than the solution.

It’s not just that the economy suffers when there is too much spending, regulation, and taxing, we also have far too many politicians and bureaucrats who behave as if they’re motivated by personal interest rather than the national interest.

Not that we need any more evidence, but there’s an editorial in today’s Wall Street Journal that perfectly captures what’s wrong with Washington.

Indeed, I’ve even recycled the title that I used just three days ago because the WSJ column is such a powerful example.

Read these excepts about a legal attack against Walmart and ask yourself whether the federal government is acting like mobsters conducting a shakedown operation.

…the Justice Department’s new suit..claims that Walmart “failed to detect and report at least hundreds of thousands of suspicious orders” and that as a pharmacy it “unlawfully filled thousands upon thousands of invalid controlled-substance prescriptions.” …The complaint…is really a 160-page exercise in scapegoating a company because it is well-known and has deep pockets. Walmart doesn’t push pills on opioid addicts. Its pharmacists fill valid prescriptions written by doctors who are licensed by their states and registered with the Drug Enforcement Administration (DEA). …Walmart says it has passed tens of thousands of leads about suspicious prescriptions to state and federal law enforcement. It’s the job of the DEA and state medical boards to investigate and revoke doctors’ licenses and prescribing privileges if there’s wrongdoing.

For all intents and purposes, the company is in a no-win situation.

When pharmacists have refused to fill questionable prescriptions, doctors have sometimes sued for defamation and patients have sometimes sued for discrimination. Several states have prohibited pharmacists from interfering with the doctor-patient relationship by second-guessing valid prescriptions. No federal law supersedes these state laws. …the DEA has suggested that some combinations of opioids never have a legitimate medical purpose and should never be filled. Yet the Centers for Medicare & Medicaid Services continues to cover these opioid combinations… In effect DOJ is asking the federal court to overrule state law in favor of informal federal guidance and a vague notion of pharmaceutical best practices. This harassment was typical of the Obama era.

This issue reminds me of the federal government’s policy on money laundering. In that case, the government not only orders banks to spy on customers, but also to read their minds to somehow figure out if a financial transaction is connected to criminal behavior.

The net result is a very costly and intrusive system that has utterly failed to achieve its purpose of reducing criminal behavior.

But that doesn’t stop Uncle Sam from periodically imposing heavy fines on banks for nit-picking violations, just like the federal government today wants to extort a bunch of money out of Walmart.

It’s almost enough to make you think there’s a pattern.

P.S. I have a .500 batting average in my experiences as a global money launderer.

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Everything You Need to Know about Government in a Single Story

When I write an everything-you-need-to-know column, I’m inevitably guilty of hyperbole.

All that I’m really doing is highlighting a very compelling example of how politicians make a mess of just about anything they touch.

That’s even true in the rare cases when they’re trying to enact policies I prefer.

The crux of the problem is that politicians like having some level of power and control over various sectors of the economy, for the simple public choice-driven reason that they can then extort bribes, campaign cash, and other goodies.

Which is good news for donors, crooks, and cronies, as P.J. O’Rourke wisely noted.

But it’s bad news for those of us who don’t like sleaze. Yet sleaze is almost inevitable when politicians have power to interfere with private market transactions.

Check out these excerpts from a Politico report.

In the past decade, 15 states have legalized a regulated marijuana market for adults over 21, and another 17 have legalized medical marijuana. But in their rush to limit the numbers of licensed vendors and give local municipalities control of where to locate dispensaries, they created something else: A market for local corruption. Almost all the states that legalized pot either require the approval of local officials – as in Massachusetts — or impose a statewide limit on the number of licenses, chosen by a politically appointed oversight board, or both. These practices effectively put million-dollar decisions in the hands of relatively small-time political figures – the mayors and councilors of small towns and cities, along with the friends and supporters of politicians who appoint them to boards. …They have also created a culture in which would-be cannabis entrepreneurs feel obliged to make large campaign contributions or hire politically connected lobbyists. …It’s not just local officials. Allegations of corruption have reached the state level in numerous marijuana programs, especially ones in which a small group of commissioners are charged with dispensing limited numbers of licenses.

Needless to say, what’s happening in the marijuana industry happens wherever and whenever politicians have power.

“All government contracting and licensing is subject to these kinds of forces,” said Douglas Berman, a law professor at Ohio State University who authors a blog on marijuana policy. …“There’s a lot of deal-making between businesses and localities that creates the environment of everyone working their way towards getting a piece of the action,” Berman said. Whether it’s city or county officials that need to be appeased, local control is “just another opportunity for another set of hands to be outstretched.”

The report concludes by noting that corruption can be avoided very simply. Just make sure politicians and other people in government have no power or authority.

States that have largely avoided corruption controversies either do not have license caps — like Colorado or Oklahoma — or dole out a limited number of licenses through a lottery rather than scoring the applicants by merit — like Arizona. Many entrepreneurs, particularly those who lost out on license applications, believe the government shouldn’t be in the business of picking winners and losers and should just let the free market do its job.

Amen.

I’ll conclude by noting that politicians are doing the right thing in the worst way.

I want to end the War on Drugs because it is a costly failure. It’s not that I think drug use is a good idea. But I recognize that the social harm of prohibition is greater than the social harm of legalization.

And, as a libertarian, I believe people should be free to make their own decisions (consistent with the libertarian non-aggression principle, of course), even if I happen to disapprove.

Sadly, politicians are not legalizing pot for libertarian reasons.

Instead, they see it as a way of having a new product to tax (and they’re botching that). And, as illustrated by today’s story, they see it as a way of lining their own pockets.

I’m almost tempted to say we’d be better off if marijuana was criminalized so it could be sold on the black market instead.

But the real moral of the story is that government power is a recipe corruption.

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American Voters Reject the War on Drugs

In yesterday’s election postmortem, I highlighted a few implications for big-picture economic issues.

• There will be another “stimulus,” but it won’t be nearly as profligate as would have been the case if Democrats had total control of Congress and the White House.
• There won’t be any serious effort for forced unionization in right-to-work states.
• Biden’s class-warfare tax increases won’t happen.
• The state and local tax deduction will remain capped.
• The corporate tax rate will stay 21 percent (the best fiscal achievement of Trump’s presidency).

But here’s another takeaway from the election results: The American people have rejected the foolish and expensive War on Drugs.

Writing for Reason, Elizabeth Nolan Brown celebrates this development.

If Americans across the country provided a clear mandate for anything this year, it’s ending the hold that drug prohibition has on our country. Of nine drug decriminalization or legalization measures on state ballots last night—including two addressing hallucinogens and one covering all illegal drugs—not a single one failed. These were decisive victories, too, not close calls. …successful anti–drug war measures in 2020 spanned a diverse array of states. …Ballot measures making marijuana legal for recreational purposes passed in…Arizona, Montana, and New Jersey. South Dakota approved both recreational and medicinal marijuana. In addition, Mississippi voters approved a medical marijuana measure. …consumption of hallucinogenic mushrooms got a green light from voters in the District of Columbia and in Oregon. And Oregonians also approved Measure 110, partially decriminalizing all illegal drugs.

What happened in Oregon is especially amazing.

In effect, the state is following Portugal, which – as I wrote back in 2017 – decriminalized all drugs early this century.

So I was interested to see a new column in the New York Times about what’s happened in that nation. Authored by Professor Austin Frakt of Boston University, it’s a largely positive picture.

…it decriminalized the use of all illicit drugs in small amounts in 2001, including heroin and cocaine… Portugal’s law removed incarceration… Opioid overdose deaths fell after Portugal’s policy change. So did new cases of diseases associated with injection drug use, such as hepatitis C and H.I.V. …One study found an increase in drug experimentation after the law. But this was a transient effect… One consequence of ending incarceration as a penalty in Portugal is that prison overcrowding decreased. …In drug policy, there are many trade-offs. Though we may not have strong evidence that drug decriminalization alone is widely beneficial, we also lack compelling evidence of benefits from criminalizing drug use, which costs the United States billions of dollars annually.

I don’t know Professor Frakt’s philosophical preferences, but the column doesn’t make a libertarian case for decriminalization.

He’s simply focusing on cost-benefit issues.

Which is quite reasonable. Indeed, I worry that our welfare state will subsidize people making bad choices if there’s legalization in the United States, so I’m certainly cognizant of potential downsides.

That being said, the libertarian part of me is glad voters are giving people more freedom, even if it means some people may make dumb choices.

Now we simply need to convince voters that more personal liberty should be matched with more economic liberty.

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Breonna Taylor Is another Casualty in the Foolish War on Drugs

I frequently cite Mark Perry in my columns (including what I wrote yesterday) because he has an uncommon ability to focus on what’s actually important when writing about economic issues.

It turns out he also has that ability when it comes to social issues, as illustrated by this tweet.

For those who aren’t familiar with Ms. Taylor, she was killed when cops raided her residence based on a dubious search warrant.

That incident, and the subsequent fallout, has triggered social unrest, and I recommend David French’s analysis if you want to know more about the various legal issues surrounding the case.

I want to focus on the bigger point, which is the foolishness of the War on Drugs.

Jacob Sullum of Reason captures my feelings in this excellent article.

Louisville, Kentucky, police officers did a lot of things wrong when they killed Breonna Taylor, an unarmed 26-year-old EMT and aspiring nurse, during a fruitless no-knock drug raid last spring. But the litany of errors that led to Taylor’s death would be incomplete if it did not include the biggest mistake of all: the belief that violence is an appropriate response to peaceful conduct that violates no one’s rights. If politicians did not uncritically accept that premise, which underlies a war on drugs that the government has been waging for more than a century, Taylor would still be alive. …Drug prohibition legalizes conduct that otherwise would be instantly recognized as felonious, including assault, theft, trespassing, burglary, kidnapping, and murder. It makes police officers enemies to be feared rather than allies to be welcomed. …That problem goes far beyond the cases, such as Taylor’s, that are highlighted by Black Lives Matter. When a middle-aged white couple is killed in a drug raid instigated by a black narcotics officer who lied to obtain the search warrant (as happened in Houston last year) or a white 19-year-old is fatally shot by a white police officer during a marijuana sting (as happened in South Carolina several years ago), those outcomes are just as senseless and heartbreaking as the death of a young black woman gunned down by white drug warriors.

The individual tragedies in the War on Drugs, he explains, are compounded by the societal damage.

At any given time, nearly half a million people are incarcerated in U.S. jails or prisons for drug offenses. Drug offenders account for almost half of federal prisoners and 15 percent of state prisoners. Arresting all of those people for actions that violated no one’s rights unjustly deprives them of their liberty and impairs their life prospects. It also hurts their families and communities. …Which is not to say that the burdens of prohibition fall exclusively on people who like illegal drugs. Everyone else pays too, in the form of squandered taxpayer money, diverted law enforcement resources, theft driven by artificially high drug prices, and eroded civil liberties. …The war on drugs is also the main excuse for the system of legalized theft known as civil asset forfeiture, which allows police to take cash and other property they claim is connected to drug offenses.

I would add just one point to Sullum’s superb column. The War on Drugs is not only responsible for the horrid policy of asset forfeiture, it’s also the excuse for costly and intrusive laws on “money laundering.”

I’ll close with a few additional observations.

I’ve previously explained why the War on Drugs is pointless and counterproductive.

My argument isn’t that drugs do no harm. Instead, I want people to understand that the social harm of criminalization is much greater than the social harm of legalization.

If you want some additional data, I strongly recommend this collection of tweets by Joshua Collins.

1) THREAD: The War on Drugs Has Been a Dismal Failure; What's Next?

In CO, 15,000 ppl were killed in a 20-year war against cartels, while the conflict in MEX caused more than 120,000 deaths and disappearances since 2006. Drug addiction rates in the U.S. have remained the same pic.twitter.com/bLdnMHL7gU

— Joshua Collins (@InvisiblesMuros) September 19, 2019

And here’s the logic – or lack of logic – of the War on Drugs captured in an image.

I call this the lather-rinse-repeat cycle of government failure.

P.S. Mark Perry is also famous for his Venn diagrams that expose hypocrisy (see here, here, here, here, and here). He even motivated me to create my own version.

 

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Great Moments in Canadian Law

When I think of over-bearing governments with myopic enforcement of silly rules, I obviously think of the United States, especially the IRS, EEOC, FDA, and EPA.

And I also think of Germany, Japan, and other straight-laced societies.

But I don’t think of Canada. After all, that’s the home of Dudley Do-Right. Canadians are too nice to do dumb things!

However, I shouldn’t be basing my views on a cartoon from my childhood. It seems that Canadians are quite capable of bizarre behavior. At least when you look at their legal system.

• Levying a $465 fine on a motorist with a slight tear in his driver’s license.
• Grudgingly allowing two girls to operate a lemonade stand.
• Awarding extra money to a healthcare worker because alcoholism is a disability.
• Ruling that it is illegal for two kids to sell worms without a license.
• Fining a mother for giving her kids non-state-approved lunches.
• Suspending a student for rescuing a classmate from a bully.
• Telling an Italian restaurant that Italian words are against the law.

Let’s review three additional examples.

I’ve written about some of the mistakes that American states (California and Colorado, for instance) have made when legalizing marijuana. Well, there are similar mistakes in Canada according to the Washington Post.

When the government launched Canada’s official recreational-pot market on Oct. 17, it was banking on the idea that many users would prefer to buy legally and that the black market would quickly begin to fade. …things aren’t going as expected. …a month after legalization, more than a third of Canadian cannabis users said they were still buying from their regular dealers and hadn’t even tried the legal system. Five illegal sellers in Quebec told The Washington Post their sales are slightly up.

It turns out that the legal system is a mess of harsh regulation.

In 2015, when the government first committed to legalization, many of them planned to apply to open private shops. “All of us thought, ‘Okay . . . I’m going to be able to come out of the shadows and I’m going to be able to pay taxes,’ ” David said. “As time went on, it became clear that’s not what they were after.” In Quebec and several other Canadian provinces, all cannabis stores are government-run, leaving no path to legality… said Lewis Koski, former director of the Colorado Marijuana Enforcement Division and now a consultant on legalization. “I can’t think of a state here in the U.S. that has a government-control model similar to . . . Canada’s.” Even in provinces that do allow private shops or dispensaries, including Alberta, Saskatchewan and Manitoba, small businesses face high barriers. It costs almost $5,000 just to apply for a license, and if approved, $23,000 each year thereafter in regulatory fees, with provinces often adding their own charges.

Let’s now look at a government-enforced Canadian cartel.

The maple syrup farmers of Québec have been saddled with compulsory membership to the Federation of Québec Maple Syrup Producers (FPAQ, according to the native French abbreviation) since 1990. The Federation holds monopoly rights over all maple syrup produced in the province, controlling wholesale distribution and prices. Anyone who dares to sell more than five litres of their boiled tree sap on their own farm or to local grocery stores faces a prison sentence and a fine of hundreds of thousands of dollars. …Angele Grenier and her husband, decades-long syrup farmers, have been smuggling their contraband syrup to the neighboring province of New Brunswick. In the dark of the night, they load barrels onto trucks and sneak across the province border to market freedom. For this terrible black market act of choosing their own customers and prices, Angele is one of Canada’s most wanted women. She has appealed the charges brought against her by the FPAQ, and her case is being taken up by the Supreme Court.

Maybe Canadian syrup smugglers can learn lessons from Norwegian butter smugglers?

Last but not least, the Toronto Star reports that Canadian law enforcement is capable of government thuggery.

At about 5 p.m. on May 13, 2009, Kosoian stepped on the down escalator at a subway station in Laval. She was heading to her history class at a university in downtown Montreal. Kosoian had used that same escalator almost every day for four years. She knew that at the front of the escalator, as well as at a spot halfway down, were yellow pictograms that said, “Caution … hold handrail.” She deemed the pictogram nothing more than a warning or recommendation. Besides, the H1N1 virus was making the rounds, and Kosoian considered the handrail a cesspool of microbes. …A police officer…stopped in front of Kosoian on the step below when the escalator had taken her about halfway down. The officer, Fabio Camacho, …ordered her to hold the handrail. Kosoian says she responded: “It’s my right to hold the handrail or not to hold it.” …when Kosoian reached the bottom of the escalator, Camacho and his partner, the officer who initially walked past Kosoian, grabbed her by the arms and took her to a nearby locked room that also contained a jail cell. …Camacho and his partner cuffed Kosoian’s hands behind her back and sat her in a chair. He searched her bag, found her driver’s licence and began writing her two tickets: a $100 fine for not holding the handrail, and a $320 fine for obstructing the work of a police officer.

It’s quite possible that Kosoian was being obnoxious and baiting the cops, but none of that changes the fact that not holding a handrail shouldn’t be a criminal offense.

Do cops in Canada bust into people’s houses to see if mattress tags are still attached (though perhaps only the U.S. is dumb enough to have such a rule)?

Interestingly, this episode from 2009 is now going to the Canadian Supreme Court.

The Laval police force and the transit agency…pressed for the fines to be paid, and Kosoian’s refusal triggered a municipal court hearing in May 2011. In March 2012, Judge Florent Bisson acquitted Kosoian of the tickets… Kosoian…launched a lawsuit against Camacho, the STM and the City of Laval. In August 2015, the Quebec Court dismissed it with a legal tongue lashing. …She appealed and, on Dec. 5, 2017, the Quebec Court of Appeal ruled against her in a 2-1 decision. …Kosoian and her lawyer again appealed, this time to the Supreme Court. …the Supreme Court has only granted about 10 per cent of the 500 or so requests for appeals it receives each year. So Thomas Slade, a lawyer who is not involved in the case, says he was initially surprised when the court agreed to hear Kosoian.

I’m not overflowing with sympathy for Ms. Kosoian, but there’s not much doubt that getting rid of stupid laws is the best way of avoiding this type of mess.

I’ll close with two observations. First, Americans can’t throw stones at our Canadian friends since we live in a glass house.

Second, Canada obviously needs to change some of its silly laws, but I don’t want this to be interpreted as an indictment of the entire country (notwithstanding Prime Minister Zoolander).

In recent decades, Canada has dealt with several issues (spending restraint, welfare reform, corporate tax reform, bank bailouts, regulatory budgeting, the tax treatment of saving, school choice, and privatization of air traffic control) in a very sensible fashion.

P.S. Though a Canadian politician is eligible for the hypocrite-of-the-century award.

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New Academic Research: Reduce Violent Crime by Ending the Drug War

The War on Drugs is a bad idea. Not because people should be using drugs, but rather because the societal harm of prohibition is much greater than the societal harm of legalization.

Moreover, even though I personally disapprove of drug use, I adhere to the libertarian principle that people should be free to do what they want (even stupid things) with their own bodies.

Today, though, let’s focus on the practical argument and look at some fascinating academic research from Evelina Gavrilova, Takuma Kamada, and Floris Zoutman (two economists and a criminologist). Here’s a summary from the abstract of their study.

We examine the effects of medical marijuana laws (MMLs) on crime. …Using data from the Uniform Crime Reports, we show that the introduction of MMLs lead to a decrease of 12.5 percent in violent crime, such as homicides, aggravated assaults and robberies in states that border Mexico. We also show that the reduction in violent crimes is strongest for counties close to the border (less than 350km)… Analysis from the Supplementary Homicide Reports data reveals that the decrease in homicides can largely be attributed to a drop in drug-law related homicides. We find evidence for spillover effects. When an inland state passes a MML, this results in a decrease in crime in the nearest border state. Our results are consistent with the theory that the introduction of MMLs reduces activity by Mexican drug trafficking organizations and their affiliated gangs in the border region. MMLs expose drug trafficking organizations (DTOs) to legitimate competition, and substantially reduce their profits in one of their most lucrative drug markets. This leads to a decrease in drug related crime in the Mexican border area. Our results indicate that decriminalization of the production and distribution of drugs may lead to a reduction in violence in markets where organized drug criminals meet licit competition.

In other words, legalize drugs and you get less violent crime.

And for those who want some of the underlying economic analysis, here’s the relevant section of the study.

Figure 2 represents the market for marijuana. For simplicity we assume that illicit and medical marijuana are perfect substitutes in consumption, such that the supply and demand of both substances can be represented in a single figure. SDTO represents the supply curve for marijuana by DTOs. S0 represents the combined supply of marijuana by DTOs and local farmers that were already active prior to the introduction of a MML. A MML allows for entry of additional local farmers and thus shifts the combined supply to the right to S1. This results in a reduction in the price of the drug, an increase in the overall quantity, and a reduction in the quantity sold by DTOs. The shaded area in the graph depicts the aggregate loss in revenues for DTOs.

Here’s the graph that shows how legalization creates significant losses for drug smugglers.

The shaded area may seem somewhat akin to the deadweight loss caused by taxation, but keep in mind that the losses to drug dealers are a plus to society while the economic losses from bad tax policy are a minus for society.

Now let’s shift from economics to bureaucracy with a story that captures the Drug War mindset (h/t: Reason).

If Illinois legalizes marijuana for recreational use, law enforcement officials fear job losses for hundreds of officers — specifically, the four-legged kind. …There are about 275 certified narcotic detection K-9s in Illinois… Because many K-9s are trained not to be social so their work won’t be affected, Larner said a number of dogs would likely have to be euthanized.

Yes, you read correctly. Defenders of the War on Drugs are threatening that they will kill their dogs if pot is legalized.

Needless to say, this is a perverse version of the Washington Monument Ploy. Quite similar to what happened several years ago in Massachusetts.

Let’s close with a clever – but quite accurate – look at how the current system operates.

I especially like the part at the bottom, which shows the cycle that creates more violence, though it also should have shown ever-higher profits for drug dealers.

The good news is that we’re winning on this issue. More and more states are liberalizing and we’re gaining more and more allies (libertarians such as John Stossel and Gary Johnson,  but also traditional skeptics such as Pat Robertson, Cory Booker, Mona Charen, John McCain, and Richard Branson).

P.S. The one downside to legalization is that politicians get a new source of tax revenue.

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California (Hopefully) Learns a Lesson about Marijuana Taxes and the Laffer Curve

I wanted California to decriminalize marijuana because I believe in freedom. Smoking pot may not be a wise choice in many cases, but it’s not the role of government to dictate private behavior so long as people aren’t violating the rights of others.

Politicians, by contrast, are interested in legalization because they see dollar signs. They want to tax marijuana consumption to they can have more money to spend (I half-joked that this was a reason to keep it illegal, but that’s a separate issue).

Lawmakers need to realize, though, that the Laffer Curve is very real. They may not like it, but there’s very strong evidence that imposing lots of taxes does not necessarily mean collecting lots of revenue. Especially when tax rates are onerous.

Here’s some of what the AP recently reported about California’s experiment with taxing pot.

So far, the sale of legal marijuana in California isn’t bringing in the green stuff. Broad legal sales kicked off on Jan. 1. State officials had estimated California would bank $175 million from excise and cultivation taxes by the end of June. But estimates released Tuesday by the state Legislative Analyst’s Office show just $34 million came in between January and March. …it’s unlikely California will reap $175 million by midyear.

And here are some excerpts from a KHTS story.

Governor Jerry Brown’s January budget proposal predicted that $175 million would pour into the state’s coffers from excise and cultivation taxes…analysts believe revenue will be significantly lower… Some politicians argue high taxes are to blame for the revenue shortfalls preventing that prediction from becoming reality, saying the black market is “undercutting” the legal one. …The current taxes on legal marijuana businesses include a 15 percent excise tax on purchases of all cannabis and cannabis products, including medicinal marijuana. The law also added a $9.25 tax for every ounce of bud grown and a $2.75-an-ounce tax on dried cannabis leaves for cultivators.

These results should not have been a surprise.

I’ve been warning – over and over again – that politicians need to pay attention to the Laffer Curve. Simply stated, high tax rates don’t necessarily produce high revenues if taxpayers have the ability to alter their behavior.

That happens with income taxes. It happens with consumption taxes.

And it happens with taxes on marijuana.

Moreover, it’s not just cranky libertarians who make this point. Vox isn’t a site know for rabid support of supply-side economics, so it’s worth noting some of the findings from a recent article on pt taxes.

After accounting for substitution between products by consumers, we find that the tax-inclusive price faced by consumers for identical products increased by 2.3%. We find that the quantity purchased decreased by 0.95%…, implying a short-term price elasticity of -0.43. However, over time, the magnitude of the quantity response significantly increases, and our estimates suggest that the price elasticity of demand is about negative one within two weeks of the reform. We conclude that Washington, the state with the highest marijuana taxes in the country, is near the peak of the Laffer curve – further increases in tax rates may not increase revenue. …tax revenue has historically been one of the many arguments in favour of legalising marijuana…the optimal taxation of marijuana should be designed to take into account responses…excessive taxation might prop up the very black markets that legal marijuana is intended to supplant. As additional jurisdictions consider legalising marijuana and debate over optimal policy design, these trade-offs should be explored and taken into account.

Let’s close by reviewing some interesting passages from a McClatchey report, starting with some observations about the harmful impact of excessive taxes.

Owners of legalized cannabis operations face a range of challenges… But taxes – local, state, federal – present a particular headache. They are a big reason why, in California and other states, only a small percentage of cannabis growers and retailers have chosen to get licensed and come out of the shadows. …In a March report, Fitch Ratings suggested that California may not realize the tax revenue – $1 billion a year – the state projected when Proposition 64, a legalization initiative, was put before voters in 2016. “While it is still too early to assess California’s revenue performance, comparatively high taxes on legal cannabis will likely continue to divert sales to illegal markets, reducing potential tax collections,” Fitch said in its report. …Add it all up, and state-legal cannabis in some parts of California could be taxed at an effective rate of 45 percent, Fitch said in a report last year.

Interestingly, even politicians realize they need to adapt to the harsh reality of the Laffer Curve.

Some state lawmakers blame the taxation for creating a price gap between legal and illegal pot that could doom California’s regulated market. Last month, Assembly members Tom Lackey, R-Palmdale, and Rob Bonta, D-Oakland, introduced legislation, AB 3157, that would reduce the state marijuana sales tax rate from 15 percent to 11 percent, and suspend all cultivation taxes until June 2021.

And I can’t resist including one final passage that has nothing to do with taxes. Instead, it’s a reference to the lingering effect of Obama’s dreadful Operation Choke Point.

Davies owns Canna Care, a medical marijuana dispensary in Sacramento. Like other state-legal cannabis businesses nationwide, her pot shop operates largely with cash. Most banks won’t transact with enterprises deemed illegal by the U.S. government. That forces Davies to stuff $10,000 in bills into her purse each month… even lawyers who represent state-legal marijuana businesses face financial risks. Sacramento lawyer Khurshid Khoja recently lost his two bank accounts with Umpqua Bank, after Umpqua started asking him about his state-legal cannabis clients.

The good news is that Trump has partially eased this awful policy. The bad news is that he only took a small step in the right direction.

But let’s get back to our main topic. I’ve written several times on whether our friends on the left are capable of learning about the Laffer Curve. Especially in cases when they imposed a tax in hopes of changing behavior!

• The big drop in soda purchases after a tax on sugary drinks was imposed in Berkeley.
• The big drop in home sales after a tax was imposed in Vancouver on purchases by foreigners.
• The big drop in tobacco sales after a big increase in D.C.’s tobacco tax.
• The big drop in soda purchases after a tax was imposed in Philadelphia.
• The big drop in sales of high-end housing after a big tax was imposed in the United Kingdom.
• The big drop in soda sales after a big tax on sugary products in Mexico.

What’s happening in California with pot taxes is simply the latest example.

And I’m hoping leftists will apply the lesson to taxes on things that we don’t want to discourage – such as work, saving, investment, and entrepreneurship.

P.S. I’ve pointed out that some leftists want high tax rates on income even if no money is collected. That’s because their real goal is punishing success. I wonder if there are some conservatives who are pushing punitive marijuana taxes because they want to discourage “sin” rather than collect revenue.

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A Libertarian Quandary on Pot, Federalism, and the Rule of Law

Here are two statements that seem in conflict.

• I don’t like marijuana.
• I want marijuana legalized.

But there’s actually no conflict because we can decide that some things are distasteful without wanting to infringe on the freedom of others to partake. And you can make that decision for moral reasons or utilitarian reasons.

Now let’s consider two more statements.

• The rule of law is a bulwark of a civilized society and government officials should not engage in arbitrary enforcement.
• Attorney General Jeff Sessions is wrong to enforce federal drug laws in states that have decriminalized marijuana.

I’m tempted to agree with both sentences. The rule of law is vital, after all, and I definitely don’t like (and not for the first time) when Sessions uses the Justice Department to hassle people for victimless crimes.

But here’s my quandary: Should we applaud if government officials ignore laws, even laws we don’t like? That approach has some distasteful implications. If you’re on the right, would you want a left-leaning government to have the leeway to ignore criminal behavior by, say, union bosses? If you’re a leftist, would you want a libertarian-leaning government to have the ability to decide that tax laws can be ignored?

Charles C. W. Cooke of National Review hits the nail on the head.

There’s no question that the right approach is for the federal government to eliminate drug laws. Heck, even people who support the War on Drugs should favor this approach since criminal justice (other than a few select areas such as treason) should be a matter for state and local governments.

And a broader point is that we simply have too many laws. Harvey Silverglate estimates that the average person unknowingly commits three felonies per day.

This means that government officials could probably indict, convict, and imprison almost all of us. Needless to say, that’s not how a free and just society should work.

Our Byzantine tax code is an example. Many of us probably unintentionally violate the law because of needless complexity. Or even if we haven’t violated the law, I’m guessing a prosecutor could convince a grand jury that we should be indicted. And who knows what would happen after that.

So while I mostly argue for tax reform because I want more growth, I also think there’s a moral argument for a simple and fair system.

And there are other laws that shouldn’t exist at all. I obviously put drug laws on that list, but I’d also add anti-money laundering laws and civil asset forfeiture laws.

All that being said, I obviously don’t want the Justice Department in Washington to waste law enforcement resources in a campaign to undermine states that have decriminalized pot. But there’s a right way and a wrong way to solve this problem.

P.S. You can click here for other libertarian quandaries.

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Everything You Need to Know about California, in a Single Story

When I write an everything-you-need-to-know column, it’s not because I’m under any illusions that I’ve actually amassed all the information one could need on a topic. Instead, it’s just a meme.

• I’m either writing an in-depth primer on an issue (for instance, spending caps or the mortgage interest deduction).
• Or I’ve found a story that symbolizes something (for instance, a Great Depression cartoon or the misery of Venezuela).

Today’s column belongs in the latter category. Could there possibly be something that more perfectly captures the essence of California than a story about the over-taxation of legal marijuana?

Marijuana dispensaries across California experienced long lines on the first day of legal recreational pot sales. But advocates warned the legal industry won’t survive without big changes…said Steve DeAngelo, co-founder and CEO of Harborside in Oakland. “At the same time, I’m terrified about what’s going to happen with these taxes.” Harborside has been a medical marijuana dispensary for more than a decade, and is now selling recreational marijuana… “In our shop here, the tax rate has gone from 15 percent all the way up to almost 35 percent for adult consumers,” DeAngelo said. …There is the regular state sales tax of 6 percent, and the regular Alameda County sales tax of 3.25 percent. Then there is a 15 percent state tax on marijuana, and a 10 percent Oakland tax on recreational marijuana. Total taxes: 34.25 percent. …In addition to taxes, marijuana regulations drive up the cost.

Excessive government and lifestyle liberalism. A perfect summation of California.

By the way, even though I’m a social conservative-style teetotaler, I agree with the pot legalization. But I have mixed feelings because I don’t want politicians to get more money to waste.

Though I am happy that people have the option to still use the underground economy.

…”a significant number of people, less affluent consumers, are going to turn to the lower prices of the underground market,” DeAngelo said. …People who are disabled or on fixed incomes may turn to the black market. “They can barely afford cannabis now, much less with a 35 or 40 percent tax increase,” DeAngelo said. When people aren’t buying from a regulated business, the state is getting zero taxes.

Yet another example of the Laffer Curve, which is simply the common-sense notion that marginal tax rates impact incentives.

When taxes are too high, there’s either less taxable activity, or the activity moves where the government can’t tax it. In other words, higher tax rates don’t necessarily mean higher tax revenue.

And it definitely means revenues will never be as high as the pro-tax crowd would like.

Such a simple concept that even some leftists are catching on.

This may lead California to lower tax rates, as has happened in other states.

Colorado, Washington state and Oregon each legalized marijuana at one tax rate and then had to lower the rate to keep people in the legitimate market. DeAngelo believes California will have to do the same. “I don’t think that the current tax rate for cannabis in California is sustainable,” he said.

That last sentence puts me in a good mood. I very much like when greedy politicians are forced to lower tax rates.

For those that want a more detailed and serious look at the economics of taxation and drug prohibition, this column from last November is a good place to start.

And for those who want a closer look at the moral/practical issues of drug prohibition, I recommend this piece from last May.

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Lessons from Portugal about Ending the Drug War

When I explain to people how the government’s War on Drugs violates the rights of people to do dumb things to their own bodies, they intellectually understand but they’re usually not convinced.

When I also explain why the Drug War causes additional crime and enriches mobsters, they almost always nod their heads in agreement but resist the obvious implication that we should decriminalize.

When I then explain that the War on Drugs has led to horrific policies such as civil asset forfeiture and senseless policies such as costly and ineffective money-laundering laws, they agree that the consequences are bad but they’re generally unpersuaded about legalization.

The stumbling block in every case is that they fear decriminalization will lead to more drug use, more addiction, and more suffering families.

Unfortunately, we don’t have a lot of real-world examples to put their minds at ease. But “a lot” isn’t the same as “any.”

This report about Portugal from the U.K.-based Guardian is must reading and may convince the doubters that we can end the War on Drugs without societal chaos and decay. It starts  with an observation about the ravages of illegal drugs.

It was the 80s, and by the time one in 10 people had slipped into the depths of heroin use – bankers, university students, carpenters, socialites, miners – Portugal was in a state of panic. …one in every 100 Portuguese was battling a problematic heroin addiction at that time… Headlines in the local press raised the alarm about overdose deaths and rising crime. The rate of HIV infection in Portugal became the highest in the European Union.

This led to predictable responses.

In the early days of Portugal’s panic, …the state’s first instinct was to attack. Drugs were denounced as evil, drug users were demonised, and proximity to either was criminally and spiritually punishable. The Portuguese government launched a series of national anti-drug campaigns that were less “Just Say No” and more “Drugs Are Satan”.

But something remarkable then happened. Rational voices began to push a libertarian-oriented message.

The first official call to change Portugal’s drug laws came from Rui Pereira, a former constitutional court judge who undertook an overhaul of the penal code in 1996. He found the practice of jailing people for taking drugs to be counterproductive and unethical. “My thought right off the bat was that it wasn’t legitimate for the state to punish users,”

And Portugal ultimately went in that direction – and got very positive results.

In 2001, …Portugal became the first country to decriminalise the possession and consumption of all illicit substances. …The opioid crisis soon stabilised, and the ensuing years saw dramatic drops in problematic drug use, HIV and hepatitis infection rates, overdose deaths, drug-related crime and incarceration rates. HIV infection plummeted from an all-time high in 2000 of 104.2 new cases per million to 4.2 cases per million in 2015. …The official policy of decriminalisation made it far easier for a broad range of services (health, psychiatry, employment, housing etc) that had been struggling to pool their resources and expertise, to work together more effectively to serve their communities.

Here’s a summary of the Portuguese approach, which certainly seems more humane and logical than what we do in America.

Portugal’s policy rests on three pillars: one, that there’s no such thing as a soft or hard drug, only healthy and unhealthy relationships with drugs; two, that an individual’s unhealthy relationship with drugs often conceals frayed relationships with loved ones, with the world around them, and with themselves; and three, that the eradication of all drugs is an impossible goal.

Want some additional evidence?

Here’s a chart from the invaluable Mark Perry of the American Enterprise Institute.

A 2009 study from the Cato Institute also highlighted the benefits of Portugal’s reform.

Because more than seven years have now elapsed since enactment of Portugal’s decriminalization system, there are ample data enabling its effects to be assessed. Notably, decriminalization has become increasingly popular in Portugal since 2001. …very few domestic political factions are agitating for a repeal of the 2001 law. …none of the nightmare scenarios touted by preenactment decriminalization opponents — from rampant increases in drug usage among the young to the transformation of Lisbon into a haven for “drug tourists” — has occurred. …The political consensus in favor of decriminalization is unsurprising in light of the relevant empirical data. …drug usage rates in Portugal, which, in numerous categories, are now among the lowest in the EU, particularly when compared with states with stringent criminalization regimes. …drug-related pathologies — such as sexually transmitted diseases and deaths due to drug usage — have decreased dramatically. …judged by virtually every metric, the Portuguese decriminalization framework has been a resounding success.

By the way, allow me to reiterate that my support for decriminalization is not an endorsement of drug use.

It’s not just that I’m a teetotaler and want others to make the same choice. Stories like this one from CNN genuinely worry me.

Regina Mitchell, a co-owner of Warren Fabricating & Machining in Hubbard, Ohio, told The New York Times this week that four out of 10 applicants otherwise qualified to be welders, machinists and crane operators will fail a routine drug test. …”We have a 150-ton crane in our machine shop. And we’re moving 300,000 pounds of steel around in that building on a regular basis. So I cannot take the chance to have anyone impaired running that crane, or working 40 feet in the air.” …For 48 of the 50 years her company has been around, drug abuse had never been an issue, she told Smerconish.”It hasn’t been until the last two years that we needed to have a policy, a corporate policy in place, that protects us from employees coming into work impaired,” she said. …there are almost 12,000 open skilled labor jobs in Mahoning County.”There are good-paying jobs and the opportunity for people in our area. We just can’t find people to show up who can pass a drug test,” she said.

This is not good news for the country. And I’ve personally spoken to several employers in other parts of the country who have made the same point.

But I’ll simply observe that we have this problem with drugs being illegal already. Given the evidence from Portugal, I’m hopeful that decriminalization might lead to less drug use.

I also wonder whether redistribution programs enable reckless behavior. In other words, people may decide it’s okay to be stoners because they can rely on handouts to stay alive instead of staying clean and having a job.

In any event, let’s review a couple of additional stories. Here’s a column from National Review, written by Michelle Malkin, which shows continuing progress on the right.

My own interest in pediatric use of medicinal marijuana is more than academic. When my daughter, Veronica, fell ill in late spring of 2015 — unable to breathe normally, bedridden with chronic pain and fatigue — she saw of specialists. …The various drugs prescribed to my daughter weren’t working and had awful side effects. …To our surprise, the mainstream neurologist suggested Veronica try CBD. This doctor had other young patients who used CBD oil with positive results… So we did our own independent research…consulted with other medical professionals and friends — and entered a whole new world. Two physicians signed off on our daughter’s application for a medical-marijuana card. She became one of more than 360 children under 18 to join Colorado’s medical-marijuana registry in 2015. …we became pediatric pot parents. For Veronica, CBD provided more relief than all the other mainstream pharmaceutical interventions she had endured, and without the scary side effects.

To her credit, Michelle has learned that the harm of government intervention exceeds any potential benefit.

As a lifelong social conservative, my views on marijuana policy may surprise some of you. I used to be a table-pounding crusader for the government’s war on drugs. …But the war on drugs has been a ghastly quagmire — an expensive and selective form of government paternalism that has done far more harm than good. What has this trillion-dollar war wrought? Overcrowded jails teeming with nonviolent drug offenders. An expanded police state enriched by civil asset forfeiture. And marginalization of medical researchers pursuing legitimate research on marijuana’s possible therapeutic benefits for patients with a wide variety of illnesses. …let me be clear as a liberty-loving, conservative mom: Keep your hands off. Let the scientists lead. Limited government is the best medicine.

Her commentary brings to mind this snarky – but accurate – image from Reddit‘s libertarian page.

Now let’s add some economic analysis to the discussion.

Here’s some insight from the Foundation for Economic Education about how the Drug War is increasing the potency and danger of drugs.

One issue that is often mentioned but rarely explained is the increasing potency of illegal drugs, whether it be cannabis with a high percentage of THC in the US or super potent MDMA (Ecstasy) in Europe. What’s behind this phenomenon? …economic theory might have the answer. …The theory that can explain rising drug potency under prohibition was first described in 1964 by Armen Alchian and William R Allen. It states that when the price of two substitute goods is increased by a fixed per-unit amount (such as transportation or taxation) the consumer will opt for the higher priced, higher quality good because the price of the more expensive product has sunk in proportion to the price of the less expensive product. …In the particular case of illegal drugs, two different kinds of drugs–let’s say two different kinds of cannabis–act as the substitute goods. When buying illegal drugs on the black market, you do not only pay for the drug itself. On top of the monetary price comes the potential social cost you pay. This can range from a small regulatory offence, where you must pay a fine, to a felony where you can face a prison sentence. This comes with other problems: losing your job, family, social status and so on. This is the fixed per-unit cost added on top of the price of the drug itself.

All of which leads to yet another reason why prohibition is backfiring and another reason why decriminalization is the answer.

It is not worth the risk to buy a low-quality product regarding the potential price you must pay. …Drug cartels have recognised this behaviour and increased the potency of their drugs (i.e. improved the quality of their product) so you get more value for the potential fixed per-unit cost you pay. …What sounds good in economic theory becomes a massive public health problem in real life. The potency of many drugs has increased too much. As it is in most prohibitionist countries, many consumers don’t know exactly what drug they are taking and in which dosage they are consuming the drug: not to mention added substances that increase quantity. …If drugs were decriminalized, customers would have knowledge about the contents of their MDMA, their cocaine, their cannabis. Drugs that are too potent could easily be avoided. Legalized drugs would include packaging with the specific content. Sales in specialized stores would allow customers to receive medical help if they show signs of problematic consumption, without fear of being imprisoned over it.

And since we’ve veered into some economic analysis, one of the reasons I favor legalization is that I don’t want law enforcement resources being misallocated.

Which is why this column resonates with me.

Police in Ohio are blaming a lack of resources for the fact that unsolved homicide cases greatly outnumber the cases that are solved, yet they seem to have the resources to arrest thousands of suspected cannabis users. …in the state of Ohio…an average of over 20,000 people are arrested on charges of cannabis possession each year. …despite the fact that they seem to have plenty of resources when it comes to arresting and detaining nonviolent offenders, police in Ohio are blaming a lack of resources for the fact that the number of homicide cases they solve continues to decline. …How did police in the United States go from solving over 90 percent of homicides in the 1960s to around 60 percent today, with cities like Columbus solving as little as 30 percent of homicides? It was not a change in resources—it was the introduction of the Drug War. …“Around the country, police make more arrests for drug possession than for any other crime,” an ACLU and Human Rights Watch report found last year. “More than one of every nine arrests by state law enforcement is for drug possession, amounting to more than 1.25 million arrests each year.” In fact, police make more arrests for marijuana possession alone than for all violent crimes combined. …As states like Ohio find that the number of unsolved homicide cases greatly outnumber the cases that are solved, it makes you wonder—what more could they accomplish if they were able to use their resources to track down violent murder suspects, instead of wasting them on nonviolent individuals who are found in possession of a plant?

Let’s close with some wisdom from Milton Friedman (h/t: Reddit).

As was so often the case, Friedman was right. If you look at the real-world consequences of the War on Drugs, the net effect of prohibition has been to enrich some very bad people.

P.S. It’s an open question whether the War on Drugs has been more damaging or less damaging than the War on Poverty. I guess the moral of the story is that there are a lot of “friendly fire” casualties when politicians declare war.

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Drugs, Prohibition, and Taxation

My view on the Drug War is somewhat schizophrenic. In my personal life, I’m basically a social conservative. I don’t like drugs, I’ve never tried drugs, and I urge others to behave the same way.

But I know that prohibition is a costly failure that leads to abusive government (such as intrusive money-laundering laws and Orwellian asset-forfeiture laws).

And even if one doesn’t care about individual rights, the Drug War is an irrational misallocation of law enforcement resources.

So does this make a libertarian on the issue? The answer is yes, of course, but I confess that legalization has a downside. And I’m not talking about more people wrecking their lives with drug abuse (indeed, evidence from Portugal suggests drug use may go down).

Instead, I don’t like the fact that politicians see legalization mostly as an opportunity to generate additional tax revenue.

My fears have materialized. sort of.

According to a CNN report, politicians in California want to be the biggest profiteers from legal pot.

Between customers, retailers and growers, taxes on cannabis may reach as high as 45% in parts of the state, according to a Fitch Ratings report. …Consumers will pay a sales tax ranging from 22.25% to 24.25%, which includes the state excise tax of 15%, and additional state and local sales taxes ranging from 7.25% to 9.25%. Local businesses will have to pay a tax ranging from 1% to 20% of gross receipts, or $1 to $50 per square foot of marijuana plants, according to the Fitch report. In addition, farmers will be taxed $9.25 per ounce for flower, and $2.75 per ounce for leaves. …Van Bustic, a specialist in the environmental impact of cannabis cultivation for Berkeley’s College of Natural Resources, said that registering with the state and becoming compliant will cost about $100,000.

Geesh, greedy governments can take the fun out of anything!

But not so fast. It seems that politicians are being so greedy that the geese with the golden eggs (or, in this case, drug-addled geese with golden buds) will stay in the shadow economy.

Not that we should be surprised. There is a wealth of evidence showing that high tax burdens lead to evasion and avoidance.

The Wall Street Journal looks at this issue and hits the nail on the head, editorializing that high tax rates on pot are a recipe for non-compliance.

…in California, where recreational pot was legalized last year, citizens now have a much clearer view of the unintended consequences that come from high tax rates. A new report from the global credit-rating firm Fitch Ratings highlights the effect of California’s high taxes on the marijuana market. The combined local and state rate on non-medical cannabis may be as high as 45% in some places, and Fitch says this acts as an incentive for Californians to shun legal pot dealers who pay the tax in favor of black-market sellers who don’t and can charge lower prices. …The irony is that one argument for legalizing pot has been to reduce illegal trafficking. But by imposing taxes that are too high on legal weed, politicians give pot heads an incentive to go back on the illegal market. This will come as no surprise to anyone who has followed the boon to illegal smokes from high cigarette taxes in places like New York City.

The CNN story cited above also addressed this issue.

Among the eight states where recreational marijuana is legal, only Washington has a higher tax rate at about 50%. Colorado and Nevada both follow with rates of 36%. Oregon has a tax rate of 20% and Alaska has a rate of up to 20%. …If taxes increase the price of cannabis beyond a certain point, the legal market becomes less competitive than the illicit market and then consumers become less likely to make the transition from the illicit market to the legal market,” said John Kagia, analyst for New Frontier Data, which tracks the cannabis industry. The Fitch report says this dynamic has already prompted Colorado, Washington and Oregon to lower their “initially uncompetitive” tax rates.

Indeed. I wrote about Colorado’s experience with pot taxation back in 2015.

A story in the Washington Post confirms that the buzzed version of supply-side economics is alive and well.

High taxes on legal marijuana in California could have the potential to turn many consumers away from the state’s cannabis shops and toward the black market, according to a report from Fitch Ratings. …“The existing black market for cannabis may prove a formidable competitor to legal markets if new taxes lead to higher prices than available from illicit sources,” the report says. …These high tax rates have the potential to drive customers toward the black market. …Colorado, Oregon and Washington all reduced tax rates after the commencement of legalization to shift customers back toward the legal market.

That last sentence warms my heart. Isn’t it nice when politicians are forced to lower tax burdens even when they don’t want to?

P.S. Government is a buzz-kill in other ways. Deregulation helped unleash the craft beer industry, but also created a new source of tax revenue.

P.P.S. Since I’m a fiscal wonk, legalizing drugs has never been high (no pun intended) on my list of priorities. But when U.N. bureaucrats try to tell American states that they’re not allowed to end prohibition, I’m almost tempted to become a user.

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If the Federal Government Ramps Up the Drug War, Expect More Collateral Damage to Freedom

What word best describes the War on Drugs?

• Inane?
• Lunacy?
• Indecent?
• Harmful?
• Thuggery?

The right answer is All of the Above. Politicians have ruined lives and wasted money in a futile campaign to stop people from recreational drug use.

It may be true that people who use drugs are being stupid. Or even immoral. But the key thing to understand is that it’s a victimless crime.

Actually, that’s not true, there are victims. They’re called taxpayers, who have to finance the government’s drug war. And there are secondary victims thanks to bad laws (dealing with asset forfeiture and money laundering) that only exist because of the drug war.

Speaking of which, here’s another horror story from the drug war.

A report by the Justice Department Inspector General released Wednesday found that the DEA’s gargantuan amount of cash seizures often didn’t relate to any ongoing criminal investigations, and 82 percent of seizures it reviewed ended up being settled administratively—that is, without any judicial review—raising civil liberties concerns. …the Inspector General reports the DEA seized $4.15 billion in cash since 2007, accounting for 80 percent of all Justice Department cash seizures.

Here’s the jaw-dropping part of the story.

…$3.2 billion of those seizures were never connected to any criminal charges.

In other words, the government took people’s money even they weren’t charged with a crime, much less convicted of a crime.

Drug users also can be victims. Heck, sometimes people are victims even if they’re not users, as we see from this great moment in the drug war.

“They thought they had the biggest bust in Harris County,” Ross LeBeau said. “This was the bust of the year for them.” A traffic stop in early December led to the discovery of almost half a pound of what deputies believed to be methamphetamine. The deputies arrested LeBeau and sent out a press release, including a mug shot, describing the bust. According to authorities, the arrest was due to deputies finding a sock filled with what they believed to be methamphetamine. …After the arrest, LeBeau was fingerprinted and booked into a jail where he spent three days before being released. The problem came after two field tests, performed by deputies, came back positive for meth. Later a third test was conducted by the county’s forensic lab which revealed that the kitty litter was not a controlled substance. The case was later dismissed.

And more bad things like this are probably going to happen because the Justice Department now wants a more punitive approach to victimless crimes.

C.J. Ciaramella of Reason reports on the grim details.

Attorney General Jeff Sessions ordered federal prosecutors to seek the toughest charges and maximum possible sentences available, reversing an Obama-era policy that sought to avoid mandatory minimum sentences for certain low-level drug crimes. …the overall message is clear: Federal prosecutors have the green light to go hard after any and all drug offenses. …The shift marks the first significant return by the Trump administration to the drug war policies that the Obama administration tried to moderate. In 2013, former Attorney General Eric Holder ordered federal prosecutors to avoid charging certain low-level offenders with drug charges that triggered long mandatory sentences. The federal prison population dropped for the first time in three decades in 2014, and has continued to fall since.

Some Republicans are unhappy about this return to draconian policies.

“Mandatory minimum sentences have unfairly and disproportionately incarcerated too many minorities for too long,” Sen. Rand Paul (R-KY) said in a statement. “Attorney General Sessions’ new policy will accentuate that injustice. …Sen. Mike Lee (R-UT), although he did not directly criticize Sessions, wrote in a tweet Friday morning that “to be tough on crime we have to be smart on crime. That is why criminal justice reform is a conservative issue.”

For what it’s worth, Sessions isn’t the only one who deserves blame.

While it’s easy to point the finger at Sessions, …Congress ultimately passed the laws the Justice Department is tasked with enforcing. Lawmakers in Congress had a golden window of opportunity over the past three years to revise federal sentencing laws—with bipartisan winds at their back and a friendly administration in White House—and failed miserably.

And there is a tiny bit of good news.

…the Office of National Drug Control Policy… Trump plans to reduce the agency’s budget by 95 percent… there are plenty of actual harm reduction advocates who would be happy to see the agency close up shop.

Though don’t get too excited.

…you know what federal agency with drug policy ramifications is not dormant? The Justice Department. …In the grand scheme of the drug war, who might occupy the ONDCP’s bully pulpit matters less than the army Sessions is building.

So don’t hold your breath waiting for better policy.

Here’s another reason why the war on pot is so absurd. As reported by the Daily Caller, people without access to marijuana are more likely to get in trouble with opioids.

Opioids continue to claim 91 lives a day across the U.S., but new research shows medical marijuana programs are drastically cutting down on rates of painkiller abuse. Research from the Journal of the American Medical Association is adding to a growing body of evidence showing states with medical marijuana programs have lower rates of opioid related overdoses. Patients who are offered pot as an alternative treatment for chronic conditions are increasingly shifting off their prescription opioids entirely, reports WLBZ. The researchers found states with medical marijuana programs in 2014 had an opioid overdose rate roughly 25 percent lower than the national average.

Last but not least, an article in Reason explains how greedy politicians are undermining the otherwise successful pot legalization in Colorado.

Colorado…voters legalized recreational marijuana in 2012, transforming the popular stuff from a prohibited vice to a substance that could be produced, bought and sold without the hassle of hiding dealings from the authorities and the fear of arrest for voluntary transactions. Yet the marijuana black market is still going strong over four years later, with many sellers and customers willing to take a chance on legal consequences rather than make a risk-free deal. …the driving force behind the black market…is taxes so sky high and regulations so burdensome that they make legal pot uncompetitive. “An ounce of pot on the black market can cost as little as 180 dollars,” according to PBS correspondent Rick Karr. “At the store Andy Williams owns, you have to pay around 240 dollars for an ounce. That’s partly because the price includes a 15 percent excise tax, a 10 percent marijuana tax, the state sales tax, and Denver’s marijuana sales tax.” Colorado also piles on expensive regulatory requirements to get a license.

This is not a surprise.

I wrote back in 2015 that the tax burden was excessive.

Indeed, I even wondered if legalization in Colorado was a good thing if the net result was a big pile of tax revenue that could be used to expand government.

The libertarian part of me says Colorado made the right decision, though the fiscal economist part of me definitely sees a down side.

And that down side may become an even bigger downer.

Governor John Hickenlooper wants to increase the marijuana sales tax from 10 percent from 8 percent. “It seems kind of odd that at the same time they’re trying to do something about the black and gray markets they’re going to ratchet up the taxes and drive more people to the black and gray markets,” state Sen. Pat Steadman (D-Denver) commented.

P.S. I wonder if Senator Steadman realizes he just embraced the Laffer Curve?

P.P.S. It’s worth noting that voices as diverse as John Stossel, Mona Charen, Gary Johnson, Pat Robertson, Cory Booker, John McCain, and Richard Branson all agree that it’s time to rethink marijuana prohibition. 

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More Inane Developments in the Drug War

When writing about money laundering laws, I’ll sometimes highlight gross abuses by government and I’ll periodically make the usual libertarian arguments about privacy.

But I mostly focus on how the laws simply don’t make sense from a cost-benefit perspective. Anti-money laundering laws and regulations impose large burdens on the private sector, which creates disproportionate hardship for the poor. Yet there’s no evidence that the laws actually hinder criminal activity, which was the rationale for imposing the laws in the first place.

I have the same attitude about the War on Drugs. Yes, I get upset that people are mistreated and it irks me as a libertarian that people aren’t free to make their own choices (even if they are dumb choices) about what to put in their bodies.

But what really gets me angry is the absurd misallocation of law enforcement resources. Consider this info from a recent WonkBlog column in the Washington Post about the ever-expanding efforts of government to harass drug users.

Federal figures on drug arrests and drug use over the past three decades tell the story. Drug-possession arrests skyrocketed, from fewer than 200 arrests for every 100,000 people in 1979…, hovering near 400 arrests per 100,000 people. …despite the tough-on-crime push that led to the surge in arrests in recent decades, illicit drug use today is more common among Americans age 12 and older than it was in the early 1980s. Federal figures show no correlation between drug-possession arrests and rates of drug use during that time.

But here’s the part that should upset all of us, even if we don’t like drugs or even if we think they should be illegal.

Instead of focusing on the fight against crimes that actually have victims (such as robbery, murder, rape, assault, etc), the government is squandering an immense about of time, energy, resources, and money on drug arrests.

…arrests for drug possession continue to make up a significant chunk of modern-day police work. “Around the country, police make more arrests for drug possession than for any other crime,” the report finds, citing FBI data. “More than one of every nine arrests by state law enforcement is for drug possession, amounting to more than 1.25 million arrests each year.” In fact, police make more arrests for marijuana possession alone than for all violent crimes combined.

That last sentence is breathtaking. Does anyone think that busting potheads is more important than fighting genuine crime?!?

Do you want an example of law enforcement resources being misallocated?

Well, this story from New Hampshire tells you everything you need to know.

…an 81-year-old grandmother had been growing…the plant as medicine, a way to ease arthritis and glaucoma and help her sleep at night. Tucked away in a raspberry patch and separated by a fence from any neighbors, the plant was nearly ready for harvest when a military-style helicopter and police descended on Sept. 21. In a joint raid, the Massachusetts National Guard and State Police entered her yard and cut down the solitary plant…authorities are using budgeted funds, prior to the end of the federal fiscal year Saturday, to gas up helicopters and do flyovers. …“Is this the way we want our taxpayer money spent, to hassle an 81-year-old and law-abiding patients?” Cutler said.

Gee, I don’t know about you, but I’ll sleep more comfortably tonight knowing that lots of taxpayer money was squandered to seize a pot plant from this dangerous granny!

Still not convinced that law enforcement resources aren’t being wasted? And still not upset that lives are being disrupted and harmed by heavy-handed government.

Then consider this horror story from Reason.

James Slatic, a California medical marijuana business owner, found out all his family’s bank accounts had been seized by the government one day in January when his 19-year-old daughter tried to buy lunch at the San Jose State University cafeteria and her card was declined. Slatic’s wife tried to transfer money to their daughter, figuring she had simply overdrawn her account, as teenagers are wont to do, but her account wouldn’t work, either. What the Slatics soon learned was the San Diego police had frozen all of their bank accounts: $55,258 from Slatic’s personal checking and savings account; $34,175 from his wife Annette’s account; and a combined $11,260 from the savings accounts of their two teenage daughters, Penny and Lily. …The Slatics’ crimes? None. Or at least, the San Diego District Attorney’s Office hasn’t charged them with any in the nine months since it seized their accounts.

His business also was shut down, which wasn’t good news for him or his employees that are now out on the street.

The trouble for James Slatic began five days before his family’s accounts were frozen, when around 30 San Diego police officers and DEA agents raided Slatic’s medical marijuana business, Med-West Distribution, and seized nearly $325,000 in cash from a safe. …The raid was a crushing blow to Slatic—not to mention his 35 employees, who lost their jobs and benefits without notice.

Here’s a video detailing this disgusting abuse by government.

There is some good news. Voters in several states voted last week to decriminalize pot.

And for those who worry that legalizing marijuana will be a gateway to decriminalizing harder drugs, I encourage you to read this Cato Institute study on what happened after Portugal legalized all drugs early last decade.

This isn’t an argument about whether you should use drugs, like drugs, or approve of drug use. You can be the drug equivalent of a teetotaler like me and still realize that it makes no sense for the government to squander lots of money and hurt lots of lives simply because politicians want to control what people choose to put in their own bodies.

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Another Episode of Drug War Lunacy

Elizabeth Barrett Browning started her famous sonnet with “How do I love thee? Let me count the ways” and then proceeded to provide lots of examples

If I had similar talent, I would produce a sonnet that began “How is the Drug War a failure? Let me count the ways” because I also could give many examples.

• The War on Drugs is unjust because it requires the government to criminalize actions when there are no victims.
• The War on Drugs is a burden on taxpayers with untold billions of dollars spent on enforcement and incarceration.
• The War on Drugs is a boon to criminals  and the underground economy.
• The War on Drugs diverts law enforcement resources from fighting crimes that have actual victims.
• The War on Drugs has been the main justification for intrusive and ineffective – yet still very costly – laws on money laundering.
• The War on Drugs is also the main justification for awful and reprehensible civil asset forfeiture laws.
• The War on Drugs also is the reason that non-drug users are grossly mistreated and even arrested.
• The War on Drugs turns otherwise law-abiding people into criminals.
• The War on Drugs is so misguided that it even resulted in the nearly unimaginable result of Clarence Thomas being on the wrong side of a Supreme Court decision and Ruth Bader Ginsburg being on the right side.

All this being said, legalizing drugs is about 99th on my list of 100 most-preferred policy reforms.

In part, this is because I’m stuffy and boring in my personal life and have never used drugs.

But I also worry about what will happen if we end drug prohibition while maintaining our bloated welfare state. The maze of handouts provided by Uncle Sam – for all intents and purposes – enables bad decisions. Would there be a significant number of people who basically drop out of society and become druggies while mooching off taxpayers?

Heck, I’m so libertarian I even worry that legalized drugs will even have bad fiscal policy effects since governments will figure out how to extract lots of tax revenue.

Though none of my concerns would prevent me from engaging in nullification if I wound up on a jury deciding a drug case.

And you’ll understand why I think we should get the government out of the business when you check out these details from a story in the Washington Post about someone whose life was turned upside down by the Drug War.

…a Florida man…was arrested when an officer mistook doughnut glaze for methamphetamine. Now Daniel Frederick Rushing is looking to sue the Orlando Police Department, which is also facing heat for its inaccurate roadside drug test.

When you read about what happened to him, you can understand why he’s unhappy.

Rushing told the Orlando Sentinel that he had been playing taxi driver for friends that day. He had just dropped off a neighbor at a hospital for a chemotherapy session and was giving another friend who worked at the 7-Eleven a ride home. But when officers saw Rushing go into the store twice without making a purchase, they grew suspicious. Officer Shelby Riggs-Hopkins followed Rushing’s car and pulled him over. …Riggs-Hopkins saw what she thought were drugs on the floorboard. “I recognized, through my 11 years of training and experience as a law enforcement officer, the substance to be some sort of narcotic,” Riggs-Hopkins wrote in the report. The officer retrieved several pieces of the white substance from the floorboard, ran a test and “received a positive indication for the presence of amphetamines.” Twice.

If this was the entire story, I would be upset. Why harass some guy if his only sin is being a drug user? He’s not hurting anyone else, so why not leave him alone?

And don’t Orlando cops have anything better to do than bust drug users? Are there really no murders, rapes, burglaries, and assaults in the city? You know, crimes that actually have victims.

But this isn’t the entire story.

As the officer placed Rushing in handcuffs and read him his rights, …“Rushing stated that the substance is sugar from a (Krispy) Kreme Donut that he ate.” …Still, Rushing was booked into jail and had to post $2,500 bail, according to court documents. He was vindicated a month later — and the meth possession charges were dropped — when the Florida Department of Law Enforcement’s chemistry section tested the substance found in his car. It detected no signs of drugs.

By the way, this wasn’t a one-time mistake.

The Washington Post column cites a related story from the New York Times that delved into the accuracy of roadside drug tests.

Data from the Florida Department of Law Enforcement lab system show that 21 percent of evidence that the police listed as methamphetamine after identifying it was not methamphetamine, and half of those false

positives were not any kind of illegal drug at all. In one notable Florida episode, Hillsborough County sheriff’s deputies produced 15 false positives for methamphetamine in the first seven months of 2014.

So the bottom line is that law enforcement resources are being misallocated, innocent people are having their lives wrecked, and government is being incompetent. That’s the holy trinity of big government.

But some people say we have to accept these awful consequences because decriminalization would lead to catastrophic results.

Not true, as Johan Norberg explains.

P.S. You may think only “crazy” libertarians favor liberalization, but there’s actually a very broad coalition of people who favor reform. Folks such as John Stossel, Gary Johnson, John McCain, Mona Charen, Pat Robertson, Cory Booker, Rick Perry, and Richard Branson.

P.P.S. For folks who don’t like having to choose between Hillary Clinton and Donald Trump, there’s a presidential candidate who has a very sensible view of the War on Drugs.

P.P.P.S. Speaking of Hillary Clinton, her understanding of the economics of drug prohibition may be even more inane and uninformed than her understanding of the economics of taxation.

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The Silly and Harmful Drug War

I’m not a fan of the War on Drugs, even though I’m personally very socially conservative on the use of drugs. Regardless of my individual preferences, I recognize that prohibition gives government the power to trample our rights, that it is borderline (if not over-the-line) racist, and that it leads to horrible injustices.

I’d much prefer for law enforcement resources be allocated to fighting crimes that actually have victims.

Though I guess one fringe benefit of the War on Drugs is that it has given us additional evidence that Hillary Clinton is not an economist.

She once justified her support for the War on Drugs by stating “there is just too much money in it.”

Wow, this may be the all-time winner for most economically illiterate statement ever uttered by a politician. At the risk of stating the obvious, the reason the drug trade is so lucrative is because it’s illegal.

Here’s some evidence resulting from the fact that some states have decriminalized marijuana.

The L.A. Times reports on a side effect of these sensible state-based reforms.

“I’ve always liked this business, producing marijuana,” the 50-year-old farmer said wistfully. He had decided that this season’s crop would be his last. The reason: free-market economics. The loosening of marijuana laws across much of the United States has increased competition from growers north of the border, apparently enough to drive down prices paid to Mexican farmers. Small-scale growers here in the state of Sinaloa, one of the country’s biggest production areas, said that over the last four years the amount they receive per kilogram has fallen from $100 to $30. The price decline appears to have led to reduced marijuana production in Mexico and a drop in trafficking to the U.S., according to officials on both sides of the border… “Changes on the other side of the border are making marijuana less profitable for organizations like the Cartel de Sinaloa,” said Antonio Mazzitelli, the representative in Mexico for the United Nations Office on Drugs and Crime.

So the unintended consequence of drug liberalization in the United States is to weaken sinister cartels in Mexico.

Sounds like a win-win situation.

Speaking of unintended consequences, let’s contemplate what lessons we can learn about prohibition from this story about some new research on drugs and alcohol in the Washington Post.

In the state of Kentucky, some counties (“dry”) prohibit alcohol sales completely. Others allow it only within certain municipalities (“moist,”) or don’t place restrictions on alcohol sales at all (“wet”). The Louisville researchers noticed that dry counties had higher rates of meth lab busts, as well as higher rates of meth crimes overall. And the effect is significant: “if all counties were to become wet, the total number of meth lab seizures in Kentucky would decline by about 25 percent,” they found. …the researchers found that this is more than just a simple correlation… In other words: people who buy alcohol in places where it’s illegal become accustomed to dealing with the black market. If you’re going to get punished whether you trade in booze or trade in meth, why not give meth a spin?

Here’s an accompanying chart, showing that counties with no alcohol had considerably more problems with meth.

By the way, the evidence presented above is just one piece of a larger puzzle.

This research fits in with other findings showing harmful effects of localized alcohol prohibitions. A 2005 paper in the Journal of Law and Economics found that when Texas counties changed from dry to wet, their incidences of drug-related mortality decreased by 14 percent as people substituted alcohol for other drugs. Records from the Kentucky State Police show that dry counties tend to have higher rates of DUI-related car crashes than wet ones — presumably because when you live in a dry county, you have to drive farther to get your booze. A 2010 report from the Robert Wood Johnson Foundation found that binge drinking rates were often higher in Alabama’s dry counties than its wet ones.

In other words, drugs and alcohol unambiguously can cause people to make stupid decisions.

But there are more stupid decisions and worse consequences when these products are criminalized.

Let’s close with a very clever Venn Diagram from Mark Perry at the American Enterprise Institute.

Hopefully my conservative friends will recognize the inconsistency in their views. And at the very least they should be strongly opposed to U.N. efforts to interfere with American sovereignty on the issue.

P.S. Mark also produced a very brave video on gender and test scores.

P.P.S. You may think only “crazy” libertarians favor liberalization, but there’s actually a very broad coalition of people who favor reform. Folks such as John Stossel, Gary Johnson, John McCain, Mona Charen, Pat Robertson, Cory Booker, Rick Perry, and Richard Branson.

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An Example of Government Theft and Thuggery, or an Example of Drug War Lunacy?

Politicians and bureaucrats are very creative in their pursuit of bad policy.

In some case, I’m not even sure how to classify their actions.

When the government squandered $224,000-plus for research on condom sizes, for instance, I thought that story easily could be classified as wasteful spending. But then I discovered the research was related to the fact that the government limits the types of condoms that manufacturers can offer, so maybe this was an example of mindless over-regulation.

Now I’m facing another quandary about how to classify a story. I’m not sure to add the following nightmare to my ever-growing list of theft-by-government stories, or whether it belongs in my collection of stupid-drug-war stories.

Here’s some background from a report in Reason by Jacob Sullum. It’s about a robbery at an airport.

When he visited relatives in Cincinnati the winter before last, Charles Clarke, a 24-year-old college student, took with him $11,000 that he had saved from wages, financial aid, and family gifts because he did not want to lose it. He did not count on the armed robbers at the airport, who took every last cent as he was about to board a flight back to Orlando in February 2014.

So did Mr. Clarke call the cops to report the theft?

Well, not exactly.

…the thieves were cops, who justified confiscating Clarke’s life savings by claiming his luggage and cash smelled like pot.

But the cops didn’t arrest Mr. Clarke for possession of marijuana (they didn’t find any). Nor did they charge him with having smoked marijuana (I guess even cops realize that would be a pointless waste of resources).

However, they did take his money on the very tenuous (and completely unproven) proposition that it may have been connected with a drug deal.

Even more amazing, the burden of proof is now on Mr. Clarke to prove his money is innocent, so the presumption of innocence granted by the Constitution doesn’t apply!

More than a year later, Clarke is still trying to get his money back… But the federal prosecutors who are pursuing forfeiture of Clarke’s money do not have to prove he was a drug dealer. …the government keeps the cash based on “probable cause that it was proceeds of drug trafficking or was intended to be used in an illegal drug transaction,” and the burden is on Clarke to recover it.

Why is this happening?

Well, I’ve written many times that incentives matter. That’s true for taxpayers and it’s true for bureaucrats.

And true for cops as well.

…the number of seizures by police at the Cincinnati/Northern Kentucky International Airport exploded from a couple dozen a year in the late 1990s to nearly 100, totaling $2 million, in 2013. By pursuing forfeiture under federal law through the Justice Department’s Equitable Sharing Program, the airport cops can keep up to 80 percent of the loot while letting the feds do most of the work.

Yup, this is what’s called “policing for profit.”

This is so outrageous that even some folks who like big government are on Mr. Clarke’s side. Here are some excerpts from a report published by Vox.

Under federal and state laws that allow what’s called “civil forfeiture,” law enforcement officers can seize someone’s property without proving the person was guilty of a crime; they just need probable cause to believe the assets are being used as part of criminal activity, typically drug trafficking. Police can then absorb the value of this property — be it cash, cars, guns, or something else — as profit: either through state programs, or under a federal program known as Equitable Sharing that lets local and state police get up to 80 percent of the value of what they seize as money for their departments. So police can not only seize people’s property without proving involvement in a crime, but they have a financial incentive to do so.

Not only is there no presumption of innocence, the government actually puts the money on trial rather than the person.

In typical criminal cases, the government has to prove beyond a reasonable doubt that someone is guilty of a crime. But in civil forfeiture cases, the government only has to show that it’s more likely than not that the property was intended to buy drugs or obtained from selling drugs. The bar is so low in part because it’s the property itself on trial, not the person whose property was taken — and due process rights cover people, not property. So in Clarke’s situation, the case is literally called United States of America v. $11,000.00 in United States Currency. (No, this is not a joke.)

The Vox report also looks at the perverse incentives created by this system.

…under the federal program, 13 different law enforcement agencies from Ohio and Kentucky are seeking a cut of Clarke’s $11,000 — even though 11 of those agencies weren’t involved in the seizure. The competition should show how lucrative these kind of seizures are in the eyes of law enforcement: they’re an opportunity to turn a costly counter-narcotics operation into a profitable venture for the law enforcement agencies involved (or even not, in Clarke’s case).

And here’s a look at how different states approach the issue.

The darker the state, the bigger the incentive for law enforcement agencies to steal money.

There’s also good evidence that these venal laws target minorities.

A bulk of forfeiture cases also appear to disproportionately afflict minorities. Clarke, who’s black, said he felt like he was racially profiled. Of the 400 federal court cases reviewed by the Post in which people challenged a seizure and got some money back, most of the victims were black, Hispanic, or another racial minority.

This is a good opportunity to say something about race relations.

I don’t have any tolerance for racial grievance mongers like Jesse Jackson or Al Sharpton, and I don’t automatically assume racism when a black man like Eric Garner dies because of an interaction with cops.

But I do have great sympathy for law-abiding African-Americans who have to deal getting hassled for “driving while black.”

Not to mention “riding trains while black.”

And as we see from Mr. Clarke’s plight, we also have to include “flying while black.”

By the way, I’m not arguing that profiling is always illegitimate. As Walter Williams has explained, it’s sometimes just common sense.

But if profiling – or even the perception of profiling – causes resentment, then doesn’t it make sense to make sure it isn’t being used promiscuously? Shouldn’t it be reserved for situations where law enforcement is seeking to protect life, liberty, or property? Needless to say, civil asset forfeiture and the drug war are definitely not good reasons to utilize a tool with societal downsides.

P.S. Let’s shift to a different topic. I realize it might be a bit unseemly to do a victory dance in the end zone, but every so often it’s worth noting that folks on the left are spectacularly wrong in their analysis.

I wrote, for instance, about Paul Krugman’s argument that the American economy would benefit from a housing bubble. Gee, that didn’t turn out so well.

Here’s another example that’s been circulating on Twitter. It’s a snapshot on the famous economics textbook authored by Paul Samuelson. Like Krugman, Samuelson won a Nobel Prize, so he presumably had a very high IQ.

Yet just as the Soviet Union was about to collapse, he actually believed that the communist economy was thriving.

Just goes to show you that Thomas Sowell was very insightful when he wrote that intelligence and wisdom are not the same thing.

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A New Federal Crime: Train Riding While Black

If I had to pick a government policy that would be most upsetting to our Founding Fathers, I’d be tempted to pick the income tax. Or maybe some useless agency, such as the Department of Housing and Urban Development.

After all, surely the Founders didn’t envision – or want – today’s Leviathan government in Washington.

But I also know I’m biased since I work on fiscal policy issues.

So upon further reflection, I think the policy that would be most horrifying to the Founding Fathers is so-called civil asset forfeiture, a.k.a., theft by government.

You may think I’m joking or exaggerating, but theft is the right word when you look at how citizens (such as the Dehko family and Lyndon McClellan) have had their bank accounts seized even though they were never even charged with a crime, much less ever committed a crime.

And now we have a new example that would have the Founders rolling in their graves, but also should get every decent person angry.

Reason has a report with the odious details.

…the Drug Enforcement Administration (DEA), is snatching the life savings of a young black male for the crime of being alone on a train. The man, Joseph Rivers, 22, was traveling from Michigan to Los Angeles by train with $18,000 in cash to pay for a music video. In Albuquerque, DEA agents boarded the train and started asking people questions. They got to Rivers, who told him he was going to shoot a music video and agreed to let them search his stuff.

Now put yourself in the mind of Mr. Rivers. You’re not committing a crime. You’re not in possession of any drugs or other illicit substances.

Agents ask to search your stuff as part of their snooping on the train and you figure being cooperative is the best way of allaying suspicion (regardless of whether the DEA used profiling).

And what’s your reward for being cooperative?

The Reason report then shares some very ugly passages from a story in the Albuquerque Journal.

Rivers was the only passenger singled out for a search by DEA agents – and the only black person on his portion of the train… In one of the bags, the agent found the cash, still in the Michigan bank envelope.

Mr. Rivers explained why he had the money, but it didn’t do any good.

“I even allowed him to call my mother, a military veteran and (hospital) coordinator, to corroborate my story,” Rivers said. “Even with all of this, the officers decided to take my money because he stated that he believed that the money was involved in some type of narcotic activity.” Rivers was left penniless.

Here’s perhaps the most disturbing part of the story is the way government bureaucrats openly admit that they can take money without any criminal charges, much less a conviction for any crime.

“We don’t have to prove that the person is guilty,” Waite said. “It’s that the money is presumed to be guilty.”

Just imagine how the Founding Fathers, if they were still around, would react to the statements of this bureaucrat?

Imagine what they would think of a policy that gave bureaucrats arbitrary powers to take money from citizens?

By the way, I’m not asking these rhetorical questions because I have some inside knowledge that Mr. Rivers is a stand-up guy. Maybe his story was fake and he actually was going to buy illegal drugs.

So what?

I’m tempted to point out at this point the foolishness of the Drug War, but that’s the point I want to make today. Heck, we can assume he had $18,000 because he intended to commit a real crime. Perhaps he was going to pay a hit man to kill someone.

At the risk of being repetitive, so what?

Our Constitution was set up to constrain the powers of government and protect citizens from abuse by government. We have a 4th Amendment to protect us from unreasonable search and seizure and we have the presumption of innocence so that we can’t be punished unless that’s the outcome of a proper legal proceeding.

Needless to say, allowing agents to steal money from train passengers is not what the Founding Fathers had in mind.

In a just society, there shouldn’t be shortcuts which trample people’s rights. Real police work should be used to amass evidence of real crimes, which then should be used in real courts where a jury can decide on guilt.

Let’s close with a few more passages from the Albuquerque story.

Rivers, 22, wasn’t detained and has not been charged with any crime since his money was taken last month. That doesn’t matter. Under a federal law enforcement tool called civil asset forfeiture, he need never be arrested or convicted of a crime for the government to take away his cash, cars or property – and keep it. Agencies like the DEA can confiscate money or property if they have a hunch, a suspicion, a notion that maybe, possibly, perhaps the items are connected with narcotics. Or something else illegal.Or maybe the fact that the person holding a bunch of cash is a young black man is good enough. …Meanwhile, Rivers is back in Michigan, dreaming, praying. “He’s handed this over to God,” his attorney said. Which seems infinitely safer than handing over anything further to government agents.

Amen.

I’ll make one final point.

In the absence of some evidence to the contrary, I’m not going to accuse the DEA agents of racial profiling. After all, government agents have stolen money from plenty of white people.

But I strongly suspect there was economic profiling. If Mr. Rivers was a 50-year old white guy in a business suit, the DEA probably wouldn’t have confiscated the money.

That doesn’t mean, by the way, that 50-year old white guys should rest easy. When government bureaucrats get away with stealing money from young people without power and connections, it’s probably just a matter of time before others get victimized as well.

Just keep in mind that slippery slopes are very slippery when government is involved.

P.S. Also keep in mind that asset forfeiture has become such an abusive nightmare that the first two heads of that division of the Justice Department now say the policy should be abolished.

P.P.S. I don’t know what’s riskier, riding trains while black or banking while Russian?

P.P.P.S. On a separate matter, the good people at the Competitive Enterprise Institute periodically measure the overall cost of regulation and red tape on the American economy. Their latest version of Ten Thousand Commandments was just released and it is very depressing reading.

Here are two charts (out of many) from the study. The first looks at the annual cost of federal rules.

The second chart looks at how the regulatory burden has grown over time.

As I said, very depressing. No wonder Santa Claus wasn’t happy with the end-of-year gifts he received last year from the Obama Administration.

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Two Big Fiscal Lessons from Colorado’s Pot Legalization

Regular readers know that I don’t approve of drug use, but that I also favor legalization because the Drug War has been a costly and ineffective failure.

(And it’s led to horrible policies such as intrusive money-laundering laws and Orwellian asset-forfeiture laws).

So I was happy when folks in Colorado voted to decriminalize marijuana use, even if part of me didn’t like the idea that politicians would gain a new source of tax revenue.

If nothing else, what’s happening in Colorado (and Washington state) will be an interesting social experiment.

And even though we only have a modest bit of data, I’m going to be bold and assert that we can already learn two lessons from what’s happened.

1. Politicians are so greedy that they set taxes too high.

In the real world, there’s this thing called the Laffer Curve. And what it shows is that excessive tax rates don’t generate big piles of tax revenue because people change their behavior.

I’ve made this point before when dealing with personal income tax rates, corporate tax rates, capital gains taxes, and tobacco taxes.

Simply stated, the political class is so anxious to get more of our money that they impose punitive tax rates that fail to generate the desired amount of revenue.

And it’s also true with taxes on marijuana.

But don’t believe me. Let’s look at some news sources about what’s happened in Colorado.

Here are some excerpts from a Daily Beast report.

According to the Colorado Department of Revenue, the state collected $44 million in taxes from recreational marijuana in 2014, $25 million less than predicted.  …why did recreational marijuana sales in Colorado fall short? …Coloradoans bought less recreational marijuana than they could have… Looking at the taxes on cannabis in the state, it’s not hard to see why. Pot taxes in Colorado are steep. In Denver, for example, an eighth of cannabis can come with four taxes: an excise tax, regular sales tax, special sales tax (for pot retailers), and a special city tax. That equals a markup of roughly 30 percent. …many pot aficionados looked at the numbers and decided to stick with their medical marijuana programs or their other dealers.

Here’s some similar analysis from a New York Times article.

Colorado’s tax results underscore a big conflict facing public officials considering marijuana legalization. Taxes should be kept low if the goal is to eliminate pot’s black market. …Colorado has also shown that pot-smokers don’t necessarily line up to leave the tax-free black market and pay hefty taxes. If medical pot is untaxed, or if pot can be grown at home and given away as in Colorado, the black market persists.

And here are some passages from the Mic’s analysis.

David Huff…from Aurora, told the AP that the state’s taxes on marijuana, which increase the price of pot by 30 percent or more, are too, um, high. “I don’t care if they write me a check, or refund it in my taxes, or just give me a free joint next time I come in. The taxes are too high, and they should give it back,” Huff said. …only 60 percent of Coloradans obtained their marijuana through a legal exchange in 2014. Some buyers are using the state’s legal medical marijuana, which is untaxed, as a source for green, while others take advantage of Amendment 64’s provision allowing the personal use of as many as six marijuana plants. The products of those plants have flooded the black market, depriving Colorado of more taxable pot.

The bottom line is that politicians better figure out how to limit their greed if they truly want the legal market to function properly.

2. A spending cap ensures that new revenue won’t finance bigger government.

I’m a big fan of restraining the growth of government. Needless to say, this means I don’t like giving politicians new sources of revenue.

That’s my view on all of the proposals for new revenue that are percolating in the corridors of power, including energy taxes, financial taxes, value-added taxes, and wealth taxes.

But if there’s actually some sort of binding limit on the growth of government, then politicians can’t use new revenue to finance a more bloated public sector.

And thanks to the nation’s best expenditure limit, that’s the case in Colorado.

Here’s what Mic wrote on the topic.

Colorado’s state constitution limits how much tax money the state treasury can receive before having to return it to taxpayers. The provision, known as the Taxpayer Bill of Rights, or TABOR… Since Colorado’s economy has been growing as a faster rate than expected, the state underestimated its total revenue, which means Centennial State residents may soon get a cut of the estimated $50 million in taxes collected from the sale of recreational marijuana during its first year of legalization. …TABOR, passed in 1992, dictates that Colorado can’t spend revenue made from taxation if those revenues grow faster than the rate of inflation and population growth. That money, known as a TABOR bonus, must be refunded to taxpayers unless voters approve a revenue change. This amendment has netted Colorado taxpayers about $3.3 billion since 1992.

Let’s return to the Daily Beast story.

In a state with one of the strictest tax and expenditure limitations in the country, Colorado operates under a Taxpayer Bill of Rights called TABOR. According to the bill, refunds are to be considered when state tax revenues don’t match up to the state estimates. This year, owing to a slight rise in the economy, the overall revenue was higher.

Though you won’t be surprised to learn that politicians want to figure out a way of spending the money. Check out these passages from the aforementioned piece in the New York Times.

Colorado will likely have to return to voters to ask to keep the pot tax money. That’s because of a 1992 amendment to the state constitution that restricts government spending. The amendment requires new voter-approved taxes, such as the pot taxes, to be refunded if overall state tax collections rise faster than permitted. Lawmakers from both parties are expected to vote this spring on a proposed ballot measure asking Coloradans to let the state keep pot taxes.

So both Republicans and Democrats will join hands in an effort to spend the money.

Gee, knock me over with a feather. What a surprise!

But let’s not focus on whether politicians want more of our money. Let’s learn from TABOR.

What it teaches us is that you get better policy when you limit the growth of government spending. And the closest thing we have to TABOR at the national level is the Swiss Debt Brake.

It’s worked very well in Switzerland because it puts the focus on the underlying problem of too much government. Notwithstanding the name, it limits the annual growth of spending, not the growth of debt.

The moral of the story is that when you address the real problem of too much spending, you automatically address the symptom of red ink.

And politicians presumably won’t have much incentive to impose higher taxes if they can’t use the money to buy votes with bigger government, so it’s a win-win situation!

P.S. Though there are some who favor higher taxes solely for reasons of spite and envy.

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Hoisting Obama on His Own Try-Something-New Petard

My Cato Institute colleague Michael Tanner has produced some first-rate substantive research on issues.

He produced a study showing that personal retirement accounts would have been a better deal than Social Security even for people who retired at the depth of the financial crisis and stock-market collapse.

He authored another study showing that overly generous welfare systems in most states make productive work relatively unattractive compared to government dependency.

And I’ve also cited his analysis and commentary on issues such as Obamacare and obesity.

Today, I want to cite him for the simple reason that I admire his cleverness.

For those of us who suffered through President Obama’s State of the Union address, you may recall that the President proposed a thawing of America’s relationship with Cuba on the basis that if something “doesn’t work for 50 years, it’s time to try something new.”

Since I’m not a foreign policy person, I didn’t pay close attention to that passage.

But perhaps I should have been more attentive. It turns out that Obama created a big opening.

Writing for National Review, Tanner decided to hoist Obama on his own petard.

During his State of the Union address last week, President Obama defended his Cuba policy by pointing out, “When what you’re doing doesn’t work for 50 years, it’s time to try something new.” As it happens, I agree with the president on Cuba. But it seems to me that his advice should be applied to a number of other issues as well

Mike starts with the ill-fated War on Poverty.

Lyndon Johnson declared war on poverty in January 1964, just three years after the start of the Cuban embargo. Since then we’ve spent more than $20 trillion fighting poverty. Last year alone, federal and state governments spent just under $1 trillion to fund 126 separate anti-poverty programs. Yet, using the conventional Census Bureau poverty measure, we’ve done nothing to reduce the poverty rate. …And, whatever success we’ve achieved in making material poverty less uncomfortable, we’ve done little to help the poor become independent and self-supporting.

He then points out the utter failure of the War on Drugs.

The War on Drugs has been going on even longer than the War on Poverty, with a similar lack of success. …in the last ten years alone we have spent some $500 billion fighting this “war,” and arrested more than 16 million Americans for drug offenses. The vast majority of arrests have been for simple possession, not sale or other drug crimes. While filling our prisons with nonviolent offenders, destabilizing countries like Mexico and Colombia, wrecking our own inner cities, and making the cartels rich, the drug war has failed to reduce either violence or drug use.

Mike also reminds us that we’ve had five decades-plus of government-run healthcare.

…we’ve suffered from government-run health care in this country for more than 50 years as well. Medicare and Medicaid started in 1965. Others would point out that we are still suffering the consequences of the IRS decision in 1953 to make employer-provided insurance tax-free, while individually purchased insurance has to be paid for with after-tax dollars. No matter how you want to measure the starting point, the government now pays for roughly 52 percent of U.S. health-care spending, and indirectly subsidizes another 37 percent. The result has been steadily rising health-care costs, a dysfunctional insurance market, and a growing shortage of physicians. …a study out of Oregon suggests that being on Medicaid provides no better health outcomes than being uninsured. Meanwhile, Medicare is running up more than $47.6 trillion in unfunded liabilities. And let us not forget the VA system and its problems.

And his article merely scratches the surface.

One could go on and on. Fannie and Freddie? Social Security and its almost $25 trillion in unfunded liabilities? Stimulus spending? Green energy? We won’t even mention the National Weather Service’s apparent inability to accurately predict snowstorms. If we are looking for lessons to learn from the last 50 years, here is one: Bigger government has not brought us more security, more freedom, or more prosperity. Yet, President Obama still sees the answer to every problem, no matter how small, as more government, no matter how big. …President Obama not only seems unable to learn from history, but apparently doesn’t even listen to his own speeches. If big government hasn’t worked for 50 years, 100 years, or for that matter pretty much the whole of human history, maybe it’s time to try something else.

The final sentence in that passage is not just a throw-away line.

I have my own two-question challenge for leftists, which is basically a request that they identify a nation – of any size and at any time – that has prospered with big government.

Mike does something similar. He basically points out that big government has an unbroken track record of failure, and not just for the past 50 years.

I suppose the question to ask is whether any big-government program can be considered a success? In other words, what has any government done well, once it goes beyond the provision of core public goods such as enforcing contracts, protecting property rights, and upholding the rule of law?

To be fair, there are some nations, such as Switzerland, that have enjoyed very long periods of monetary stability and peace. And jurisdictions such as Hong Kong and Singapore have experienced decades of prosperity and tranquility.

In all of those jurisdictions, I think government is too big, but they are considered small-government by modern-world standards.

In any event, the point I’m making is that some governments seem semi-competent, but there also seems to be a relationship between the size and scope of government and the failure of government.

It will be interesting to read the comments.

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Libertarianism and Human Decency

Some people confuse being libertarian with being libertine.

I’m sometimes asked, for instance, if I’m a libertarian because I want to smoke pot or do other drugs.

I respond that I’ve never done drugs and have no desire to use drugs.

Then I’m asked if I’m a libertarian because I want to gamble.

I respond by saying that I don’t gamble, even when I’m in Las Vegas or some other place where it’s legal.

Sometimes I’m asked if I’m libertarian because I want to use prostitutes.

I respond by explaining that I’d never patronize a prostitute because I want to at least be under the illusion that a woman actually wants to be with me.

At this point, some people conclude I’m boring, and that may be true, but this is also the point where I try to educate them about the libertarian philosophy.

I give them the usual message about small government and free markets, but I also explain that libertarians don’t believe that government should persecute people for victimless crimes.

This doesn’t mean we think it’s good to use drugs or that we personally approve of prostitution. And it doesn’t mean we’re oblivious to the downsides of gambling.

The libertarian message is simply that prohibition makes matters worse, not better. For instance, prohibition gives government the power to behave in reprehensible ways.

Let’s look at two examples, starting with this disturbing and powerful video from Reason TV (warning, both the subject material and language are not for the faint of heart).

Having watched the video, now ask yourself whether you think this is an appropriate way for governments to be using our tax dollars?

Remember, we’re not talking about cops busting people for impaired driving. That’s totally legitimate, regardless of whether they’re impaired because of drugs or booze.

The question is whether cops should look for excuses to pull people over simply in hopes of finding that they have some pot. And when they don’t find drugs, should they then go through obscene efforts in hopes of finding some contraband?*

Our second example isn’t as disturbing, at least on a physical level, but it should be equally troubling if we believe in decent and humane society.

It seems that SWAT teams have too much time on their hands and are now conducting raids on old folks playing cards.

On Saturday, state and local authorities raided a monthly poker tournament at a bar in the city of Largo, after an investigation into unlawful gambling, the Tampa Bay Times reported. The Nutz Poker League, which was running a free game open to the public at Louie’s Grill and Sports Bar at the time of the crackdown, said on its Facebook page that some of the police were in “full riot gear” and had their “weapons drawn.” …One woman present described the event in a blog post: “Today, while out playing poker with this poker league, we were raided by the [Florida Division of Alcoholic Beverages and Tobacco], all with men and women officers wearing black masks so we couldn’t see their faces. We were forced (by a threat of going to jail) to place our hands on the table where they could see them and to stay there until we were told.” …Luke Lirot, an attorney involved with the matter, told Card Player that players took cell phone photos and video of the raid, and that they were “ordered by officers to delete” the material. According to the Tampa Bay Times, the undercover investigation, dubbed “Operation Cracked Aces,” had been ongoing for months prior to the bust.

The community group that runs the recreational league has an appropriately libertarian view of this costly harassment.

“The ‘crime’ here is the waste of valuable public resources, and the misguided efforts to enforce an archaic law that was never intended to be used to criminalize events such as the one here, where six individuals were unjustly arrested and terrified, and now face prosecution,” the league said. “If state statutes can be exploited and stretched to criminalize these types of events, legislation needs to be adopted to clear up this unnecessary abuse.” Nutz Poker added that the raid was an example of “tyrannical [law] enforcement.”

By the way, the Florida raid is not an isolated incident.

Here are some excerpts from a report in the Baltimore Sun.

…at the Lynch Point Social Club in Edgemere, police say, …dozens of men would meet regularly to play no limit Texas Hold ‘Em poker games and gamble on electronic machines. County police said it was all off the books and against the law, and busted the club’s members in a raid involving a tactical unit last week. The organizer and dealers were arrested and face charges. Almost immediately after our story posted, there was a quick backlash against police. The story’s been shared nearly 200 times on Facebook and generated 40 comments as of this writing… commenters had no tie to the event but were angered at an investigation they believe was a waste of police resources. …But police say games like the ones hosted in Edgemere are against the law and must be enforced, and may even put the players at risk for becoming victims of a robbery.

Here’s the bottom line: A bunch of guys want to pass the time by playing cards and making wagers. They’re not hurting anybody else, yet cops decide to send a “tactical unit” to conduct a raid.

Once again, I’m glad there’s a backlash against the police. Cops should be protecting innocent people, not harassing them.

Or killing them.

And this is why libertarianism is a philosophy of human decency. We don’t believe in using coercive government power against people who aren’t harming others.

*I’m thinking an involuntary cavity search might be worth it if I got a $900,000 award after suing the government.

P.S. Since I feel very confident about libertarian principles, I don’t object to sharing anti-libertarian humor.

Here’s the latest example.

I’ve previously shared a cartoon with the same theme, and that post also makes the should-be-obvious point that fire departments would exist in a libertarian world.

And that link also has many more examples of libertarian humor.

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Great Moments in Prohibition and the Drug War

Even though I’m personally a prude on the issue of drugs, that doesn’t stop me from opposing the Drug War, both for moral and practical reasons.

After all, how can any sensible and decent person want laws that produce these outrageous results?

The DEA trying to confiscate a commercial building because a tenant sold some marijuana.

The government seeking to steal a hotel because some guests sold some marijuana.

Cops raiding an organic nursery and seizing blackberry bushes.

The feds grabbing cash from innocent bystanders in legal cases.

The government arresting a grandmother for buying cold medicine.

Cops entrapping an autistic teen to boost their arrest numbers.

And don’t forget the misguided War on Drugs is also why we have costly, intrusive, and ineffective anti-money laundering laws, which result in other outrages, such as the government arbitrarily stealing money from small business owners.

Though not every enforcement action leads to grotesque abuse of human rights. Sometimes the Drug War merely exposes the stupidity of government.

Let’s add another horror story to our list.

Jacob Sullum of Reason has a very disturbing example of how the Drug War leads to very bad outcomes.

Why did a SWAT team raid Bob and Addie Harte’s house in Leawood, Kansas, two years ago, then force the couple and their two children to sit on a couch for two hours while officers rifled their belongings, searching for “narcotics” that were not there?

Sullum conveniently provides the answer, though it’s not one that should satisfy any normal person.

…the Hartes made two mistakes: Bob went to a hydroponics store in Kansas City, Missouri, with his son to buy supplies for a school science project, and Addie drank tea. It cost them $25,000 to discover that these innocent actions earned them an early-morning visit by screaming, rifle-waving men with a battering ram.

Here are the odious details of local government run amok.

…the Hartes hired a lawyer to help them obtain the relevant records… Eventually the Hartes learned that a Missouri Highway Patrol trooper saw Bob at the hydroponics store on August 9, 2011. Seven months later, state police passed on this hot tip to the sheriff’s office, which sprang into action (after a few weeks), rummaging through the Hartes’ garbage three times in April 2012. On all three occasions, they found “wet plant material” that a field test supposedly identified as marijuana.

Does that sound like probable cause for an assault on their home?

…the cops did not bother to confirm their field results with a more reliable lab test before charging into the Hartes’ home, three days after their third surreptitious trash inspection. When the Hartes starting asking questions about the raid, the sheriff’s office suddenly decided to test that wet plant material, which it turned out was not marijuana after all. The Hartes figure it must have been the loose tea that Addie favors, which she tends to toss into the trash after brewing.

So what’s the bottom line? The Hartes want to make it easier to obtain records.

…the Hartes think Kansas cops would be more careful if obtaining police records were easier. “You shouldn’t have to have $25,000, even $5,000,” Addie Harte tells KSHB. “You shouldn’t have to have that kind of money to find out why people came raiding your house like some sort of police state.”

I obviously agree, but an even more important lesson is that we should re-think America’s foolish Drug War.

I happen to think drugs are bad and that people shouldn’t use them. Heck, I also think people shouldn’t overeat, that gambling is dumb, and that alcohol abuse is terrible.

But I know that government prohibition won’t solve these problems and almost surely will make matters worse.

Besides, I don’t like being on the same side of an issue as certain people.

I’d rather side with folks such as John Stossel, Gary Johnson, John McCain, Mona Charen, Pat Robertson, Cory Booker, Rick Perry, and Richard Branson.

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Pot Legalization: A Common-Sense Way of Fighting Organized Crime

I have some bad news and some good news.

The bad news is that politicians have come up with another proposal for an additional tax.

Some people like prohibition

The good news is that they can only impose this new tax if they ease up on the silly Drug War.

That creates a bit of a quandary if you believe in freedom and small government.

But, on net, it’s a move in the right direction.

We have two examples to share. The first is from South America, where the government of Uruguay seems poised to legalize marijuana. Here are some blurbs from an AP report.

Uruguay is pushing ahead to create a legal marijuana market… The Senate planned to debate the pot plan Tuesday, with approval by the ruling coalition widely expected before the night is over. Because senators turned away all requests for amendments after it passed the lower chamber, their vote will be final.

One reason for this proposed reform is to fight organized crime.

President Jose Mujica says the point is not to promote marijuana use, but to push out organized crime. The government hopes that when licensed growers, providers and users can openly trade in the drug, illegal traffickers will be denied their profits and go away.

Let’s give President Mujica an A+ for economics. He recognizes that criminalization creates a black market.

But Uruguay politicians are not exactly dreamy-headed libertarians. Big government would be involved.

Socialist Deputy Julio Bango, who co-authored the proposal, told The Associated Press that “this is not a law to liberalize marijuana consumption, but rather to regulate it. Today there is a market dominated by drug traffickers. We want the state to dominate it.”

And the article also mentions that legalization would be accompanied by heavy taxes. I don’t like that part, but there’s no question this would be a net plus for liberty and crime reduction.

Some lawmakers in New York also seem to understand that prohibition is illogical. Here are some excerpts from a local news report.

State Sen. Liz Krueger’s measure — the Marijuana Regulation and Taxation Act — would legalize, regulate and tax marijuana under state law. “It will take the market in marijuana away from the criminal enterprises, just as happened when alcohol prohibition was ended,” she said at a City Hall press conference.

Kudos to Krueger for her grasp of incentives. The Drug War is just as foolish – and just as good for criminals – as prohibition.

Though I wonder whether Sen. Krueger is being too greedy.

“It would establish an excise tax of $50 an ounce of marijuana and authorize localities to charge a sales tax on retail sales if they wish to,” Krueger said. …Liu estimates that a pot tax would generate $431 million in New York City alone.

I’ve never done drugs, so I’m not familiar with the market, but I do know that if the tax is too high on a legal product, you create a black market.

That happens with cigarettes, for instance, and we examples of excessive taxation causing less revenue from Bulgaria, Romania, and Ireland. And we’ve even seen this Laffer Curve effect in Washington, DC.

Last but not least, we should never forget that the Drug War is a horrifying example of Mitchell’s Law, with one bad policy leading to another bad policy.

The War on Drugs, for example, is the reason why politicians imposed costly and ineffective anti-money laundering laws. As well as disgusting and reprehensible asset forfeiture laws.

P.S. Libertarians are not the only ones to think the drug war is foolish. Yes, you find libertarians such as John Stossel and Gary Johnson on the list of those who want to end prohibition. But you also find John McCain,  Mona Charen, Pat Robertson, Cory Booker, and Richard Branson.

But maybe you disagree with all those people and would rather be on the same side as Hillary Clinton.

P.P.S. This is not an issue of whether you approve of pot use. You can be strongly against drugs, like me, but also realize that it makes no sense for government to get involved. Particularly since criminals are the ones who benefit.

P.P.P.S. The Drug War gives the government immense powers to engage in bad policy.

• The DEA trying to confiscate a commercial building because a tenant sold some marijuana.
• The government seeking to steal a hotel because some guests sold some marijuana.
• The feds grabbing cash from innocent bystanders in legal cases.
• The government arresting a grandmother for buying cold medicine.

Or sometimes the Drug War merely exposes government stupidity.

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