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How Federal Taxes fund the black market

How Federal Taxes fund the black market

Posted by Marijuana Doctors on 05/24/2015 in Medical Marijuana Economics

There is no doubt that the current system of drug prohibition has been an utter failure. The massive amount of income derived from the illicit sales of drugs have funded criminal organization for decades and with it increased the overall insecurity over the world.

We must ask ourselves the following question; how much are we giving up in maintaining this outdated and corrupt policy?

What could we be spending billions of dollars on instead of throwing it down a fiery pit known as prohibition? What could we do with the extra revenues generated from taxed “drugs” under a regulated system?

The first step

Cannabis is the first Schedule I ‘narcotic’ to be legalized in a handful of states. With this legalization, we have seen a drop in crime and added revenue to the state in addition to savings on law enforcement expenses from prosecuting marijuana related issues.

Colorado raked in $15 million dollar last year for schools and provided thousands of new jobs by merely legalizing marijuana for adult recreation. This is brilliant insight at what a “prohibition-less” society could look like and while there are still a few bumps in the road, the overall “experiment” is trucking along without any real major issues.

A more sensible drug policy would not only increase public safety, but also add much needed resources to state coffers. When the drug trade becomes public, the profit incentives for ‘illegal operations’ become too much of a risk and thus eventually criminal cartels will be weeded out of the equation.

Not if Uncle Sam has anything to do with it!

The problem however comes down to taxes. While nobody is arguing that cannabis shouldn’t be taxed, there is a push from the Federal Government to add a 50% excise tax on cannabis and a yearly employee tax as well.

Looking at Colorado’s current model that would mean you’d be paying roughly 79% tax on marijuana or on other words, while the pot might cost you $10 USD per gram, you’d have to pay an additional $7.90 in taxes.

This makes legal marijuana incredibly expensive and in turn, consumers would turn to the black market once more to get cheaper weed. Over taxing marijuana would not only harm the legal side of things, it would divert funds back into the hands of the very people we are trying to take the money from.

Now we know that the Federal Government wants nothing more than to maintain their draconian policy and taxation is just one of the strategies they have in their pockets to stifle marijuana legalization.


Ending the war on cannabis is pivotal for real change in America. It would mean that millions of people would no longer be prosecuted for a harmless act; it would mean that revenue is diverted from the pockets of drug cartels.

Yet it can only really work if you match the ‘street prices’, potentially with a slight increase due to taxes, but by making cannabis so expensive that the black market alternative is more appealing defeats the entire purpose of legalization.

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