The Boston Globe's Case is Even Worse than Scott Sumner Says
By David Henderson
Yesterday, co-blogger Scott Sumner wrote an excellent post taking on the Boston Globe columnist Renee Loth’s weak case against marijuana legalization. (Her column is from April, but it’s still relevant.)
The case is even weaker than Scott says.
Consider this segment of Loth’s case:
As with legalized gambling, the states are in a competitive frenzy to hatch these golden geese before the market is saturated. It’s beggar-thy-neighbor time, and no one wants to miss out. States are salivating at the prospect of easy revenue without the pain of raising taxes.
But marijuana revenues, like gambling income and other forms of “voluntary taxation,” are a cheap, fractured way to fund public services. Instead of people contributing equitably to the common good, a smaller subset foots the bill. Sure, some people will smoke pot whether it’s for sale at the 7-11 or not. But does the state need to endorse it, or — worse — come to depend on it?
Scott writes: “The endorsement comment is just silly.” And he’s right.
But notice something else: her discussion of taxes.
Loth rightly recognizes that legalizing gambling would raise tax revenues. And although the payers from whom these tax revenues would be taken would rather not pay them, they would prefer to pay low or even medium taxes on legal low-price marijuana than to pay high risk-freighted prices on illegal marijuana. Numerical example: Imagine that when marijuana is illegal, the price is $200 per ounce. Then it’s made legal, with the kind of entry of firms that Loth envisions (in her words, the market is “saturated”) so that the price falls to $100 per ounce. Then even a hefty $50 per ounce tax, even if all of it is passed on to consumers (as it would be if the supply curve is essentially horizontal), would cause the price to be $150 per ounce. So the buyers gain and the government gains.
But nooooo, we can’t have that, says Loth. Why? Because people aren’t contributing “equitably.” In other words, she would prefer to purposely make some other people worse off with higher taxes on what they buy (sales taxes) or earn (income taxes) than to raise the same amount of revenue by raising no taxes but instead legalizing a good so that the revenues are taken from people who are better off paying the revenues than buying in an illegal world.
That’s either ignorant or cruel, or both.