On Thursday, CNBC provided an update regarding plans to introduce a bill legalizing marijuana.
Writing about Jeffrey Miron, senior lecturer in economics at Harvard University and a senior fellow at the Cato Institute, CNBC states:
"Miron estimates that the US would be around $88 billion a year better off if drugs were legalized, with $41.3 billion saved on enforcement of drug-related laws and $46.7 billion garnered in tax revenues."
I was incredulous that a senior fellow at the Cato Institute would actually make such an absurd claim!
So I double-checked the original source. CNBC's claim is accurate!
Here's where Miron errs:
If legalization generates $46.7 billion in annual tax revenues, how could the US become $46.7 billion "better off"?
I'm sure that much, if not most, of those marijuana purchases would be made by Americans. Therefore, when these people pay tax on the purchases, they simply shift money from themselves to the government. Therefore, America is no richer overall! The money stays within America!
Similarly, if the cost of US law enforcement is reduced by $41.3 billion, America is not likely to become much, if at all, richer! Although government costs would decrease, that would be partially offset by the loss of income by Americans who lost their job in law enforcement due to budget cuts!
Now, I'm not claiming that it isn't beneficial to legalize marijuana. I actually think it's likely that legalization would be very beneficial to the USA!
But if one wants to get into the economics of the matter, the logical framework must be there!
The money that is made on taxes goes back to the American people in the way of better education, social systems etc. So yes it does make the country richer. Your being too literal.
ReplyDeleteErin,
ReplyDeleteas I mentioned, the money earned in taxes is money taken from Americans, and that makes Americans poorer by an equivalent amount of money.
Who's to say who will spend the money better? The government or the people?
If I had to choose, I would lean towards the people, but I'd prefer to do an analysis, that's another article. The analysis would be influenced by whether the government ALREADY is operating optimally.
Anyway, if Miron really DID believe that the country was better off taxing people AND better off by cutting taxes (cutting taxes is the eventual result of reducing the number of workers on the government payroll, everything else being equal), he couldn't have made his main argument at all:
That the country was better off by raising $46.7B in taxes and also better off by reducing salaries paid to government workers by $41.3B.
He couldn't have made that argument, because the first part refers to raising taxes, the second to cutting taxes. If, according to your logic, raising taxes makes society better off, then by definition cutting taxes makes society worse off. As a result, he couldn't have argued that both raising taxes and cutting taxes would make society better off.
But now consider the cost savings to the penal system. There would not be as many people to support in the prisons, and, by assumption, these people, who are no longer incarcerated, would have jobs in the workforce doing something earning wages. Maybe, he could be right.
ReplyDeleteIt seems to me that the only thing we will lose then is the big inflated egos of the law enforcement employees, who would be forced to find work in a field with less stature, where they no longer garner the high respect of the subjects they now intimidate for their petty infractions against a legal precedent that stifles freedom over ones own life and personal choices.
Becky,
ReplyDeleteconsider this:
Taxpayers would be paying less to the penal system, but the penal system employees would be receiving less pay. So, the overall American DIRECT effect in that regard only would be a wash.
However, your comment raises an interesting externality. Prisoners who are now free and get a job can increase the wealth of the USA, but ONLY if their job involves getting wealth from foreign countries somehow (like exports).
When I wrote my article, I did have externalities in mind, but I chose not to list them all, as they are numerous!
I had these externalities in mind when I stated:
"Similarly, if the cost of US law enforcement is reduced by $41.3 billion, America is not likely to become MUCH, IF AT ALL, richer!"
I was clarifying that it was possible the country COULD become richer...but my main point was simply that if it did become richer, it wouldn't be by an amount remotely close to the $88 billion claimed, because almost all of those savings result in an equal cost borne by another American party.
Thanks for the interesting observation about prisoners and jobs!