Marijuana Tax

Here’s a morning thought:

If the government legalized marijuana and then taxed it to the point where the price is equal to what it is today (plus risk), we would have the same level of consumption but an extra revenue stream.

Risk is a deterrent just like a tax. Make something illegal, and you add risk thereby reducing consumption. A tax would be merely monetizing the risk.

I’m not saying this is an optimal policy for I don’t know if this or a no-tax legalization would be better. To keep things simple though, it makes sense to think of the taxed legalization to keep the change in consumption out of scope. When you make that assumption, whether or not a no-tax legalization would be better, it’s pretty easy to see that:

1. Our current policy is far from good/optimal.

2. There are better options.