Sate and federal governments in the United States face massive looming fiscal deficits. One policy change that can reduce deficits is ending the drug war. Legalization means reduced expenditure on enforcement and an increase in tax revenue from legalized sales. This report estimates that legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition. Of these savings, $25.7 billion would accrue to state and local governments, while $15.6 billion would accrue to the federal government.
Approximately $8.7 billion of the savings would result from legalization of marijuana and $32.6 billion from legalization of other drugs.The report also estimates that drug legalization would yield tax revenue of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco. Approximately $8.7 billion of this revenue would result from legalization of marijuana and $38.0 billion from legalization of other drugs.
Jeffrey Miron and NYU graduate student Katherine Waldock estimate that ending the war on drugs would save more than $40 billion a year in enforcement costs (about $16 billion federal, $26 billion state and local) while allowing collection of some $47 billion a year in new tax revenue. Although marijuana is by far the most popular illegal drug and accounts for half of all drug arrests, Miron and Waldock calculate that legalizing it would yield just one-fifth of the $88 billion in total savings and revenue...
Miron and Waldock's paper considers only the budgetary impact of repealing drug prohibition. Many other costs of the war on drugs—including the basic loss of control over one's body and brain, the erosion of Fourth Amendment rights and other civil liberties, interference with religious rituals and medical practice, black market violence, official corruption, lives disrupted by arrest and incarceration, terrorism subsidized by drug profits, and deaths and injuries from tainted or unexpectedly strong drugs—are not so easily expressed in dollars.