Friday, October 9, 2009
Robert Mikos (Vanderbilt Law School) was scheduled to present Crime Doesn't Pay: Some Realism about Taxing Marijuana today at the annual meeting of the Midwestern Law and Economics Association at Notre Dame Law School. From the precis:
This Article analyzes state proposals to legalize and tax marijuana, but the insights generated herein could be applied to the legalization and taxation of other proscribed activities as well. It makes two main contributions. First, it suggests that extant revenue projections are overly optimistic because the tax will not be easy to collect. The fragmentation of the marijuana market, for example, will hinder governments’ ability to monitor taxable transactions, thereby creating a large tax gap.
Second, the Article demonstrates that the federal ban on marijuana could thwart state programs (e.g., licensing systems) that might otherwise help to shrink the tax gap. To enforce a marijuana tax, states must gather detailed information on marijuana transactions. Such information, however, could be seized by federal officials and used to impose federal sanctions, thereby giving distributors added incentive to evade state taxes. To my knowledge, this is the first Article that analyzes the taxation of goods proscribed by another sovereign and the unique problem posed by such a hybrid regime.