Lost Taxes and Other Costs of Marijuana Lawsby Jon Gettman Executive Summary

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Government reports indicate that the nation’s marijuana laws cost taxpayers $41.8 billion annually. This calculation is based on (a) a reconciliation of estimates of the annual supply of marijuana in the United States and estimates of its overall value and (b) Office of Management and Budget (OMB) data on the share of the Gross Domestic Product diverted by regulatory taxes to US Government budgets.

Government reports from the Office of National Drug Control Policy, the Library of Congress, and other sources indicate that the supply of marijuana in the United States is 14,349 metric tons, or 31.1 million pounds. Various price indexes from public and private sources produce a retail price of $7.87/gr or $3,570/lb, setting the overall retail value of the illicit marijuana market at $113 billion.

The Office of Management and Budget reports that local, state, and the federal government receipts represent 28.7% of the gross domestic product as tax revenue. The diversion of $113 billion from the taxable economy into the illicit economy deprives taxpayers of $31.1 billion annually.

According to the Uniform Crime Reporting Program of the Federal Bureau of Investigation, marijuana arrests consist of 5.54% of all arrests. The Bureau of Justice Statistics reports that total criminal justice expenditures in the United States in 2004, for example, were $193 billion. Marijuana arrests cost taxpayers $10.7 billion annually.

Federally-funded surveys indicate that marijuana has remained widely available over the last 25 years. The Monitoring the Future Survey indicates that since 1992 surveys report that at least 2 out of 5 eighth grade students, 2 out of 3 10th grade students, and 4 out of 5 high school seniors find marijuana widely available.

Despite marginal changes in annual data, marijuana use in the United States has remained fundamentally unchanged in the last decade and a half. Since the beginning of annual surveys on drug use, now called the National Survey on Drug Use and Health, in 1990 the average level of annual marijuana use has been 9.3% (± 1%) of the population age 12 and over. In 1990 10.2% of this population used marijuana in the last year, and in 2005 annual usage was at 10.5%.

During this period the average monthly use of marijuana averaged 5.1% (± .6%). In 1990 monthly marijuana usage was at 5.1%; in 2005 monthly marijuana usage was reported by 6% of this population. During this period monthly use of marijuana by adolescents age 12 to 17 averaged 6.9% (± 1.6%). In 1990 monthly marijuana use was reported by 5.2% of this age group; in 2005 this age group reported monthly marijuana use by 6.8%.