Discuss the arguments for and against the legalization of Cannabis and the taxation of the good by the Government.
Legalising cannabis and placing a tax on the good has several advantages
1. The Government can raise revenue from the tax. Because demand is likely to be inelastic, the tax revenue could be quite high. The tax revenues could be used to help finance health care and treat lung cancer. (things associated with dope smoking)
2. It would reduce size of black economy. If cannabis was legalised it would reduce criminal activity. It would also free up police time to investigate more serious crimes and drug use.
3. Taxing Cannabis should prevent ‘Over Use’ Although cannabis might be legalised it is advisable to still discourage consumption through taxation. Cannabis can be considered a demerit good because
- People underestimate dangers of smoking (long term memory loss, increased risk of psychosis)
- Smoking has negative externalities. Dope smokers are less productive when stoned. Increased risk of accidents if driving when stoned.
Therefore we make people pay the social cost of cannabis by taxing the good. This can achieve social efficiency and should reduce the overconsumption of cannabis.
4. Prevent Dangerous Forms of Cannabis
On the black market, people don’t know what they are buying. People often buy cannabis
Arguments Against legalisation of Cannabis / Dope
- If tax is too high people may still consume on the black market. Therefore there will be tax evasion, the government will not get the money and criminal activity will continue. (It is already a real problem for cigarrettes)
- May encourage the dope tourist, like in Amsterdam – they will spend money in the UK but is it the kind of tourist we want to encourage?
- Legalisation may encourage more people to consume cannabis, because it is now considered to be acceptable.
- Some argue that if you decriminalise cannabis, it could encourage consumption of other more dangerous drugs like ecstasy. However, it could work the other way, because if cannabis is legalised people could buy dope from a respectable shop rather than a drug dealer.
Also referred to as: Cannabis / marijuana / hemp / weed / dope / grass
- Cannabis use at BBC