Should Government Legalise and tax Cannabis?

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

Advantages of legalising cannabis

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 coul 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

1. People underestimate dangers of smoking (long term memory loss, increased risk of psychosis)
2. 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 but end up with drugs that are mixed with more potent forms of skunk – which can be much worse for your mental health. Legal cannabis could be restricted to the milder form which causes less psychotic episodes than skunk.

5. Reduce police time

Legalising cannabis would free up police time to spend on more profitable use of time like chasing burglars. Legalising cannabis would also prevent many, otherwise, law-abiding citizens breaking the law.

6. Reduce the power of criminal gangs

The legalisation of cannabis would be bad news for criminal gangs who make money from selling it. Also, people who want to buy cannabis would then be able to do it without meeting criminals who may use selling cannabis as a gateway to other drugs.

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 cigarettes)
• 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? However, with more countries considering to legalise cannabis, this issue of a dope tourist will probably be relatively minor
• Legalisation may encourage more people to consume cannabis because it is now considered to be acceptable. Cannabis still has many negative effects on health – especially long-term mental health. Cannabis is a demerit good – where people may underestimate the personal costs of smoking.
• 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

See also:

• Should taxes on cigarettes be increased?
• Cannabis use at BBC