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black market prices are so far out of whack with market value (apart from the value of getting something your govt. has declared illegal) that taxes would have

black market prices are so far out of whack with market value (apart from the value of getting something your govt. has declared illegal) that taxes would have to be ridiculously high to make prices even come close to street cost of equivalent drugs. Either that or street price collapses to legal price (perhaps minus taxes) and criminals are less incented to participate due to drastically reduced margins. High taxes really are only a concern for someone looking to buy wholesale, an individual user buying say 3.5-7 grams at a time would likely be paying, at most, a few dollars in taxes, which is hardly prohibitive since the same amount illegally costs ~40-80 dollars afaik (note: I don't dabble in illegal drugs but may have used some in high-school, so this cost knowledge is a little out of date, but I suspect not horribly off).

gnosis 14y ago
You're talking about current illegal drug prices. When taxes on legal drugs are high enough, criminals selling legal drugs on the black market could still make a tidy profit while undercutting the cost of legal drugs. Granted, those profits won't be nearly as obscene as those garnered now from the sale of illegal drugs, but profitable enough to stay in business. Legal cigarette prices in the US are nowhere near the price of illegal drugs, but the taxes on them still provide enough incentive for organized crime to get involved in smuggling cigarettes and selling them on the black market, and enough incentive for cigarette users to buy black market cigarettes. The same is likely to happen with legalized marijuana, unless the price (including taxes) is kept low enough to make buying black market marijuana not worth the trouble -- much like it's usually not worth the trouble to buy moonshine in the US, when there's plenty of relatively cheap, legal and safe alcohol available.
- ryanmolden 14y ago
  Yes, my primary point was that the current cost on the illegal market (which is what attracts criminal elements) is so ridiculously out of whack with the actual cost of production that taxes would have to be massively high to drive a black market similar to what exists when it is illegal. Will there be some people still getting it 'illegally'? Sure, as you pointed out there is a black market for cigarettes, but it pales in profit comparison to markets that are entirely illegal, and cartels aren't going to be attracted to nickel and dime markets when they have so many other ways to make money. American organized crime may be involved in black market cigarettes, but that could also be viewed as a sign of them searching for new revenue streams as their old(er) ones get shut down or become less reliable. Organized crime also used to be involved in alcohol, not so much anymore yet it is still heavily taxed in most peoples eyes. Further, I assume that legal providers would need some sort of approval/licensing from the state. Illegal providers would not pursue that. So while they would save money dodging the licensing/tax issues they likely could not cost compete with legal producers as they are taking a greater risk they would want to be compensated for (i.e. arrest). The illegal producers would then be doing a risky activity (they wouldn't be shielded by the legality if there are rules around production/supply that they aren't following) and incurring costs that legal producers would not incur. Whether those costs offset the licensing/tax issues is unclear, but I suspect they would. I don't think your claim is preposterous (that taxes need to be kept in check), but I also am not convinced that taxes will be so high as to drive this kind of market. Time will tell since more states have recently introduced marijuana legalization (assuming the DEA doesn't go all gangbusters on said states).

gnosis 14y ago

You're talking about current illegal drug prices. When taxes on legal drugs are high enough, criminals selling legal drugs on the black market could still make a tidy profit while undercutting the cost of legal drugs. Granted, those profits won't be nearly as obscene as those garnered now from the sale of illegal drugs, but profitable enough to stay in business. Legal cigarette prices in the US are nowhere near the price of illegal drugs, but the taxes on them still provide enough incentive for organized crime to get involved in smuggling cigarettes and selling them on the black market, and enough incentive for cigarette users to buy black market cigarettes. The same is likely to happen with legalized marijuana, unless the price (including taxes) is kept low enough to make buying black market marijuana not worth the trouble -- much like it's usually not worth the trouble to buy moonshine in the US, when there's plenty of relatively cheap, legal and safe alcohol available.

ryanmolden 14y ago
Yes, my primary point was that the current cost on the illegal market (which is what attracts criminal elements) is so ridiculously out of whack with the actual cost of production that taxes would have to be massively high to drive a black market similar to what exists when it is illegal. Will there be some people still getting it 'illegally'? Sure, as you pointed out there is a black market for cigarettes, but it pales in profit comparison to markets that are entirely illegal, and cartels aren't going to be attracted to nickel and dime markets when they have so many other ways to make money. American organized crime may be involved in black market cigarettes, but that could also be viewed as a sign of them searching for new revenue streams as their old(er) ones get shut down or become less reliable. Organized crime also used to be involved in alcohol, not so much anymore yet it is still heavily taxed in most peoples eyes. Further, I assume that legal providers would need some sort of approval/licensing from the state. Illegal providers would not pursue that. So while they would save money dodging the licensing/tax issues they likely could not cost compete with legal producers as they are taking a greater risk they would want to be compensated for (i.e. arrest). The illegal producers would then be doing a risky activity (they wouldn't be shielded by the legality if there are rules around production/supply that they aren't following) and incurring costs that legal producers would not incur. Whether those costs offset the licensing/tax issues is unclear, but I suspect they would. I don't think your claim is preposterous (that taxes need to be kept in check), but I also am not convinced that taxes will be so high as to drive this kind of market. Time will tell since more states have recently introduced marijuana legalization (assuming the DEA doesn't go all gangbusters on said states).