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Monday, April 26, 2010

Selling illegal drugs? Don't forget the stamps.

Being a tax professor has its perks. Among these are highly interesting colleagues. One such, Sarah Lawsky of George Washington University's law school, spent some time recently exploring the practice of state governments purporting to tax illegal drug sales. She writes:

Anyone who sells illegal drugs in Kansas without an appropriate stamp affixed is subject to tax penalties. (This doesn't make selling drugs legal, of course; it just means that there is an extra penalty if you sell drugs without paying the extra tax.)

There is only one place to buy the Kansas stamps in person: in Topeka, the state capital, at the state office building. (You can also buy them via mail, though you have to supply a mailing address, and you may be able to buy them through on-line auction.) While in Topeka this past week for Brad Borden's Washburn tax conference, I took the opportunity to go to the state office building and buy a few of the stamps.

The whole experience was very professional, but it is hard for me to imagine that anyone selling illegal drugs would be willing to give their name (even a fake one) and sit in a booth in a state office building for 45 minutes while something goes on in some back room somewhere, involving people you cannot see but who periodically call you on a phone in the booth and tell you it will be just a few more minutes. And indeed, the very freaked-out gentleman who eventually sold me the stamps told me this was only the third time he had made such a sale in his time working there (though he wouldn't tell me how long that was). This made me suspect that there are two other tax professors with such stamps somewhere in the country.

You can read more about the Kansas drug stamp tax here.

Does Oregon tax illegal drug sales? Think of the revenue they might be losing by going after Reed.

Comments (10)

only problem wih them here in TX is the actual amount of tax imposed makes their purchase not only idiotic economically for the purchaser, but they are not within the reach of anyones monetary means.I found the actual statute and inserted it below. The actual dollar amount was so ridiculous I actually felt sorry for anyone getting busted. They give them an outlet to avoid tax prosecution but in reality they don't. None of his customers will ever pay thousands of dollars over the price of a 25 dollar amount.
The rate of the tax is:
(1) $200 for each gram of a taxable substance
consisting of or containing a controlled substance, counterfeit
substance, or simulated controlled substance;
(2) $3.50 for each gram of a taxable substance
consisting of or containing marihuana; and
(3) $2,000 on each 50 dosage units, or portion of 50
dosage units, if the total amount is less than 50 dosage units, of a
controlled substance that is not sold by weight.
Absolutely ridiculous from any realistic viewpoint of a dealer being in business for profit.

Taxation may be a better, more effective way to enforce drug laws.

Remember that the "Feds" nailed Al Capone not for murder, even though he had murdered many, but for tax evasion.

I know it's always fun to pick on the nerdy kids, but do you seriously think Reed has more of a drug problem than most other campuses? Certainly it's had a policy of tolerance for many years, and there have been a couple of clusters of heroin deaths over the past couple of decades, but the idea that drugs are more rampant there than at other schools certainly wasn't borne out by the time I spent at Reed or any of the six other colleges and universities I meandered through.

According to 2004 data from the US Department of Health and Human Services, more than a third of full-time college students between the ages of 18 and 22 used illegal drugs. It was slightly higher for non-students in the same age group. Reed's a pretty small school, it can't be dragging that average up all by itself.

There's illegal drugs, and then there's illegal drugs. All the kids smoke pot -- they don't all shoot smack.

How times have changed. A generation ago, Mississippi's governor wanted to tax illegal moonshine. As far as I know, the proposal went down with considerable laughter.

Most of the kids at Reed don't use heroin, either. Grass, acid, and (after I was there) ecstacy. Probably a certain amount of prescription drug abuse. Definitely some uppers for certain people trying to get through long study sessions.

Say what you will about the mostly privileged kids who go there, Jack -- I started there when I was 25 and my tuition was largely paid for with grants, so I've had my own harsh words -- but the program at Reed isn't exactly conducive to someone with a serious heroin addiction. Or a major drug problem of any kind. If you're smart enough you can probably skate through to graduation just as you can in any school, but not if you're messed up on drugs every day.

Heroin's got a certain cachet among some people that I've never understood. Almost everyone I've ever known who had been a junkie was involved in the music scene in one way or another. It's not like it's hard to find someone trying to sell it to you on the street in downtown Portland.

Reed has a heroin problem. Other colleges don't seem to. I don't understand why that's so hard for you to acknowledge.

Those stamps will make great collectibles, blotter paper, etc.

That's one of the reasons why you don't see too much of an issue with going after drugs in Texas, other than "cheese". It's because after you've busted the dime bag guys, you note that the real money is in cocaine. Go that way, and suddenly you're busting people with lots of money and extremely powerful friends. (Southern Methodist University has such an open drug problem that the first day of classes are referred to as "the running of the coke dealers," and nothing is done other than wimpy amnesty programs for those who pass on that friends may be dying of overdoses. Every time the school makes a half-assed attempt to clean up the campus, the worst offenders' helicopter parents threaten to call in "my close personal friend George W. Bush.")

I don't think you can meaningfully tax the underground economy without a sales tax. Sales tax proponents don't talk about that nearly as much as they should.

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