Question

20. President Mary Jane Higherthanakite is thinking about ending the current war on drugs and asking Congress to legalize drugs for the adult population. Her main reason for doing this is that she believes that such a policy will improve our society because the now legal drugs can now be taxed at high rates and therefore increase tax revenues for the government. She asks you to provide her with an analysis of the benefits and costs of legalization (without the tax.) for our society. She also asks you to separately analyze the benefits of her tax on drugs policy. (10 pts)

Answer 1

20.

Without tax, there will be many benefits. The first benefit will the effective control and administration related to the producers of these drugs, distribution and sales so that crime can be controlled. It will help reduce undercover economy that is involved with the illegal mobilization of the drugs. The second benefit is the regulation of the use of the drug that can be enforced upon the service providers. So, drugs will be legalized, but only be delivered to those who will be required. The third benefit is the making the drugs available to cure specific diseases where the drugs are more effective. It will be a new tool to combat those diseases that can be treated using these drugs. So, social welfare increases.

Though there are costs as well. The government has to maintain a department, team, and or network so that drugs and its utilization & mobilization can be regulated. Further, government has to keep records of all the drug producers and its legitimate use to prevent the misuse of the legalization of the drugs. It also attracts costs.

With tax, the first benefit is the tax revenue that will come from the production, sale & purchase of the drugs. The revenue collected, can be used for some other development purposes. The second benefit will be that tax will act as a barrier to those who want to purchase drugs for illegitimate use.So, illegitimate use can be prevented by using tax as a barrier.