NCPA - National Center for Policy Analysis


May 18, 2009

In these tough economic times, one idea that will help the federal and state governments fill their coffers is to legalize drugs and then tax sales of them.  And while we're at it, we should welcome all forms of gambling (rather than just the few currently and arbitrarily allowed) and let prostitution go legit too.  All of these vices, involving billions of dollars and consenting adults, already take place.  They just take place beyond the taxman's reach, says Nick Gillespie, editor in chief of and


  • No reliable estimates exist on the number of prostitutes in the United States or aggregate demand for their services, however, Nevada, one of the two states that currently allows paid sex acts, is considering a tax of $5 for each transaction.
  • State Senator Bob Coffin argues further that imposing state taxes on existing brothels could raise $2 million a year (at present, brothels are allowed only in rural counties, which get all the tax revenue), and legalizing prostitution in cities like Las Vegas could swell state coffers by $200 million annually.
  • A conservative extrapolation from Nevada to the rest of the country would easily mean billions of dollars annually in new tax revenues.


  • Every state except Hawaii and Utah already permits various types of gambling, from state lotteries to racetracks to casinos.
  • In 2007, such activity generated more than $92 billion in receipts, much of which was earmarked for the elderly and education.
  • Representative Barney Frank, Democrat of Massachusetts, has introduced legislation to repeal the federal ban on online gambling; and a 2008 study by PriceWaterhouseCoopers estimates that legalizing cyberspace betting alone could yield as much as $5 billion a year in new tax revenues.


  • Based on estimates from the White House Office of National Drug Control Policy, Americans spend at least $64 billion a year on illegal drugs.
  • And according to a 2006 study by the former president of the National Organization for the Reform of Marijuana Laws, Jon Gettman, marijuana is already the top cash crop in a dozen states and among the top five crops in 39 states, with a total annual value of $36 billion.

Source: Nick Gillespie, "Paying With Our Sins," New York Times, May 17, 2009.

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