NCPA - National Center for Policy Analysis


February 26, 2010

North Carolina is one of about 20 states that use a government-issued stamp to tax illegal drugs.  The cost varies by state and weight, as does the stamps' appearance.  Penalties for non-payment also vary, from being classed as a misdemeanor in Georgia to 200 percent of the tax plus $10,000 or five years in prison in Louisiana, says The Economist. 

Few, if any, drug users actually buy the stamps: 

  • Most of those sold in Kansas, for instance, go to collectors.
  • According to a Mobile newspaper, the director of investigations for Alabama's revenue department said the state never expected actually to sell stamps to drug users.
  • Instead, the tax exists to further punish those arrested for possession by making them liable to penalties for tax evasion if their drugs are stampless, as they almost invariably are.
  • Those penalties can be lucrative; over the past decade Kansas has collected $10.3 million. 

If legislators feel that drug users get off too lightly, they could simply increase the criminal penalties, rather than creating a new class of crime that requires the involvement of another government agency.  As it is, these laws are not merely convoluted, but have often been found unconstitutional, say The Economist: 

  • In 1994, the United States Supreme Court ruled that because Montana's illegal-drug tax was a second punishment for a single crime it amounted to double jeopardy.
  • Other states' drug-tax schemes have also been challenged on constitutional grounds.
  • In response, some states have scrapped or modified their schemes, usually by allowing buyers of the stamps to remain anonymous or by forbidding revenue departments from telling law enforcement when someone buys the stamps.  

The concept of taxing illegal drugs punitively dates back to the Marijuana Tax Act of 1937.  This did not ban the drug outright; it subjected anyone who dealt in it commercially to a nominal tax but an onerous array of regulations and criminal penalties for non-compliance.  Bureaucracy lives on, says The Economist. 

Source: Report, "A Fine too Far," The Economist, February 20-26, 2010. 

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