interesting war on drugs sidestep

February 6, 2003 12:53 PM

A frequent point of opposition to the war on drugs is that of taxation. The argument goes like this: If the prohibition on illegal drugs ended, the government would see a surplus like no other (and pay for treatment, enforcement, etc). The folks in Kansas have a strange hybrid option: keep them illegal, but ask that drug dealers report taxes on their profits. Their FAQ lists the details and the a rate sheet (pdf) is available. Drug dealers not following suit can be busted as tax evaders, in addition to selling drugs. Novel approach or silly idea?
posted by mathowie (38 comments total)

Actually, drug dealers are required to report their income at the federal level, too. Income from illegal sources is still income.
posted by monju_bosatsu at 12:57 PM on February 6, 2003

How Elliot Ness busted Al Capone...unpaid taxes.

Cart, horse. Silly idea.
posted by nofundy at 12:59 PM on February 6, 2003

This idea is just kinda asinine. What's the point of adding an illegal act to an illegal act. This implies that the drug aren't good enough as they are and they are incapable of doing anything about it. Besides they should be reporting income anyway.. since most (any?) drug dealers don't, they are already evading taxes... *DUH*
posted by MrLint at 12:59 PM on February 6, 2003

Income from illegal sources is still income

Yes. Besides, how many people know that this is how the Feds finally got Al Capone into the klink?
posted by PeteyStock at 1:00 PM on February 6, 2003

Oof, nofundy is too fast for me.
posted by PeteyStock at 1:01 PM on February 6, 2003

I was under the impression that this happens at the federal level already. As far as I know, the IRS requires Americans to report illegal income right alongside wage income. Of course, I doubt very many have complied since reporting criminal income is (obviously) certain to bring the Man around.
posted by majick at 1:04 PM on February 6, 2003

A dealer is not required to give his/her name or address when purchasing stamps and the Department is prohibited from sharing any information relating to the purchase of drug tax stamps with law enforcement or anyone else.

Riiiiiiiiight. They'll just wait for you to leave the building and then follow you home.

Why don't they just tell them all the've won free boats. D'OH!!
posted by archimago at 1:06 PM on February 6, 2003

Monju is correct about the income tax consequences, of course, but Matt has mischaracterized the tax in question. It's not an income tax assessed on the profits, but an additional tax assessed at a flat rate based on the amount (byweight) of marijuana or other illegal substance. So it's really more akin to a user fee or a sales tax than an income tax.

This will, no doubt, cause a great deal of amusement for those of us in the tax business, although we would probably rather see it at a different time of year. Still, it's one of the funnier tax issues to hit since the Tax Court ruled that a stripper's breast implants were depreciable personal property rather than a nondeductible personal expense.
posted by anapestic at 1:07 PM on February 6, 2003

For more discussion, go here. :-)
posted by shepd at 1:08 PM on February 6, 2003

This is not particularly novel; it is the same line of reasoning that got Al Capone busted for tax evasion rather than any of his other crimes. It has been tried in Australia, Chicago, and Montana, among other places. According to the link the Montana law was overturned as placing defendants in double jeopardy. The purpose of these laws is to give law enforcement another tool to go after drug dealers with rather than increase revenues.
posted by TedW at 1:14 PM on February 6, 2003

And for anyone who says "bet they don't have to print many of those things!", I couldn't find one from Kansas, but here's one from Arizona.
posted by yhbc at 1:14 PM on February 6, 2003

In North Carolina, one can buy tax stamps for anything you sell -- legal or illegal. As TedW says, this is really just another way for law enforcement to get criminals; in particular, it can be much easier to show that certain people had certain amount of money (because they spend it on stuff like cars, etc.) than to show they got this money in a particular way.

Of course, this just encourages people to launder money, which provides more jobs for the underworld sort. I see it all as an economic engine.
posted by meep at 1:35 PM on February 6, 2003

Arizona has had this law for several years. In fact, a couple of years ago a fellow used this law (successfull to a point, the st. supreme court rejected his arguments) to argue that the state condoned what he was doing and therefore could not be held accountable.
posted by jmgorman at 1:35 PM on February 6, 2003

See, just another good reason I got the hell outta Kansas.
posted by gramcracker at 2:01 PM on February 6, 2003

According to the link the Montana law was overturned as placing defendants in double jeopardy.

Please keep in mind that it wasn't the law that got overturned in the Kurth case, it was the application of it. The state (Montana) failed to prove damages resulting from the Kurth's activity (except there failure to pay the taxes in the first place) in their civil action, and hence they were effectively charging the Kurths twice with the same criminal action, once in legal court, and again in civil. If they'd have charged them with tax evasion at the time of their drug charge trial, then the state attorney's office would have had a leg to stand on. As it was (and is) laws like this are just a cheap way to take away everything that a convicted drug dealer owns. As I understand it, zero tolerance laws can only take holdings and property that have been used in the production and sale of drugs.

These laws are a dirty attempt to impoverish and subjugate convicted drug dealers, while flooding state coffers with the income, not only from the drug production and sale, but from everything that the convicted ever had, or in the future could hope to. A convicted rapist can do the time, and leave prison still owning whatever property and moneys they had before the conviction. Apparently, drug dealers don't deserve such a future (or any at all according to current legal thought). That's my opinionated reading of such laws, of course.
posted by Wulfgar! at 2:09 PM on February 6, 2003

Syllabus of the Kurth case.
posted by Wulfgar! at 2:16 PM on February 6, 2003

Some of those drug stamps look pretty ridiculous.
posted by euphorb at 2:20 PM on February 6, 2003

Besides, how many people know that this is how the Feds finally got Al Capone into the klink?

Anybody that has seen The Untouchables, maybe? :)

Seriously, though, this is like Double Secret Probation. It's just an extra bite for the state when they do finally catch the dealer. I doubt anyone seriously believes that it's any kind of enforcement tool, or that any drug dealers will actually come forward and comply.
posted by RylandDotNet at 2:22 PM on February 6, 2003

I wonder... are you required to posess the drugs in order to buy a stamp? That is, would I get in trouble if I bought a tax stamp as a gag gift but never actually posessed or sold the drugs?
posted by RylandDotNet at 2:27 PM on February 6, 2003

This seems to be a rehash of the Boston Tea Party.
posted by The Jesse Helms at 2:39 PM on February 6, 2003

heh heh. "Hash."
posted by teenydreams at 3:05 PM on February 6, 2003

heh. heh. "Tea."
posted by teenydreams at 3:06 PM on February 6, 2003

heh. heh. PAAAAAARRRRRRTYYYYYYYYYY!
posted by quonsar at 3:10 PM on February 6, 2003

Well, I would hardly call it novel, given that Iowa has been doing it for years...
posted by delmoi at 3:15 PM on February 6, 2003

Errr, it looks like the tax rates are higher than the cost of the drugs....


If the government want to tax the underground economy, it is VERY simple. Go to a VAT and dump the IRS income tax.

If you consume, you pay. And, everytime you pay $1.33 instead of $1.00 for a can of soda or bag of chips, you can whine about high taxes VS every 2 weeks when you get you pay stub. Perhaps in-your-face-taxation would illicit change.
posted by rough ashlar at 3:21 PM on February 6, 2003

Perhaps they could make blackmail legal, and just take a cut off the top. Maybe prostitution and contract killing as well. Think of the money the government could save. Why there's billions in selling children as slaves alone! Not to mention the market for cutting people up for organs and selling them on the street!
posted by blue_beetle at 3:36 PM on February 6, 2003

IRS 2002 Publication 17, page 95:

Illegal income, such as stolen or embezzled funds, must be included in your income on line 21 of Form 1040, or on Schedule C or Schedule C-EZ (Form 1040) if from your self-employment activity.

No mention of filing a Schedule 1. *rim shot*
posted by eddydamascene at 3:50 PM on February 6, 2003

*crickets*
posted by eddydamascene at 4:04 PM on February 6, 2003

I just started working at the IRS, and I'm told we will be running across returns with "drug dealer" and the like listed for "occupation". I haven't seen any yet, though.
posted by beth at 4:07 PM on February 6, 2003

my god, i'm sorry (as a mostly-sober guy) but $200 for a gram of coke? jesus that's insane. $150 for an eight-ball maybe, but...
posted by badzen at 5:12 PM on February 6, 2003

The highest prices I could Google were $200/gram for cocaine and $6/gram for marijuana. These were both from large seizures, and I doubt the values were underreported. Compare to flat taxes of $200/gram and $3.5/gram.
posted by eddydamascene at 5:49 PM on February 6, 2003

Perhaps they could make blackmail legal, and just take a cut off the top. Maybe prostitution and contract killing as well. Think of the money the government could save. Why there's billions in selling children as slaves alone! Not to mention the market for cutting people up for organs and selling them on the street!

Yeah, you're right; the idea of drug legalization is absurd. Next thing you'll know, they'll be talking about repealing prohibition and reaping tax revenue from devil liquor. Liberal fools!
posted by mr_roboto at 6:25 PM on February 6, 2003

those values are insane.

retail for average coke in LA is $60 / gram, $20 / gram for hi qual weed. if you have good connects, it goes lower ($120 / ball for coke -- 3.5 gram -- $50 for same amount of weed)

cops always come up with crazy ass prices for that shit -- $10,000 / lb for weed (!) -- mainly to pump their press on seizures.

for instance, they take 1 pound of mexican brick weed ($25 / eigth) and break it down at what it would cost for some beverly hills high kid to buy the best chronic in the world at rip off prices... oh yeah, that dirt weed shit costs $20,000 per pound so that the papers report their minor action as some record-breaking blow to the medellin cartel

and if anyone knows where you can get good weed at $6 per gram, give me a call, since that's $21 / eighth, which doesn't exist in LA, even for rank ass mexican brick weed.

and now, in come Poindexter and his goons! good thing I'm too broke to afford any smoke *hehe*
posted by badzen at 6:45 PM on February 6, 2003

Sorry, that $6/gram figure was from a seizure of 20 kilos of stems and seeds.
posted by eddydamascene at 7:05 PM on February 6, 2003

Hey, this "mathowie" guy has posted more than once in 24 hours. How'd he do that?
posted by UKnowForKids at 9:58 PM on February 6, 2003

He knows the guy who fixes the server or something.
posted by eddydamascene at 10:33 PM on February 6, 2003

Perhaps they could make blackmail legal, and just take a cut off the top. Maybe prostitution and contract killing as well. Think of the money the government could save. Why there's billions in selling children as slaves alone! Not to mention the market for cutting people up for organs and selling them on the street!

Those activities involve direct harm to another person. The simple act of ingesting a narcotic in private hurts no one but the user. Please rework your analogy with some examples of illegal acts that do not hurt others, and stop hiding behind your strawman.
posted by Dirjy at 4:48 PM on February 8, 2003

As someone who has had friends that have been convicted of possession without obtaining proper tax stamps for marijuana, I think this is just another way to kill the drug use in america. As someone mentioned before, it's another way to force drug dealers (and users) into a situation where they have absolutely ZERO ability to hire good representation for court. It's sad that america goes for this, but it does.

Another example of how the government is trying to push drug dealers (and users) down is with FAFSA (federal financial aid for students) If you have been convicted of ANY drug offense you can not receive financial aid to go to college. Fun.
posted by meanie at 7:07 AM on February 9, 2003