A new Cato Institute report examines the budgetary impact of ending the drug war and concludes that $88 billion could be saved each year (about $41 billion from canceled spending and about $47 billion in new tax revenue).


Here’s the executive summary:

State and federal governments in the United States face massive looming fiscal deficits. One policy change that can reduce deficits is ending the drug war. Legalization means reduced expenditure on enforcement and an increase in tax revenue from legalized sales.


This report estimates that legalizing drugs would save roughly $41.3 billion per year in government expenditure on enforcement of prohibition. Of these savings, $25.7 billion would accrue to state and local governments, while $15.6 billion would accrue to the federal government.


Approximately $8.7 billion of the savings would result from legalization of marijuana and $32.6 billion from legalization of other drugs.


The report also estimates that drug legalization would yield tax revenue of $46.7 billion annually, assuming legal drugs were taxed at rates comparable to those on alcohol and tobacco. Approximately $8.7 billion of this revenue would result from legalization of marijuana and $38.0 billion from legalization of other drugs.

Saving money that is otherwise wasted is just one of a dozen good reasons to end the drug war. But since policymakers have placed all of us into a financial jam, this report shows one way to improve our position. Voting against the drug war remains a risky vote but more politicians are concluding that it is a less painful vote than voting against other things the government spends money on. 


Harvard economist Jeff Miron and his co‐​author Katherine Waldock have data on the federal budget and all the states. Check out how much money your state is wasting and spread the word to others.