THE HARMFULNESS TAX

In the era of the Volstead Act, H. L. Mencken said of the alcohol problem
that, between the distillers and saloonkeepers on the one side and the
prohibitionist on the other, no intelligent person thought there was any
solution at all. The same may be true of the illicit drug problem today,
with its traffickers and users on one side and its moralists and police on
the other. Only the problem is perhaps more serious because the acceptable
range of solutions is so narrow. There is very little effective opposition
to prohibition.

Any serious approach to this problem (as opposed to the present futile
approach) demands recognition of complexity and ambiguity. We have to reject
the dream of a free society that is also drug free. We may have to
acknowledge that the use of alcohol and other drugs has benefits, as well as
dangers. The main obstacle to thinking about any serious alternative to
present policies is that no one in government wants to give up the symbolism
of the criminal law or the commitment that has been made over the last 80
years, not only in the United States but all over the world, to treating
drugs as a criminal problem.

I would like to suggest a proposal for a noncriminal approach to
recreational drugs. Let currently controlled substances be legalized and
taxed. The taxes would be used for drug education and for paying the medical
and social costs of drug abuse. A regulatory agency would be established to
determine these costs separately for each drug, and the rate of taxation for
each drug would be adjusted periodically to reflect the information gathered
by this agency. Thus, the government would acknowledge the impossibility of
eliminating all drug use and use its taxing power and educational authority
to encourage safer drug use. The drugs that are now legal, alcohol and
tobacco, would not be distinguished from the others.

To illustrate the kind of calculation involved, it was recently estimated
that direct health care costs plus indirect losses in productivity and
earnings due to cigarettes amount to $65 billion a year, or about $2 a pack.
(The exact figures depend on how costs are defined; for example, the
economic loss from smoking may be "balanced," in a perverse way, by the
lowered cost of caring for chronic disabling diseases of old age in a
society where many die young of smoking-related illness.) Such a taxation
policy might be regarded as a way of making people buy insurance for the
risks to themselves and others in their use of drugs. Life insurance
companies already offer substantial discounts in their premiums for
nonsmokers, an insurance preference slowly being extended to fire and other
insurance policies.

The program might be instituted in phases, so that we could adjust and learn
more before committing ourselves fully. Phase one might involve alcohol,
tobacco, and cannabis; alcohol and tobacco because they are already legal,
cannabis because it is probably the least dangerous drug used for pleasure.
They could all be sold through specially licensed outlets at prices
determined by the regulatory agency. Advertising would be banned. Present
prices might be maintained at the start. Then, as the regulatory agency
collected more information, pricing would change to reflect social costs. If
this system works as hoped, data would eventually indicate that these drugs
are causing less and less harm. At that point we could consider bringing
other drugs into the system.

The advantage of this system is that we would no longer have the expense,
corruption, chaos, and terror of the war between drug traffickers and
narcotics agents. In this war a self-reinforcing cycle is developing as drug
enforcement operations begin to pay for themselves by funds confiscated from
the drug traffickers whose operations they make enormously profitable. The
taxing systems suggested here would establish a different kind of revenue
cycle, in which society would pay for the costs of drug abuse by extracting
them from the drug users in proportion to the amount they contribute to the
problem. The regulatory agency that would supervise this taxing system would
also serve as an educator and guide to society-an educator not constrained
by the present, totally unrealistic assumption, built into the criminal law,
that any use of certain drugs must be evil or dangerous, while other drugs
have a range of benign and harmful uses. Honest drug education would become
possible.

Is it possible that this arrangement would work? Would it be possible to tax
drugs enough to pay for their costs? Even if it were possible, would drug
abuse increase so much that we would be paying too high a price in personal
and social misery? Is the elasticity of demand great enough so that taxing
would substantially influence the amount of drugs consumed, especially by
heavy users? Evidence on all this is very uncertain, even in the cases of
alcohol and tobacco, where most research has been done. There is a large
literature on the distribution curve of alcohol consumption among
individuals in society, most of which concludes that any policy designed to
cut total consumption will at least proportionally reduce alcohol use among
problem drinkers and, therefore, the medical and social costs of alcohol
abuse. That is, the demand is elastic enough, even among alcohol users who
create problems by their use, to be affected by a rise in price. In fact
there is some evidence that in countries where the price of alcohol is
relatively higher, fewer alcohol problems exist, and the same is true for
states within the United States. Inelasticity of demand is greatest in the
case of tobacco, because nicotine is one of the most highly addicting
substances. Nevertheless, it is clear that even here raising the price by
taxes has considerable effect on consumption.

A problem raised by any system of authorized sales is the black market. The
tax would have to be set low enough so that a black market would not be
profitable. It is possible to do this and still reduce demand for the drug
considerably, as the case of alcohol seems to show. Yet it is not clear
whether any tax low enough to prevent a substantial black market would be
high enough to pay for the social and medical costs of the drug use.
Certainly present taxes on alcohol are far from doing that. It might prove
impossible to create a system that would make the abusers of the drug, or
even its users, pay for the full costs of abuse. Maybe this problem is
insoluble. Certainly the criminal law approach offers no solution for it.

Many might agree that the "harmfulness tax" approach would work if it were
limited to alcohol, tobacco, and cannabis. What about cocaine? Consider the
present alternatives. The so-called Andean strategy of interrupting South
American supplies is bound to fail for the simple reason of botany. The
assumption seems to be that coca grows only in Peru, Bolivia, and Colombia.
In reality, the coca bush will grow in any place were certain conditions are
met: an altitude of 1,500 to 6,000 feet; continuous high humidity; a uniform
average temperature of 65 degrees throughout the year; and soil free of
limestone. Coca thrives on land that is too poor for other crops. In the
past it has been grown commercially in Jamaica, Madagascar, India, Ceylon
(Sri Lanka), and especially Java. Even if, implausibly, the coca bush could
be destroyed in the Andes, it would soon be blooming again elsewhere, just
as the cultivation of opium poppies increased in Iran and Afghanistan when
it was curtailed in the Far East. Let us hope we do not have to see American
soldiers coming home in body bags before we realize that the Andean strategy
will never eliminate the supply of cocaine.

No policy aimed directly at drugs and drug users can deal with the social
issues that are the true heart of what is loosely, inadequately, and
propagandistically labeled the "drug problem." What I am proposing is a
"harmfulness tax" as an alternative to the present unsuccessful drug
prohibition policy. Both legal and currently illegal drugs would be taxed in
proportion to the social costs associated with their use. In a sense, drug
users would be required to buy insurance against the harm that their drug
use might cause to society. As was noted, the scheme would be implemented in
stages, beginning with alcohol, tobacco, and marijuana. After the program
had been established in this way, it would be extended to other drugs,
including cocaine. This proposal accords well with experiences gained in
taxing legal drugs and with the realities of current drug use in America.

Lester Grinspoon, M.D., is Associate Professor of Psychiatry Emeritus at
Harvard Medical School. A Fellow of both the American Association for the
Advancement of Science and the American Psychiatric Association, he is
founding editor of the Annual Review of Psychiatry and the Harvard Mental
Health Letter. His latest book is Marihuana, the Forbidden Medicine (with
James B. Bakalar, 1993).