Inflicting harm on the poor

Gary S. Becker et al. argue that (pdf)

a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. This means that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.

...a monetary tax on a legal good could cause a greater reduction in output and increase in price than would optimal enforcement, even recognizing that producers may want to go underground to try to avoid a monetary tax. Indeed, the optimal monetary tax that maximizes social welfare tends to exceed the optimal nonmonetary tax. This means, in particular, that fighting a war on drugs by legalizing drug use and taxing consumption may be more effective than continuing to prohibit the legal use of drugs.

...our analysis implies that monetary taxes on legal goods can be quite effective, drugs and many other goods are illegal.... [T]he explanation is related to the greater political clout of the middle classes.

...[T]he total price of illegal goods tends to be lower to poorer persons. Since most crimes are concentrated in poorer neighborhoods, illegal drug production and distribution also tends to be concentrated in these neighborhoods. This makes illegal goods cheaper to persons who live in these neighborhoods since access to them is easier. The total cost of drugs and other illegal goods is cheaper to poorer persons also because they are more likely to be involved in the trafficking in these goods. They are more involved because the cost of imprisonment and similar punishments from selling drugs is less to individuals with lower opportunities in the legal sector. The full cost argument is stronger if we consider enforcement against consumers. Since the non-monetary tax, i.e., punishment, is more time intensive, this corresponds to a difference in the value of the tax between classes that exacerbates the effect. There are also reputational effects that make conviction costlier for the wealthy. In fact, more than half of all persons imprisoned on drug charges are African-American....

Even disclosure of use sometimes is very costly to higher income and more educated persons. During his first presidential campaign, Bill Clinton had to deny that he inhaled on the allegedly few occasions when he smoked marijuana. Marijuana use during his student days cost Judge Douglas Ginsberg a Supreme Court seat.

Our conclusion is that making goods illegal and punishing suppliers and consumers by imprisonment and other methods are more costly to higher income persons, and hence tends to reduce their consumption more than consumption of lower income persons. Even if low, middle, and higher income parents have the same desire to discourage drug use by their children, the great political influence of higher education and income groups would explain why drugs are illegal rather than subject to sizeable monetary excise taxes. It also helps explain why punishment is mainly imposed on suppliers rather than consumers of drugs since traffickers are more likely than consumers to be low-income persons.

This analysis also helps explain why prostitution and much gambling are illegal rather than legally consumed with high excise taxes. If individuals at all income levels want to discourage consumption of these goods by children and other family members or friends, the politically powerful middle and higher income persons would prefer to make them illegal rather than legal and subject to high "sin" taxes. The explanation is again that consumption of these goods by middle and richer individuals are reduced more when they are illegal than subject to the high sin taxes. The intent may not be to inflict greater harm on the poor, but making goods like drugs, gambling, and prostitution illegal, and mainly punishing traffickers, has precisely that effect.