comments_image Comments

11 Ways the Drug War Raises Your Taxes and Shrinks Your Profits

One public policy with profound impacts on business and the economy is rarely evaluated: drug prohibition policy.

Photo Credit:


Over the past five years, we have witnessed profound change in the U.S. and global economies. Who would have ever imagined that General Motors would go into bankruptcy and the government would take a one-third stake in its ownership? U.S. unemployment has been extraordinarily high. Key sectors of the economy such as housing have been knocked to the ground. Federal government indebtedness has skyrocketed. State and local government spending has cratered, resulting in extensive cuts in services, from public schools to police departments.

Every business knows that its survival could be upended by a shock to oil prices, the unavailability of credit, or a hit to the economy of Europe or China. Every investor is desperate to protect their portfolio against loss, and struggles to obtain a return on investment greater than inflation. The economic impact of public policy dominates every contest, from county sheriff to president, from U.S. senator to town councillor.

Yet one public policy with profound impacts on business and the economy is rarely evaluated: drug prohibition policy. Around the world, government leaders, ordinary citizens, and business leaders are now questioning the effectiveness, the merit, and the wisdom of continuing the war on drugs.

If you are an out-of-work carpenter or automaker, or you once had a job making anything in the U.S., part of why you are unemployed or underemployed is the war on drugs.  All of the additional costs to the businesses in lost sales translate into fewer jobs for the people who make the things to sell. All the additional costs of added insurance or security, or losses due to shoplifting or other crime, mean less money to spend on salary or advertising to build market share and keep the company you work for growing, giving you the possibility of a raise or a shot at a promotion.

If you have a retirement account or own property, drug policy makes those assets less valuable. If you simply work for a profit-making business, chances are the size of any raise you might get is smaller because of drug prohibition.

If you own or manage a business, the following list explains how drug prohibition shrinks your customer base, increases your taxes, creates crime, raises your costs and reduces your profits: 

(1) You have fewer customers because the war on drugs reduces purchasing power.

Over the last twenty years, more than seven million Americans received felony convic- tions for possessing drugs or selling them. Tens of millions of others have criminal records for arrests or misdemeanor drug convictions. Many of these people are drug-free, but struggle to find a job and a regular paycheck. Ex-felons are rarely hired for responsible jobs – typically they are underemployed, if employed at all. Tens of millions of potential customers can’t buy what you are trying to sell. Our prison population has grown by two million persons over forty years. People in prison don’t buy Fords or Chevrolets. Japan and Germany do not hurt their domestic motor vehicle markets by filling their prisons with young people, drug offenders, or substance abusers.

(2) Your potential customers can’t buy your products because the war on drugs has de- prived them of credit.

Typically, one-third of your customers use a credit card at the cash register ( 1, citation link at end ). Ex-felons’ applications for credit are often rejected, even if they have regular jobs. In many neighborhoods, a significant fraction of the men and women walking by your door can’t buy your goods or order your goods and services by Internet or telephone.

See more stories tagged with: