The Wages of Sin

Once upon a time pot and gambling were considered vices and banned in most states.

Now they are big business.

The little strip mall where my gym is located has three retail outlets which sell marijuana (which is legal here in Maryland). Perhaps not coincidentally, there is also a 7-11 which does a booming business at night and on weekends.

Also visible from the parking lot are three very large signs promoting on-line sports betting.

Gambling and pot are not only big business, they are highly lucrative for state governments. Maryland currently takes in bit more than $100 million in marijuana tax revenue and about $25 million in sports gambling. The amount generated by gambling is expected to double over the next 12 months as Maryland will raise the tax rate from 15 to 30% on revenue.

The wave of marijuana legalization kicked into overdrive in the 2010s, and sports betting was jumpstarted when the Supreme Court ruled in 2018 (Murphy vs. NCAA) that the issue was a matter to be resolved by the individual states. In both cases concerne about public health effects were downplayed, both in the belief that such effects were minimal, and that they were more than offset by increases in tax revenue and by reduced strain on the criminal justice system.

On a personal level, we’ll see where this goes. There is the issue of liberty and the widely-held belief that we are best suited to make our own decisions. However, the man in the street can tell you that it’s common sense that if you legalize something you will get more of it, and that neither gambling nor marijuana is truly “harmless.” Studies of marijuana use point to possible severe long-term effects. Sports gambling? The ability to place bets online on your phone, even for prop action, might be the last thing an already addictive pastime needs.

What is more interesting is the view from state governments. Since the Supreme Court returned the issue to the states in 2018, an additional 34 states added sports betting, of which 30 allow it online. Recreational marijuana use? There are 24 states plus other jurisdictions which allow it, and 12 of those have legalized it in the past five years. When it comes to tax revenue, the $100 million+ that Maryland makes on pot is dwarfed by Arizona, which pulled in nearly $300 million in taxes last year. Sports gambling? Illinois pulled in $152 million, New York $800 million. These numbers might be small percentages of the overall budgets, but they represent marginal new revenue that can make the difference in whether budgets are balanced or not.

So is the difference between a vice and a crime whether a government can levy a tax on it? It’s long been accepted that gambling is an addictive vice that destroys lives but, as Maryland is proving this legislative session, it is also a great way to balance the budget.

However, governments are not only legalizing vices in order to tax them, they are considering whether to reclassify other activities and products as vices in order to justify increasing taxes. In the past such tax increases were justified on obvious targets alcohol and tobacco. Now, however, the search for revenue has been expanded in scope. Maryland, facing a multi-billion-dollar budget shortfall, is considering whether to impose a 2-cent per ounce levee on sodas, sports drinks, and other “sugary drinks” in the hope that doing so would generate $400 million in new tax revenue. The state legislature is also fielding a bill to apply an 11% excise tax on federally-licensed firearm dealers.

The possibilities for new sin taxes in the blue states are endless. Fast food? V-8 engines? Joe Rogan podcasts? MAGA merchandise? Stay tuned as blue-state budgets tighten.

In the meantime, I’m going to propose a remake of “Smokey and the Bandit,” But instead of running Coors across state lines with Burt Reynolds driving a Trans-Am as a blocker, it’s going to involve running Dr. Pepper and Gatorade into Maryland with Sydney Sweeney driving a cut-exhaust Civic.