The Wages of Sin

by

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 a 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 concerns 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 revenues 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 such as 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.

10 thoughts on “The Wages of Sin”

  1. Break down society, get more dependents, win for nanny state.
    And do not disregard the Curley Effect of making life less enjoyable for normals.
    I have long thought the primary reason for the insane gun laws in some states was just to drive out likely conservative voters- aka those deplorable V8 engine lovers.

  2. Ah, so my Civic might yet enjoy a second career in the end! Great news! (Sadly, no comparable ‘seat cover’ to accompany….)

  4. In terms of sin, our social betters basically put tobacco use (by lowering it) and marijuana use (by raising it) on the same level of acceptability and partially justified it by the taxes from which it can be reaped.

    So now the libertarian doors are opened to legalizing all sorts of behaviors, partially out of a conviction that they are “victimless crimes” but also because bringing it out of the shadows and taxing the heck out of it we can benefit from the gushers of revenue. Prostitution? Harder drugs?

    Keep in mind too that the elevation of marijuana/lowering of tobacco dynamic can also work with alcohol, especially with that facile CDC study linking booze to cancer.

    There are two other dynamics.

    The first is that federalism and local jurisdictions offer a form of “social proof” where crazy/obscene ideas can be tested out and then injected into the larger mainstream. That’s what happened with mail-in voting, of course it’s failed in other areas but you should never turn your nose up at what’s going on in blue areas.

    The second is that diversity and moral order might be fundamentally incompatible. By diversity I don’t mean just DEI but also views on vice and moral in general.For the 150 years or so, since at least Oliver Wendell Holmes, John Dewy, and William James we have drained not just moral structures out of the socio-political order, but have outright banned them.

    Instead of a form of “assimilating” where people are asked to accommodate themselves to the social order, the social order instead assimilates to the various sub-groups of society. This isn’t just a matter of liberty and government keeping its nose out of other people’s lives, but also how people interact with each other within the same physical space.

    The great libertarian conceit is that government has no role to play in this… of course it does, it might be a minimal one but by definition a social order implies moral choices. It’s one thing to have a socio-political system that continually allows people to live as they wish in the name of freedom, it is another for the same system to accommodate an ever diversifying set of subgroups because it is unable to articulate a larger moral order. That’s what is happening in Britain right now

  5. As an example of the economic illiteracy of the folks running the country (or at least Maryland):

    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.”

    Because making something more expensive never gets you less of something. And, just as important, betting is, naturally, never funded by earlier, successful, bets.

    Or are the government’s accountants assuming the bookie’s accountants are even dumber than they are, that they won’t adjust the payouts to maintain their own margins?

    Or does the government believe that all this gambling is the result of addiction and that its citizens will keep pumping in just as much money even if they can’t win as much? And, if so, how does the government justify allowing gambling-as-a-business at all?

  6. Do any of the states that have legalized marijuana still even make a pretense that any of the revenue will go toward drug treatment? Dito for gambling? Is there any evidence that criminal drug and gambling activity has decreased?

    A number of states have complained that they cannot raise the revenue they would like because of competition with illegal producers. Numerous legal pot operations have been taxed out of business. I wonder what the bankruptcy ramifications, which are federal, are for pot producers while it remains illegal on the federal level?

    By legalizing and taxing vice, the government is in the position of profiting off the backs of those that are most vulnerable. At what point do laws loose any foundation in morality and become just a collection of random rules intended to raise revenue?

  8. We (including myself) like to cite that politics is downstream from culture so that in a sense all government does is ratify the choices that culture has made. A fundamental part of liberty

    Yet it is also true to a large extent that politics influences culture as well. Gambling has slowly transformed itself over the decades from a backroom activity to being allowed in certain jurisdictions, to gambling on reservations, to being able to do on-the-fly prop betting on phones. That is a “remarkable” achievement in terms of normalization and driven not so much by being “pro-choice” as desire for revenue.

    I’ll leave it up to a historian to decide when the avalanche began. Maybe it was Vegas/Atlantic City which provided access to casino gambling by major population centers, maybe it was reservation gambling (which I’m not sure the feds could have prohibited for long) However government action has promoted the legitimization of a once prohibited cultural activity, a destructive activity, driven not by promotion of choice but desire for money

    We are seeing the same phenomena with marijuana as we saw with gambling. Over the past few years where recreational marijuana is legal I find the smell of pot smoke to be pervasive along sidewalks. It’s not supposed to be, but the police turn a blind eye to it and therefore it is being equated to tobacco smoke. In another 10 years it will simply be a fact of life.

    If you follow hot new trends, alot of 20 somethings are backing of alcohol consumption, what is left unsaid is that they are increasingly turning to marijuana, especially in edible form – smoking is bad for you after all – and also lessens the “stink” that drinking provides. I have sat across a table more than once from somebody who declines a drink but has a buzz going. Why? The social approbation has disappeared in part because it is legal.

    Until we understand that the promotion “vice” is driven not just by those who push recognition of their “victimless” crime but by the desire of governments to tax it, we’re going have more of this.

  9. Let’s not ignore the most damaging form of legal gambling — the Stock Market. There is a major difference between genuine investing and the day-trading speculation which goes on in Wall Street.

  10. If you think the stock market is a gamble, try farming. Bet a million, (very literally, often more) wait nine months to a year to see how much you lost with everything from the weather to crop prices to political meddling. While USAID was a totally corrupt slush fund, it did buy commodities from American farmers for distribution, what everyone thought was their main activity. So the present uproar is going to break some innocent eggs to make Trump’s omelet. They need to do a good job to make it worth it.

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