In the late 1980s, during the age of “Just Say No,” Alabama lawmakers passed a bill placing a tax on illegal drugs such as marijuana — complete with a little green stamp to show the tax had been paid.
Charles Crumbley, director of the Investigations Division at the State Department of Revenue, said the stamps have never been popular.
“We didn’t sell a lot because drug dealers really don’t want to do that,” he said.
What they did allow the state to do, however, was add tax penalties onto the list of charges brought against drug dealers. But court rulings took even that ability away from state tax officials.
Next, the law became a target for legislation earlier this year that does away with taxes that collect less than the amount required to enforce them.
But, Crumbley said, the marijuana tax doesn’t fall into that category. It’s self-sustaining, he said, and not in immediate danger of being cut, even if it does not send big returns into the state General Fund. State accountants tallied up $4,615 worth of stamps sold in 2012-13, according to the Legislative Fiscal Office.
So who buys stamps representing taxation of an illegal product? Mostly stamp collectors, he said. It costs nothing for existing employees to pick up the phone and sell a few stamps.
“The people that do want to talk to us will let us know immediately that they are (stamp) collectors,” Crumbley said.
Things were different when Alabama lawmakers passed the drug stamp tax at the height of America’s war on drugs.
“At the time, we were seizing a lot of cash, jewelry and guns,” Crumbley said. “When there is a forfeiture, they are able to forfeit those assets used to commit the crime, but when you assess a civil tax, it goes against any and all property.”
Courts deemed the department’s ability to seize property as tax forfeiture on illegal drugs a breach of due process in the Fifth Amendment after a landmark case in South Carolina, where similar tax laws had been put into place. Following the change of standards, Crumbley said, all that could be done now is sell stamps.
Rachelle Yeung, a legislative analyst for the Marijuana Policy Project, said a tax on illegal drugs is the wrong approach. The project is a pro-marijuana advocacy group based in Washington D.C. supporting the decriminalization, regulation and taxation of marijuana.
“I think if the state of Alabama wants to collect tax revenue from marijuana, they should make it legal and regulate it,” she said.
Yeung then pointed out instances where other states have found success with taxing decriminalized recreational marijuana. In the first three months following Colorado’s decision, the Centennial State netted $7.3 million in taxes from recreational marijuana alone.
Crumbley, a co-author of the drug tax bill in Alabama, said while it was mostly unsuccessful, a valiant effort and good intentions made it possible.
“What we were trying to do is tax an underground economy that escapes normal taxation that everyone pays,” he said. “Regretfully, we have not been successful.”