Policing the Illicit Cannabis Market After Legalization

A long and useful discussion on enforcement of marijuana taxes led me to post there some information from the most authoritative source on immediate post-Prohibition enforcement I have been able to find, Tun Yuan Hu, The Liquor Tax in the United States, 1791-1947: A History of the Internal Revenue Taxes Imposed on Distilled Spirits by the Federal Government (New York: Columbia University, Graduate School of Business 1950).  I’d be glad to learn of other sources.

In 1934, the Director of the Federal Alcohol Control Administration, Joseph H. Choate, Jr., said that “bootleggers are now turning out from their stills alone, not counting smuggling and alcohol divertings, a quantity of spirits which cannot be much less, and may be more than we drank before prohibition — that the government is losing more taxes than it gets, and that a colossal criminal industry, necessarily highly organized, still exists.”  Hu at 85-86.  (Hu did not believe Choate’s pessimistic estimate; Hu found that a “more reasonable estimate” for 1934 was 45,000,000 gallons of bootleg liquor versus tax paid consumption of 68,000,000 gallons.  Id. at 86.)

This situation led to an “Enforcement Campaign against the Tax Evader.” Id. at 95. This campaign worked in tandem with a tax rate aimed in part at “stamping out the bootlegger.” Id. at 80.

In the end, “tremendously increased importations and the consequent reduction of the prices of legal liquor greatly aided the attack on the bootlegger, which was being vigorously pushed through law enforcement.” Id. at 95. “From repeal of Prohibition through 1937 the main efforts were directed toward the liquidation of organized bootlegging gangs, especially those operating in Northern metropolitan areas. This syndicated type of illicit operation was virtually destroyed by the end of 1937, and since that time the control of production and distribution of illegal distilled spirits became largely a problem of coping with relatively small violators.” Id.

Liquor bootlegging in America today seems marginal if not folkloric.

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Author: patoglesby

From 1982 to 1990, I worked in tax policy for Committees of the United States Congress. In recent years, I was Adjunct Lecturer at UNC-Chapel Hill's Business School and then Adjunct Professor at its Law School.

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