Yes, if states don’t stop the black market, it will flourish and keep tax receipts down. Here’s another story on the same issue.
A friend points out the more general problem: “The problem is akin to arguing that cash only businesses will drive out taxpaying businesses. They are a problem at the margins. ” And with restaurants, for instance, even those that pay tax may not pay all the tax they owe.
But tracking down bootleggers should be worth the effort. Enough enforcement will take away their economies of scale — which legal operations can obtain, if the federal government, too, goes after the illegal sector first.
The marijuana states don’t yet have analogs to the statutes barring possession of untaxed alcohol, like Missouri’s. But medical marijuana complicates the picture, because it is (typically) untaxed, but lawfully possessed.
The Center for New Revenue 