To beat the bootlegger, you need flexible prices. Legislatures, even at their nimblest, may prove too slow to adjust tax rates adequately. Uruguay is avoiding that trap: “If one gram costs $1 in the black market, then we’ll sell the legal product for $1. If they drop the price to 75 cents, then we’ll put it at that level,” says Julio Calzada, a presidential adviser and the head of the National Secretariat on Drugs.
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It will be hard for legislators, especially on the federal level, to allow administrators to set tax levels. One just has to witness the beating the GOP routinely dishes out to the IRS to realize that. It is routine to hear for calls for abolition of the IRS from know-nothing politicians. I cannot imagine such individuals ever granting such nimble powers to administrators no matter how sensible it may be.