Daily Dish of Dominey Design
{  April 23, 2003  }

Drug Tax Stamps

Consider yourself warned - if you live in Kansas, and make a living peddling cocaine, pot, methamphetamine, or any other substance, then according to this document from the Kansas Department of Revenue, you have to pay state taxes on all your sales.

Seriously.

Now let's imagine the roundtable meetings politicians must have had for this brilliant idea. Obviously drug dealers don't carry around cash registers, or process credit cards, so they can't automatically add tax to a pot-head's purchase. What's the answer? I know! The dealer must come to our office and purchase "drug tax stamps" to prove they paid taxes on their sales. If the drug dealer is caught selling drugs, and doesn't have a pocketful of stamps to prove their financial stewardship to the State of Kansas, then they will face all kinds of fines and empty threats of extended jail time.

If you read their FAQ, it only gets better. Not only are there different tax rate sheets for drug types, but properties of each drug. For example, the sale of a "dry" plant of marijuana is taxed at $.90 a gram, compared to the "wet" variety which receives a special discount of $.40 a gram (no mention of the red hair variety).

Okay, so say you were actually stupid enough to go in to their office, admit to being a drug dealer, and ask to purchase a handful of stamps - what do you do with them? Like a pack of cigarettes, you affix the stamp to your bag of illegal substances. Your patrons will then know what a responsible, law-abiding drug dealer you are.

Wait a second.

If you're abiding by the law by paying tax on your "illegal" product, does that make it legal? According to the State of Kansas, no. Then can anyone explain what they're doing in the business of accepting, processing, and spending tax money earned on the sale of illegal drugs? Again, according to their FAQ...

Taxing the Underground Economy - The fact that the business of dealing marijuana and controlled substances is illegal does not exempt it from taxation. Legitimate business transactions are taxed. Dealing drugs is a large part of a previously untaxed underground economy.

We know full well that legitimate business transactions are taxed. And yes, drugs do pump money into the local economy (as in, 2am munchie runs to Taco Bell). But does the money flow from the underground to the above-ground economy constitute a legitimate source of taxation? The page utterly fails to explain this gaping hole of logic because the logic - and they know it - is completely screwed.

Now, correct me if I'm wrong, but wouldn't it be in the State of Kansas' best interest to help spur sales in this "Underground Economy" to generate even more revenue for the state coffers? Doesn't that make the State, and all involved politicians, willing participants in the production and distribution of drugs in their state? If all drug dealers were dumb enough to buy the stamps, the police would have a vested interest in keeping their sales team on the streets. After all, the tax on that cocaine is putting gas in their car and matching funds in their 401k.

The idiocy of money-grubbing, tax and spend politicians never ceases to amaze me.

Comments

Perhaps the politicians merely want a little of what they're spending on their drugs back. I agree, though, that the whole idea is incredibly stupid. I can just picture some politician saying, "All these drug dealers are out there making more money than me illegally. I want a cut of the deal! Who's with me?" :)

Posted by: ste at April 23, 2003 1:49 PM

I think this whole idea started in Georgia....and you should see the taxes they put on Viagra. C'mon over here Britney...and grab me a Pepsi.

Posted by: Bob Dole at April 23, 2003 1:56 PM

ROFL, that's the best laugh I've had all day.

Posted by: Simon Willison at April 23, 2003 2:52 PM

taco bell.. pshh, don't you guys have a taco cabana?!

Posted by: steven at April 23, 2003 2:53 PM

I couldn't find them again, but I've actually seen statistics on how much money these tax stamps bring in. I was quite shocked at how much it was, given selling drugs is illegal and all. It seems some dealers want to be ethical, or something like that...

Doesn't it seem as if the state could make sure they get taxes from many illegal drugs by legalization of that drug? Oh but that wouldn't work, the police wouldn't have enough to do, and prisons wouldn't be overflowing. At any rate, the whole idea of charges taxes for an illegal activity is really stupid.

Posted by: Andy at April 23, 2003 2:54 PM

seriously.. i heard this exact same story, but not just from the State of Kansas.. I believe I saw it on an actual Federal IRS form for businesses. It boggled me then, and it boggles me now. Your rant made me smile, though, because I doubt I could say it much better.

Posted by: nate at April 23, 2003 3:03 PM

There was a similar law in Nebraska, I believe, but it's not for collecting legitimate taxes from drug peddlers as you suggest, but rather to turn the screws that much tighter on convicted drug felons by slapping them with tax evasion charges (which will bring a monetary liability rather than just time served) on top of their drug penalty. A way of convicting them twice for the same crime.

Posted by: Scott at April 23, 2003 3:11 PM

I don't think this is stupid at all -- there's really no expectation of revenue. It's, as Scott said, just a way of getting dealers on a different charge. Remember, this is how Al Capone ended up getting nailed -- tax evasion on his illegally-gotten gains. This also isn't new -- it's been around for at least the better part of a decade.

Posted by: Josh at April 23, 2003 3:35 PM

That is the funniest thing I've ever heard. But I agree with Nate, if they really want to make some money and boost our economy — legalize it.

Posted by: Paul Mayne at April 23, 2003 3:37 PM

Actually, if you look through the IRS instructions for Form 1040, it says you must report income from illegal activities and embezzlement...

Posted by: Paul at April 23, 2003 3:41 PM

Also, it's likely not the "tax and spend" politicians (Dems) who are creating these laws (since they won't generate real revenue anyway, but are a nice way around the double jeopardy protections in place) but the "punish and suffer because there are no insinuating circumstances" politicans (Reps).

Posted by: Scott at April 23, 2003 4:16 PM

I'm stunned. This one just floors me.

We have a government that is so hungry for money, they cannot see straight.

This week, my wifed called the goverment agency responsible for issuing passports to complain. We applied for a passport for my daughter and they sent this us a letter indicating errors in our application (which was incorrect).

As the call began we were told that we would be charged .55 per minute! Now they want to charge you to complain about their 'service'. What? You have to pay to be mad?

I'm waiting for the DMV to charge you for standing in line. What a freakin' cash cow that will be.

Posted by: mr. ken at April 23, 2003 4:57 PM

They should also give the dealers who come in for the stamp a free "I'm an idiot dealer" button too. If there's ever an excuse to cheat taxes, being a drug dealer is one. LOL! :)

Posted by: Chris at April 23, 2003 5:13 PM

Scott made the points that first came to mind when I read it as well. This has been in effect in Iowa for some time now. And this is mostly another way to punish the criminals when they get caught, and help recoup some of the costs of convicting them. In some ways, it probably helps reduce the taxes the rest of us pay.

Posted by: Jeremiah at April 23, 2003 9:47 PM

This is of course, not just limited to Kansas. You have been blindsided by the emotions caused by this ridiculous logic. You should have focussed on the graphic design of the different stamps, it will make you much more happy.

http://www.flyingbuffalo.com/stamps.htm

(Scroll down if you just want to see the stamps)

Posted by: smokem at April 23, 2003 11:07 PM

I doubt that they expect drug dealers to actually purchase these things. The politicians just wanted a way to slap convicted drug dealers with a big fine.

The question that interests me here is why did the politicians have to go to these lengths? Why not just make existing drug dealing laws stricter?

Posted by: Todd at April 24, 2003 2:36 AM

Todd asked: "Why not just make existing drug dealing laws stricter?"

Because those laws are already some of the most vicious, mean and strict laws there are. And they've done nothing to solve the problem, and certainly aren't bringing in more money.

Posted by: Andrew at April 24, 2003 11:05 AM

I've heard of this also, and like Scott said above, it's a way to charge drog offenders with multiple crimes.

It's not stupid, it's brilliant. It's a catch-22. If they don't tax their drugs, then it's an additional crime when they get caught. If they go to pick up drug stamps, then they'll be picked up for dealing. It's a lose-lose for them either way.

Posted by: Greg at April 24, 2003 1:03 PM

They've done the same thing in Idaho for at least 10 years or so .. just a scam to add monetary fines to dealers at the time they're busted.

Posted by: C at April 24, 2003 6:02 PM

I think it's a great idea. Shut the hell up, fool.

Posted by: Taylor at April 26, 2003 1:56 AM

Actually, this is completely unconstitutional, and there have been court cases about similar laws. A law that forces someone to pay taxes on drugs is a law that forces someone to admit to illegal activity, which is unconsitiutional. Just my 2 cents.

Posted by: Brian at April 26, 2003 3:39 AM

I know there's lots of 'ooh, federal goverment is the bane of western civ (even though it brought you, um, the Internet) but simply look at it this way: revenue collection and defining illegal activity are seperate processes in goverment. Revenue collection is not some vast conspiracy: it's simply how the goverment pays the bills. Economic actitivty is regulated so that transactions are taxed fairly (meaning equitably as defined by tax law). If large sums or money are being moved around (thus depleting the revenue potential of a region: state, city, country), then the ability of the region to enforce laws (that define illegal activity) is depleted. Since sizeure laws have been in place for some time, and often involve the federal goverment (since the DEA funds more large scale interdiction), the states lose the taxable portion of a large deal (sale, laundering, etc.), even though they may end up housing the criminal or funding the trial. These laws are intended to claim their fair (as defined above) share of economic activity in their area. Since, after all, dope may be legalized, and then the states won't have to ruch legislation in place (unlike being blindsided by ecommerce, which still avoids taxation).

Posted by: nic at April 26, 2003 12:41 PM

I have seen "the idiocy of money-grubbing, tax and spend politicians" and it is us. Everybody want something from the government, but no one wants to pay for it. Just mortgage the future -- what the hell.

Posted by: Tim Swan at April 28, 2003 3:17 PM

this is a fairly common thing. in some places selling drugs is technically legal, but only with the tax stamp, which you can't actually. so in effect there is no legal way to sell the drugs. it's just a bureaucratic way of going about making drugs illegal and providing for the most penalties.

Posted by: eric at May 1, 2003 10:07 AM

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