Reply #62: I dont think you understand

[lakercub]

just how much the cartels charge for their product. Their prices are beyond obscene...and the government would have a lot of leeway in setting the tax levels for these "goods." They would be able to tax these far lower than the cartel prices, while still making it an expensive commodity. But we don't need to debate this...it has already been done. Again I point to prohibition. The price of alcohol soared when the mafia and other organized crime outlets got to run the booze illegally. When prohibition returned, booze prices went right back down again.

Here is an article that talks about this a little bit. Note the part about how the prices of blackmarket goods tend to be set:
http://www.economist.com/opinion/displaystory.cfm?story_id=13237193

and here is an excerpt:
Yet prohibition itself vitiates the efforts of the drug warriors. The price of an illegal substance is determined more by the cost of distribution than of production. Take cocaine: the mark-up between coca field and consumer is more than a hundredfold. Even if dumping weedkiller on the crops of peasant farmers quadruples the local price of coca leaves, this tends to have little impact on the street price, which is set mainly by the risk of getting cocaine into Europe or the United States.

Nowadays the drug warriors claim to seize close to half of all the cocaine that is produced. The street price in the United States does seem to have risen, and the purity seems to have fallen, over the past year. But it is not clear that drug demand drops when prices rise. On the other hand, there is plenty of evidence that the drug business quickly adapts to market disruption. At best, effective repression merely forces it to shift production sites. Thus opium has moved from Turkey and Thailand to Myanmar and southern Afghanistan, where it undermines the West’s efforts to defeat the Taliban.