Finance

How States Profit from Illegal Drugs

April 7, 2014

Early last month a group of police officers sat inside Tavern on the Square in Lincoln's Haymarket, picking bar owner Matt Taylor's brain about a piece of artwork on the wall.

The framed blue poster morbidly shows a skull resting against a headstone, with a marijuana joint and a syringe laid into crossbones.

“People ask about it all the time,” Taylor said. “They'll say, 'That's pretty cool. What is it?' ”

The customers who ask get a lesson in an obscure piece of the Nebraska tax code inspired by the war on illegal drugs. The artwork is a replica of Nebraska's $100 drug tax stamp.

Nebraska began issuing the stamps in 1991 following the passage of a tax on illegal drugs signed into law by then-Gov. Kay Orr. They can be bought at Nebraska Department of Revenue offices across the state.

Drug tax laws, which exist in 20 states, offer a way for those states to collect money on illicit transactions. If you possess illegal drugs, Nebraska law requires that you have a stamp on your drugs. A stamp doesn't legalize the product, but a person can be charged for not having one.

In Nebraska, the law was intended as another way to punish drug dealers. The state has collected $544,588 from evaders of the drug tax since 1991, according to State Tax Commissioner Kim Conroy.

Since the stamps were first offered, 625 of them have been sold in Nebraska's revenue offices, bringing in $10,220, most likely from collectors. No name is required for drug tax stamp purchases because buying them might entail a form of self-incrimination.

Many drug dealers and buyers find out about Nebraska's tax only after being charged with a crime.

The tax is $100 per ounce of marijuana; $150 per gram of a controlled substance, such as cocaine; and $500 for each 50-dose unit or portion of a controlled substance not usually sold by weight, such as LSD or steroids.

Those who have less than 6 ounces of marijuana, less than 7 grams of a controlled substance, or less than 10 doses of a drug are not required to have a stamp.

Five percent of the tax proceeds go toward funding administration and enforcement of the tax. Half the remaining money is devoted to law enforcement and drug education programs in the county where the drugs were found, while the other half goes to the Nebraska State Patrol.

Being caught without a stamp means the person must pay the drug tax and a fine for not paying it. People also face a potential Class IV felony, which carries up to five years in prison and a separate $10,000 criminal fine.

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