Donald J. Boudreaux
and Adam C. Pritchard
Tribune News Service
Alcohol prohibition became the law of the land 100 years ago — on Jan. 16, 1920 — following ratification of the 18th Amendment and enactment of the Volstead Act. Progressivism played a driving role, with Americans possessed by reformist fervor set to cure the ills of society by banning the manufacture and sale of liquor. Today, reformers are pushing in a seemingly opposite direction, seeking to undo a longstanding ban on marijuana.
What lessons do the demise of alcohol prohibition provide for modern-day marijuana advocates? The circumstances are not as similar as you might think, and we should not expect a federal marijuana policy reversal in the near future.
The marijuana effort has found success in a number of states. Somewhat incongruously, however, the federal government retains its prohibition on marijuana, despite a policy of non-enforcement. Efforts to repeal the federal ban and conform the law with practice have gone nowhere.
High-school history tells us alcohol prohibition suggests Congress will relent and legalize pot, like it did alcohol, once it becomes clear prohibition is futile. People did not give up drinking in the 1920s, and worse, prohibition created opportunities for mobsters and other lawbreakers to grow rich while inflicting collateral damage on their neighbors. Congress, we’re told, recognized the failure of this “noble experiment” and repealed prohibition in 1933.
Despite this common interpretation, it is unlikely Congress will follow a similar pattern in repealing the marijuana ban. The tale makes a key omission: That the 1920s witnessed little momentum among citizens and politicians for ending Prohibition. Here’s how historian Norman Clark described it:
“(B)efore 1930 few people called for outright repeal of the (18th) Amendment. … The repeal movement, which since the early 1920s had been a sullen and hopeless expression of minority discontent, astounded even its most dedicated supporters when it suddenly gained political momentum.”
Something else happened in 1930 that suddenly changed the dynamic: The Great Depression, and its effect on federal revenues.
Alcohol prohibition was very closely linked to the federal income tax. Before the first national income tax in 1913, liquor taxes accounted for about one-third of annual federal revenue. Income taxes went from supplying about 16% of the federal government’s revenues in 1916 (the year before American entry into World War I) to supplying double that proportion in 1917. By 1918, the income tax supplied nearly two-thirds of federal revenue, and by 1920 it produced nine times more revenue than liquor taxes and customs duties put together.
So while Congress did eventually acquiesce to a popular social movement, it did so only after its coffers were being filled by another reliable source of revenue.
Then, for more than a decade, Congress gave no hint it would undo mandatory virtue. Prohibition, however imperfectly enforced, was on solid ground as a legal matter until things changed dramatically again in the 1930s. The Depression hit and income-tax revenues fell by 60% between 1930 and 1933.
Naturally, Washington was desperate for a solution, and its power brokers knew where to find one: At the bottom of the (legally purchased and taxed) bottle. One anti-Prohibition congressional leader acknowledged that if his faction “had not had the opportunity of using that argument, that repeal meant needed revenue for our government, we would not have had repeal for at least 10 years.”
Sure enough, Prohibition’s repeal did indeed generate tax revenues. As a percentage of federal revenues, liquor taxes jumped from 2% in 1933 to 9% in 1934, then to 13% in 1936.
The public and its leaders were not blind to Prohibition’s failure. Nor were they blind to the attendant disrespect for the law it enabled. But as is often the case, winning the argument isn’t always enough, and fiscal incentives matter every bit as much as — or more than — opinion polls.
So, if the history of alcohol prohibition is a guide, those seeking to legalize marijuana at the federal level might need to persuade our leaders that a windfall awaits them. The politics of prohibition inevitably revolve around the eternal quest for tax revenue.
Donald J. Boudreaux is professor of economics at George Mason University and a senior fellow with the F.A. Hayek Program at GMU’s Mercatus Center. ADAM C. PRITCHARD is the Frances and George Skestos Professor of Law at the University of Michigan.
