Tennessee Center for Policy Research

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Drew Johnson, (615) 383-6431
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Tennessee Center for Policy Research Finds Tennessee’s “Drug Tax” Fiscally Wasteful, Legally Flawed
Program costs taxpayers thousands per day while disregarding Constitutional protections
Nashville, TN - June 27, 2005

A report released today by the Tennessee Center for Policy Research (TCPR) finds that from January 1-June 21, 2005, Tennessee’s Unauthorized Substances Tax (UST) cost taxpayers nearly $1.5 million more than it generated in revenue.

The UST also has troubling Constitutional implications for Tennesseans, infringing upon two separate Fifth Amendment protections.

The tax, which was created to generate revenue for the state general fund and state and local law enforcement agencies, requires that individuals in possession of illegal drugs or alcohol pay a tax by purchasing a drug stamp or face severe fines if arrested. Purchasing a drug stamp does not provide immunity from criminal drug possession or trafficking charges.

If an individual arrested on drug charges cannot pay the fines resulting from failure to pay the UST immediately, the state can seize his or her property without the burden of establishing guilt in a court of law.

This year, the Department of Revenue has assessed $14.9 million in tax penalties for drugs on which taxes were not paid. However, the state has collected only $480,007 of that amount through property seized and fines levied as a result of drug busts. Since three quarters of the fines collected as a result of the UST are returned to the local law enforcement agencies that make the drug arrest, the tax has generated only $120,002 in new revenue for the state.

The cost of implementing the tax and operating the bureaucracy necessary to administer the tax over the same period reached $1.58 million.

Even worse than the cost to taxpayers is the UST’s disregard for the Constitution.

According to TCPR research fellow Ryan Burleson, “It is quite probable that the UST violates the Constitutional protection against double jeopardy since if a drug offender is required to pay a stamp tax or is subject to extensive fines for lack of a drug stamp at the time of a drug bust, and is also prosecuted for possessing unauthorized substances, there are multiple punishments for one offense.”

“Additionally, although purchasing a drug stamp is done anonymously, getting caught without stamps leads law enforcement agencies to gather extensive information from the drug offender. This sets up Tennessee’s tax code for a second Constitutional violation since that information can be used against the defendant in court, ultimately forcing the defendant to be a witness against himself,” said Burleson. “This is another violation of the Fifth Amendment.”

“Before the state squanders additional taxpayer money funding the administration of this flawed scheme and risks millions of additional dollars by facing the legal challenges sure to rise against the program, the state legislature should repeal the Unauthorized Substance Tax,” said TCPR president Drew Johnson.

“Given the inadequate results of the UST, repealing the drug tax would not hinder the state’s attempt to address the critical and complex problem of drug use in Tennessee. By repealing the UST, however, the state legislature would go far in proving that the state government is concerned about addressing the issue of illegal drugs and alcohol in a manner in concert with the Constitution and respectful of hard-earned tax dollars.”

Note: TCPR Policy Brief 05-03, The Unauthorized Substances Tax: How Tennessee’s
Drug Policy Cracks the Constitution and Blows Tax Dollars is available online at: www.tennesseepolicy.org.

The Tennessee Center for Policy Research is an independent, nonprofit and nonpartisan research organization dedicated to providing concerned citizens, the media and public leaders with expert empirical research and timely free market policy solutions to public policy issues in Tennessee.