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, progressive 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 growing number of states. Somewhat incongruously, however, the federal government retains its criminal prohibition on marijuana, despite an apparent policy of non-enforcement. Efforts to repeal the federal ban and conform the law with practice have gone nowhere.
The high-school history account of alcohol prohibition suggests that Congress will eventually relent and legalize marijuana, like it did alcohol, once it becomes clear that 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 Congress, we’re told, recognized the failure of this “noble experiment” and repealed alcohol prohibition in late 1933.
Despite this common interpretation, it is unlikely that Congress will follow a similar pattern in repealing the marijuana ban. The tale makes an important omission: that the 1920s witnessed precious 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 specifically 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 percent 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 that 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 percent 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 the hoped-for tax revenues. As a percentage of federal government revenues, liquor taxes jumped from 2 percent in 1933 to 9 percent in 1934, then to 13 percent in 1936.
The public and its leaders were not blind to Prohibition’s failure up to that point. Nor were they blind to the attendant disrespect for the law that it enabled. But as is often the case in American politics, winning the argument isn’t always enough, and fiscal incentives can matter every bit as much as — or more than — public 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 major 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.