Vice Squad
Thursday, March 27, 2008
A Federalism Quandary

Back in the late 1800s and early 1900s, alcohol was taxed at the federal level, but illegal in some states. This created a bit of friction, as alcohol dealers (operating illegally within a state, if their alcohol was for beverage purposes, not industrial or sacramental or medical use) would sometimes pay their federal taxes. The federal tax rolls, therefore, could be used (and were used) to identify state lawbreakers. Some federal license holders tried to argue that state prosecutions based on federal tax payments violated the self-incrimination clause of the 5th amendment, but that argument generally was not availing. Some states (twenty-eight states, by 1917) even passed laws that made the payment of federal alcohol taxes for beverage alcohol a prima facie state crime. (See Chapter 5 in Richard Hamm's Shaping the Eighteenth Amendment.)

Today we are witnessing a curiously symmetric problem. Medical marijuana is legal in many states, but is illegal as a matter of federal regulation (except for those handful of patients who are provided with federal marijuana). States want to tax the sales, but what marijuana provider wants to provide tax records that could be used for a federal prosecution? I hope that the self-incrimination argument -- which on the merits seems to be airtight from the point of view of this non-lawyer -- proves to be more persuasive this time around.

Thanks to Radley for the pointer.

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