Is it really as absurd as Jay Homnick argues that it is to tax an illegal product? Since sentencing is harsher for sale of drugs without the tax stamp, it's just the sort of protection money we all pay to the government to avoid loss of liberty. It's a raw deal, since as Homnick points out, drug dealers don't get quite the service from government that legitimate businesses get: You can't call the cops if your stash is stolen, and the courts won't enforce a contract with your supplier. But given that, as Homnick acknowleges, "there is a long-standing practice of not excluding illegal income or purchases" from taxation, it would seem that that ship has sailed.
The federal/state jurisdiction issue is a bit of a red herring -- the legal system sorts out apparent conflicts like that all the time. Insofar as there's any problem with this legal regime, the solution is plain: End the insane war on drugs. We don't make laws based on Bible verses (else adultery and coveting would be crimes), but if we did I wonder how drug-dealing could be logically proscribed as a form of placing a stumbling-block before a blind man while selling alcohol is not. Surely Jay Homnick doesn't mean to be the Grinch who stole Purim.
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