Speaking of taxes on illegal sources of income, last year Tennessee's "tax" on "unauthorized substances" generated $1.8 million, slightly more than its 2005 haul. But the drug tax also ran into some legal trouble: In July a state chancery court judge ruled that the levy, which is typically collected from drug offenders after they're arrested (along with penalties for noncompliance), is a punishment disguised as a tax. Chancellor Richard H. Dinkins said it therefore violates the constitutional prohibition of double jeopardy when applied to someone who faces state prosecution for possession of the "taxed" drug. Since the tax is assessed presumptively without a hearing, Dinkins ruled, it also violates the right to due process. And despite language in the tax law promising confidentiality, he concluded, it may lead to compelled self-incrimination.
One argument that Dinkins rejected, because there was insufficient evidence in the record to support it, nevertheless vividly illustrates the bad faith of legislators in Tennessee (and in two dozen or so other states) who pretend a criminal penalty is a tax:
Plaintiff asserts that, since the stamp which dealers are required to purchase is too large to affix to each gram of marijuana or to "any amount of unauthorized substances"…compliance with the statute is impossible. The impossibility of compliance, plaintiff further charges, is a "complete defense to Mr. Robbins' noncompliance" with the Act.
A few years ago in Reason, Stephen F. Hayes told the story of an Indiana man's Kafkaesque encounter with that state's drug tax.