Why tax the hell out of it? It sounds like some sort of psychological projection where the government are your parents and to appease them, you're willing to bargain badly for something. "If you just let me stay out a few extra hours, I'll clean the entire house tomorrow." Why be so groveling and weak?
I'd contend that black markets for tax evasion are qualitatively different from black markets for restricted goods. Consider the hefty tax on cigarettes. Sure, there's a cigarette black market, but it's not nearly the majority of the market.
The (highly-opinionated) Tax Foundation did a study on this [0]. I'm not sure how reliable their numbers are (again: they're a foundation with an agenda), but if you read through their own spin, you can see that the big tax-based black market for cigarettes exists where there's a state-border disparity in tax rates, and even then, in 48 states the (estimated) black market took up less than half of the actual market.
So: set taxes at whatever arbitrary level, but don't go too high. Also, consider setting national tax rates instead. So many of our problems derive from state-level control of stuff. Delaware corporations, state taxes, state laws. But I'm just a poor socialist / federalist.
Legally distributed drugs can and are still competitive with black market equivalents because legal vendors don't need to build stolen shipments, bribes, and gang war into their pricing.
Regulations is a secondary taxation on legal dealers. Businesses have to pay high license fees, buy required security, keep records of EVERY PLANT (rfid tags).
Its still profitable enough and safe enough from police harassment that there about 900 businesses.
Yeah but black markets can still exist even if it is profitable for some. From what I've read some consumers are turning to black markets because it's cheaper than licensed stores [1].
Detroit decriminalized possession (up to 1 oz.) in 2012 to reduce police work.
I'm agreeing with you, they should (I'd rather it be statewide). I'm just offering clarification, it wouldn't be a large spending decrease in terms of enforcement.
From what I understand about the drug trade, and the Cartel de Sinaloa specifically (re: Chapo Guzman), Chicago could probably fix its pension issues and have money left over by taxing the amount of cocaine that flows through that city.
