1. If/When this happens how will the local and federal governments get their piece of the action.  Prostitution Licenses?

We’ll likely see a wide variety of statutes and structures.  

First the financial issues:  Minnesota, for example, has an estimated 2,300 providers who in 2002 generated an estimated $215m in revenue.  A 15% service tax on that would be $30m annually into Minnesota’s coffers.  Very few legislators will ignore a revenue source like that.  And there’s always the possibility that legalization will increase the market, though I doubt it will be by more than about 10%.  On a per capita basis cities such as Atlanta, DC, and L.A. have higher numbers yet.

Minnesota (state, counties, and cities) spends an estimated $12mm annually on enforcement which will be reduced to an estimated $3.5mm (enforcement of street solicitation, brothels, and management of licensure systems).   By way of comparison L.A. spent over $100mm in 2000.

A few states, such as ND, will likely decrim rather than legalize.  Other states will go overboard with regulations.  One straw I looked at even mentioned having clients register with the county health department and then make providers keep records of who they see and when.  Chicago is likely to have 50 pages of facility regulations including the size, material, softness, and union manufacturer of the mattress .

The majority of states will likely go with a model that legalizes consensual adult prostitution but criminalizes public solicitation (street prostitution), coercion, pimping, living off the proceeds, and running of a bawdy house (brothel).  Many will require providers to register, pay an annual license fee, and get routine health checks.  Some will also create a service fee/tax of up to 15%.  A strong recommendation is made however that municipalities be allowed to allow for red light districts and brothels at their discretion.

A few states will go with a model that creates an additional layer of regulation.  I’ll post a strawman of one such separately.


2.  If/When this happens the same argument that is used for the high price of drugs can be applied to this venture.  Since it would now be legal would the price drop because of the lack of criminal element?

I think the only thing controlling price will be market forces.  If more clients than providers enter the market prices will remain the same or possibly even rise.  If more providers enter then prices (for some providers) will drop.  Most likely we'll see a broadening of the market with a wider range of price/service options.