Drug legalization affects various social outcomes. In the debate over marijuana legalization, academics and the media tend to focus on how legalization affects public health and criminal justice outcomes. But policymakers and scholars should also consider the fiscal effects of drug liberalization. Legalization can reduce government spending, which saves resources for other uses, and it generates tax revenue that transfers income from drug producers and consumers to public coffers. Drawing on the most recent available data, this bulletin estimates the fiscal windfall that would be achieved through drug legalization. All told, drug legalization could generate up to $106.7 billion in annual budgetary gains for federal, state, and local governments. Those gains would come from two primary sources: decreases in drug enforcement spending and increases in tax revenue. This bulletin estimates that state and local governments spend $29 billion on drug prohibition annually, while the federal government spends an additional $18 billion. Meanwhile, full drug legalization would yield $19 billion in state and local tax revenue and $39 billion in federal tax revenue.