Like Nick Schulz, I find the notion that government should legalize the activities of consenting adults in order to financially exploit them...philosophically insufficient.
Sodomy laws, for example, should be repealed if for no other reason than that it's none of your damn business what consenting adults do in the privacy of their bedrooms.
[Although I haven't heard anyone propose that sodomy laws be repealed so that gay sex can be taxed. That would be an interesting piece of legislation.]
I'm glad to hear of people who favor drug and prostitution legalization. But those who do so with a taxation proviso aren't truly supporting limited government. They're just advocating a different flavor of government intrusion. The farmer who doesn't kill the golden goose, but still takes its eggs, is still exploiting the goose.
And that's not going to cut it in a free society.