Drugs are (somewhat unlike alcohol) a kind of self-increasing demand. You need more and more and more to get the high. So even if they are legalized, you'll still have an ever-increasing demand, and as long as demand increases, supply will increase also. Besides, once government legalizes drugs, they will be seen as just another opportunity to create a tax. (Notice that just about the only thing they don't tax is abortion -- if you did, there might be fewer of them.) So the price will keep going up, too. Now, if the demand is increasing and the price is being kept high, the crime that is associated with the habit will continue or increase. Libertarians say we should punish the associated crime, not the drug use, and they do have a point. But if we know that drugs breed crime, then isn't the policy of keeping them illegal a crime-prevention measure? But I do agree that some people's civil rights have been trampled on in the War on Drugs. There must be a better way...
This is also true of alcohol.
So even if they are legalized, you'll still have an ever-increasing demand,
No, a dynamic equilibrium will be reached as high-tolerance users quit (or die) and new users start.
once government legalizes drugs, they will be seen as just another opportunity to create a tax. [...] So the price will keep going up, too. [...] the crime that is associated with the habit will continue or increase.
So don't overtax them; it's a choice, not an inevitability.