I think we should just legalize it and tax it no differently than we tax the wine industry. When you impose extra taxes on formerly illegal items (often called a sin tax), you are moralizing and taking advantage of drug users as a population. You're saying, "OK, fine, we won't lock you up and bureaucratically destroy your life, but you have to pay us more money."
Or a case in point, California's legalization of marijuana. With a medical recommendation (which I have), I was able to buy from many stores/delivery services and not have any extra taxes beyond sales tax. But now with legalized recreational, there's a 20% extra tax. This is on top of an already nearly 10% sales tax. So everything is way more expensive, creating an incentive to just buy on the black market. But then where's the 20% tax on wine? It's extremely arbitrary, what is a sin and what is not according to those in power.
So for those that say "Legalize and tax the hell out of it", I really wish they'd just say "Legalize it because locking people up for modifying their own internal body chemistry is simply wrong."