The most disturbing thing about this thread is how many people only think so far as "Why is it illegal for a person to decide what they do with their body?" Laws making prostitution illegal don't exist for protecting a person against themselves: otherwise, self-mutilation would be illegal.
Illegal activity needs to be regarded in the damages it causes to peoples lives, and decisions about the activities need to be made on the basis of cost-effectiveness of the improvements you would make by causing the activities.
The most markedly heinous aspect of prostitution is the treatment of prostitutes by their handlers. Sexual slavery takes any promise of kind treatment, respect, loving relationships, and physical security from their victims and replaces it with a lifetime of repeated forced, unconsensual sex, drug-addiction and legal troubles.
The second major negative consideration of prostitution is the spread of infectious diseases.
The third is its social implications for customers/prostitutes.
Sexual slavery and infectious diseases can be partially alleviated by legalizing prostitution. The competition of government-sanctioned brothels would make sexual slavery as an outlet for customers who simply want to pay for sex less profitable. Regulations for the use of condoms would reduce the spread of disease over the legal customer/prostitute populace. However, niches which cannot be fulfilled by sanctioned brothels would still exist. Customers desiring cheaper prostitutes, or unprotected sex, customers having diseases which prohibit them from legal prostitution, or even more disgustingly desiring the ability to abuse and dominate their prostitute would still exist, and the criminal underworld could employ the same tactics it currently uses to fulfill these niches and remain profitable.
Some people refuse to think of these things objectively, and pleas to logic for sanctioned prostitution by politicians would fall on many deaf ears, resulting in public outcry. It's true that any movement to legalize prostitution would be political suicide.
I think that for the benefit of making prostitution a taxable industry, for general health-and-safety and the trouble it would save many would-be sexual slaves, its more than worth it to legalize prostitution. Good luck finding an entire Senate/House of Representatives willing to fall on their swords to bring it about.
Also, we need a league of Batmens who do nothing but kill pimps who operate via psychological domination/drug addiction. I'm a firm believer in the basic value of human life, and I believe that any person who could do that to another person loses their own value tenfold.
I mean, ideally it'd be best if we could convince violent pimps that their ways made life as we know it worse, and that it's better to provide good services like mowing grass, or binding wounds, or treating diseases, or making steel, or advancing the arts, or engineering products. I doubt that's possible though... so the Batmens they should get.