I think you're only partially right. Gangs thrive because of the illegal income. You'd hurt them where it matters most. But, I think you're also correct in saying they'd just find another source.
They thrive on illegal income because they see themselves as outside of society's laws and norms because in their eyes society abandoned them. Thus they target means of income that are likewise outside of the norms of the society they no longer feel a part of.
Gangs are able to recruit because it breeds itself.
America offers gobs and gobs of opportunity, but the kids don't take it. I've seen it first hand. They want the easy road. They see the thugs in their neighborhoods rolling around in expensive, tricked-out rides...wearing expensive clothes...etc. They want all that, but they don't want to have to get a job to get that...they want it now. What better way than to join a gang?
This is where I am going to disagree with you. America offers gobs of opportunity
if you are the right sort of person. If you don't have the education, if you have a criminal history, if you are from the wrong side of the tracks and don't have a talent for music or sport, then you aren't going to get any of those gobs and gobs of opportunity. You have people who are working, but live in homeless shelters or their cars because they can't afford a home. You have homeless people who can't even get that much because with no permanent address they aren't entitled to state or federal help. The bottom 40% of your population has a combined total of just 0.1% of the combined wealth of the country! You have a huge section of your population in certain states that have no legal protections, no right to federal help, but they were born in the US. Their entire crime was being born to parents who migrated to the US illegally. What hope or opportunities do they have?
It's not that these groups don't want to work; it’s that many of them can't get it work that is capable of sustaining them and their families. Many of leaving school to do menial jobs to try and help their families out, but then have nowhere to go because they don't have any skills. Working for a gang isn't "the easy road", heck a lot of gang members work harder than some rich white folks who get to summer in the Hamptons and have a NYC Apartment, rather it is to them, the only road out of poverty. Washing dishes in a restaurant isn't going to pay the bills for the rest of your life, and for every one person that started washing dishes and ended up owning the restaurant, there are hundreds that didn't.
I don't want to get too far off topic, but as far as gun homicides go in Buffalo, NY (42 in 2012), nearly all of them can be connected to some gang activity. If the victim wasn't a gang member, or related to a gang member, victims were by-standers caught in cross-fire or random drive-bys.
For the record, not a single homicide was committed in Buffalo during 2012 with a legally held gun.
I'm still trying to compile stats for the rest of NY state.
And I'm not disagreeing that gangs are a serious issue, just over what creates them. The funny thing is that most gang shootings are for the same things that people here claim to be willing to shoot others as well. They are done as self-defence, or defence of their "home" against an invader. Gangs are by nature, tribal, and so they defend their territories again those that would take them from them. From an anthropological point of view they are almost like mini-primitive countries, setting borders and having disputes of territory. Now yes, those territories usually involve where they can ply their illegal trades, so don't get me wrong, I'm not pro-gang, rather I can understand how these people ended up there.
I find it a serious shame the attitudes that some here have towards them, considering them sub-human or worse. In the end, all that separates us from those that joined a gang is the fate that we weren't born in the wrong neighbourhood and because of that, we had a lot more options to choose from in where to take our lives. Not everyone was so lucky.
Now again don't get me wrong here, I still believe that every gang member had a choose in what they became, but unlike us who had the choose of whether we became a doctor, or a lawyer, or a computer programmer, their choices were to become a pool cleaner, a dish washer, or join a gang, the first two don't fill the needs they have other than a job.
I would note that there is one legal option for them that would fill the gaps that gang life does, but the trouble is that most of them have already entered the gang system and got a record before they get to an age to enter that, and that's the Military. The two things actually have a huge amount in common, if you could get the at risk kids and get them into a military type surrounding before the gangs got to them, you'd likely find that a lot of the gang issues dried up.