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The Largest State Sin Tax Revenues 

In an earlier post, we discussed sin taxes in some detail. We identified specific examples of sin taxes.  Those include taxes on items such as cigarettes, tobacco, alcohol taxes and candy. We also  touched on the goals that sin taxes are meant to further. Sin taxes further two goals.  The first is to raise additional revenue for the state.  The second is to deter certain behavior regarded as detrimental to personal health or to public wellbeing. Many of the behaviors targeted by sin taxes are known to place substantial costs on the healthcare system.  Accordingly, some of the additional revenue from these taxes offset these costs. A state sin tax intended to reduce obesity rates, for instance, may also compensate for the extra costs associated with these rates.   

Professional opinion varies on the efficacy of sin taxes. Some experts contend that they’re a sensible means to both raise revenue and combat destructive behavior.  Others argue that they disproportionately impact those from lower socio-economic background.  Some others argue that they constitute more of a nuisance than a source of social welfare. Though a consensus on the efficacy of sin taxes seems unlikely to develop anytime soon, there can be no disagreement about the fact that these taxes do raise significant sums for state governments across the nation. In this post, we will take a look at the states which have the largest state sin tax revenues. Note that these figures are from 2014, not 2017, but the ordering for 2017 is likely very similar.  In total, states in 2014 raked in about $32 billion from sin taxation, or about 3.8% of total tax revenue across all states. 

Pennsylvania Sin Taxes

The Commonwealth of Pennsylvania topped the list for state sin tax revenue when it brought in roughly $2.73 in 2014. The Keystone State brought in over $1 billion from tobacco taxes alone, and another $770 million from racing and similar establishments, and then an additional $575 million from casinos. It also brought in a significant sum from alcohol taxes, and a small sum from video gaming and pari-mutuel betting. Altogether, sin taxes accounted for approximately 8% of Pennsylvania’s entire state income.  

New York State Sin Tax

Our great State of New York came in second on the list for 2014, bringing in $2.66 billion from sin taxes. By a wide margin, the state sin tax which brought in the largest share of this revenue was cigarette and tobacco taxes, which makes sense given our state’s heavy taxation of these products. Taxes from the sale of tobacco products in New York State generated an impressive $1.446 billion. Our state also generated substantial sums from alcohol products and from racing and casino establishments, but almost no revenue was derived from sin taxes on casinos (alone) or video gaming.  

Texas 

The Lone Star State came in third place for state sin tax revenue in 2014, having generated a total of $2.52 billion. Texas brought in a near identical amount of funds from cigarette and tobacco products as New York – $1.446 billion. What’s also interesting is that Texas was the only state to bring in more than $1 billion from alcohol sales. The remaining source of state sin tax revenue came from video gaming and pari-mutuel betting. Notably, Texas lacked a significant revenue stream from casino or racing and casino establishments.  

Illinois 

The State of Illinois came in fourth in 2014 with total state sin tax revenues amounting to $1.81 billion. Out of this total, the largest share derived from the sale of cigarette and tobacco products, just as with the states in the top three spots. Sin taxes from casinos contributed the second highest source of state sin tax revenue, and the third highest came from alcohol taxes. The fourth largest source of sin tax income came from video gaming and pari-mutuel taxes; this source generated approximately $152 million. Interestingly, Illinois did not take in any significant revenue from racing and casino establishments. 

Michigan 

The State of Michigan came in fifth place among states, with sin taxation bringing in a total of $1.35 billion. As with the other states on our list, taxes from the sale of cigarette and tobacco products constituted the single largest source of sin tax revenue. Taxes from alcohol and casinos also contributed significant amounts, and just a sprinkling of funds came from video gaming and pari-mutuel betting. The state did not generate any significant funds from casino and gambling establishments. 

As stated, these numbers demonstrate that a state sin tax can contribute a significant percentage of overall income for state governments throughout the country. More research is necessary to determine whether a state sin tax places inequitable burdens on citizens from lower socio-economic backgrounds.  Nonetheless, it’s clear that these taxes are a major source of revenue for state budgets. The attorneys at Mackay, Caswell & Callahan, P.C. work hard to build our expertise so that we can bring the best possible service to our clients. If you’re a business owner who’s curious about a state sin tax, or you have another tax issue, don’t be afraid to contact us and our top tax attorney in NYC will review your case immediately.  

Image credit: Mike Clarke