Love to drink, smoke and gamble? Rhode Island would like to put out the welcome mat. Hefty taxes on your "sins" fill the gaps in the state's budget. Even though Rhode Island doesn't have the nation's highest levies on any particular form of vice, yet 15.9 percent of state revenues come from so-called sin taxes, according to an analysis by Governing, a magazine devoted to coverage of state and local governments.
Sin taxes are a controversial, but growing, method to fill state treasuries. Levying fees on everything from cigarettes to soda, sin taxes generated roughly $32 billion in state tax revenue last year while supposedly deterring unhealthy behaviors, according to Governing.
Critics of the taxes maintain they're both regressive -- hitting the poor far harder than the rich -- and relatively ineffective. Despite 111 hikes in state cigarette taxes over the past 15 years, the taxes rarely generate the expected revenue.
That's not just because fewer people smoke. According to experts at the Tax Foundation, the unequal state levies -- New York penalizes smokers with a $4.35 per pack sin tax vs. 55 cents a pack in West Virginia -- encourage smuggling. After all, a money-savvy resident of Oregon, where hard alcohol is taxed at a $22.73 per gallon rate, would be sorely tempted to skip over the border to California where the excise tax is just $3.30 before hosting a party.
Yet for some states, sin taxes are a huge form of revenue. These five states, in fact, rely on visitors and residents to drink, smoke and gamble up a storm.