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.
Taxes on hard alcohol, wine and beer are relatively standard in this tiny Atlantic state, yet two big casinos bring in roughly 10 percent of the state's total revenue. That's thanks in part to an agreement that sends 61 percent of the video lottery terminal revenues to the state at one of Rhode Island's two big casinos. State officials fret that Massachusetts will soon be competing for gamblers, however.
That's got the state looking at hiking its cigarette tax, which at $3.50 per pack is already second-highest in the nation. Meanwhile, the state imposes per-gallon levies of $3.75 on hard alcohol; 60 cents on wine and 11 cents on beer. Rhode Island gets 15.9 percent of tax revenue from sin taxes.
Vegas, baby. Tax collections from casinos accounted for $900 million, or about 13 percent of Nevada's total tax revenue in 2014, according to Governing. But gaming revenues have been declining as an increasing number of states allow Indian-owned casinos to open and expand.
Still, Nevada's residents probably appreciate the state's reliance on sin taxes. After all, they're largely paid by tourists and they've allowed the Silver State to survive without imposing state income taxes.
That said, cigarette taxes are relatively modest here at 80 cents per pack, while per-gallon alcohol taxes amount to $3.60 on hard alcohol, 70 cents on wine and 16 cents on beer. (It's worth mentioning that the nation's highest taxes on wine and beer are in Kentucky and Tennessee, respectively. Both states are well known for their whiskey.) Sin taxes account for 14.8 percent of Nevada's tax revenue.
Racetrack casinos account for the bulk of West Virginia's sin tax revenues, but, like the gambling revenues in other states, these taxes are in decline. The state legislature is now contemplating legalizing sports betting and allowing off-track betting at bars. West Virginia imposes a 55-cent per pack tax on cigarettes; $2.82 on each gallon of hard alcohol; $1 for wine; and 18 cents for beer. Sin taxes make up 11.5 percent of the state's tax revenue.
There's no sales or income tax in New Hampshire, but cigarette taxes do the trick. With a $1.68 per pack levy, New Hampshire sells a lot of smokes. Are the Granite State's residents big smokers? Not necessarily.
But the state has the lowest cigarette tax in the Northeast. You can draw your own conclusions from there. The state also controls the sale of all alcohol other than beer, which is taxed at a 30-cent per gallon rate. Nearly 10 percent of the state's revenue comes from some form of sin tax.
Tobacco and gambling are also workhorses in the Delaware budget, were sin taxes account for 9.4 percent of revenues, according to Governing's analysis. The state assesses a $1.60 per pack tax on cigarettes; and per-gallon levies of $3.75 on hard alcohol; 97 cents on wine and 16 cents on beer.