U.S. law allows Americans to engage in certain activities that are known to be risky and unhealthy. Every day, Americans enjoy vices like smoking cigarettes, drinking alcohol, and gambling. Taxes imposed on these activities are commonly known as “sin taxes.”
States collected nearly $60 billion in revenue from such taxes in 2016, the most recent year for which data is available. It is up to each state to regulate gambling activities, like casino gambling, or lotteries. States also control the rate at which alcohol and cigarettes are taxed, leading to wide fluctuations in each state’s revenue from these activities.
To determine the 10 states profiting the most from sin, 24/7 Wall St. reviewed revenue from sin taxes as a percentage of the state’s total tax revenue. Data is from the Census Bureau’s State Government Finances report and the American Gaming Association’s “State of the States” 2017 report.
Residents of states profiting the most from sin are not necessarily shouldering a greater tax burden than most other Americans. Only one state on this list ranks among the top 10 states where Americans pay the most in taxes.
States have differing shares of revenue from sin taxes because of differences in laws and populations. Even if a state has very high tobacco taxes, it may not collect much in cigarette taxes if a small share of residents use tobacco. States can change the excise tax rate on alcohol, tobacco, and more as a way to increase state revenue as well as encouraging residents not to take part in these activities. Different alcoholic drinks, such as liquor and wine, can be taxed differently. Each state has its own tax rate for beer — this how much beer is taxed in your state.