States Profiting the Most From Sin

Tennessee is one of just 10 states that makes at least 4.0% of its total tax revenue from sin taxes like those on tobacco products, alcohol, or gambling. Sin taxes accounted for nearly $1.3 billion of the state’s $31.4 billion in revenue in 2016.

No state makes a larger share of its revenue from taxes on alcohol than Tennessee. The Volunteer State pulled in 1.08% of its total revenue from beer, wine, and spirits excise taxes. This is due in part to Tennessee’s beer tax, which, at $1.29 per gallon, is the highest of any state. But like many other states, lottery funds are the top sin tax contributor, at nearly $609 million.

Florida is one of just six states in which at least 80% of residents are 18 or older — meaning a relatively large share of residents can use tobacco, play the lottery, or indulge in other acts that feed into the sin tax. The lottery accounts for nearly half of all sin tax revenue in Florida — about $1.7 billion, which is the third highest total among all states.

Floridians tend not to indulge, or overindulge, in some other behaviors covered by sin taxes. Florida’s adult smoking rate of 15.5% is lower than the U.S. rate of 17.0%. The state also has a lower share of adults who drink excessively at 17.5%, compared to 18.0% of adults nationwide.

Pennsylvania collected nearly $1.4 billion in revenue from direct gaming taxes in 2016 — the most of any state by over $400 million. The state has a dozen casinos operating, and it also permits live horse race betting and off-track betting.

As one of the most populous states in the country, Pennsylvania ranks among the top states in terms of total revenue collected from alcohol, tobacco, and lottery. The state brought in hundreds of millions of dollars from taxes on each in 2016.

As one of the least populous states, South Dakota had the lowest total tax revenue among all 50 states in 2016 at just over $4.5 billion — and 4.7% of that came from sin taxes. Lottery proceeds accounted for more than half of the state’s $212.4 million sin tax revenue, or nearly 2.6% of the state’s total revenue — a higher share than all but three other states.

South Dakota’s population is relatively young. Just 75.5% of residents are 18 years of age or older — a smaller share than all but five other states. A larger adult population would likely drive up sin tax revenue for the state.

Maine is the only state in which liquor store profits are the largest source of sin taxes. Taxes on these stores provided Maine with $165.4 million in revenue in 2016, dwarfing the lottery tax revenue of $89.1 million. Liquor store taxes amounted to over 1.8% of Maine’s total tax revenue, the highest share of any state.

Maine also collected a relatively high share of its revenue, 1.3%, in taxes on tobacco products. Only three other states collected a larger share of their revenues from tobacco. Maine’s population is one of the oldest in the country, meaning a larger share of residents can legally play the lottery and consume alcohol and tobacco products, contributing to greater sin tax revenue.

No state collected a greater share of its revenue from tobacco taxes than New Hampshire. Over 2.4% of the state’s $8.3 billion in revenue came from excise taxes on tobacco. For context, the average share among all states is 0.7%, and the second largest share of tobacco tax revenue is 1.6% in Rhode Island.

Liquor is also a major contributor to the New Hampshire’s revenue. New Hampshire has the second highest share of its revenue coming from alcoholic beverage license taxes as well as liquor store profits, at 0.2% and 1.7%, respectively.

Delaware is one of just four states in which sin taxes make up more than 6% of total revenue. Almost 3%, or over $240 million in 2016, of the state’s total revenue came from lottery proceeds, the third highest share among states. Lottery revenue amounted to more than 45% of sin taxes the state collected that year.

A relatively high share of about 1.2% of Delaware’s revenue comes from tobacco products. Only a handful of other states derive a larger share of their revenue from tobacco.

It should come as no surprise that Nevada, home to Sin City, ranks highly among states profiting the most from sin. Sin taxes provide 6.7% of Nevada’s revenue, one of the highest shares of all states. Of the $1.1 billion in annual revenue Nevada makes in sin taxes, more than $900 million come from gaming. Nevada has over 300 casinos.

Nevada ranks only third in terms of total tax revenue gained from gaming, behind the more populous states of Pennsylvania and New York. The state has the 19th highest total revenue from sin taxes at $1.1 billion, despite having the 33rd largest population among states. Nevada is one of just a handful of states that has no state-run lottery.

West Virginia gets more than 3.6% of its total revenue from lottery proceeds — more than triple the 1.1% average among states. The state pulled in more than half a billion dollars from the lottery in 2016, making up more than half of the revenue it collected from all sin taxes.

West Virginia collects about 0.6% of its revenue from taxes on tobacco products, below the 0.7% national average. This is somewhat surprising considering the state has the highest adult smoking rate, at 24.8%. West Virginia, however, has lower state cigarette excise taxes than most other states.

At 10.4%, Rhode Island derives by far the largest share of its revenue from sin taxes, several percentage points above the next closest state. Despite having barely over 1 million residents, Rhode Island pulled in over $856 million from sin taxes in 2016.

Like many other states, Rhode Island’s biggest sin tax contributor to its revenue is the lottery. The state made over $369 million in lottery proceeds in 2016, accounting for 4.5% of the state’s total revenue that year — the highest share of any state by far. Nearly 1.6% of the state’s 2016 revenue came from taxes on tobacco products, more than double the 0.7% average among states. This may be due in part to the fact that Rhode Island’s cigarette excise tax rate of 4.3% is one of the highest of all states.