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Does Your State Tax Your Sins?

Posted By Miranda Marquit On 07/23/2013 @ 12:10 pm In Taxes | No Comments

With a slow economy [3], many states are looking for ways to raise more money. In order to boost their revenue, some states have been raising their so-called sin taxes.

Sin taxes have been around for a long time — since before the last recession — but they are getting more attention lately as the list of “sins” gets longer, and more expensive, for those who engage in them.

What are Sin Taxes?

Sin taxes are extra charges levied by states on items considered “vices.” Cigarettes (and other forms of tobacco) and alcohol have long been considered items that get the “sin tax” treatment. Also on the list are activities related to betting. In some states, where prostitution and gambling are legal, states might collect on those activities as well.

In recent years, sin taxes have expanded in some states to include soda pop and other sugary items. The idea behind charging for sin taxes (at least how proponents justify them) is that the revenue raised can then go toward education and health care services. The justification is that many of these activities contribute to health care costs on society, so the sin taxes help offset these costs. Additionally, states suggest that people are discouraged from engaging in many unhealthy behaviors [4] since they cost more.

Opponents of sin taxes complain that the state has no business punishing people for their own choices. Many opponents are especially unhappy with states that levy taxes [5] on sugary drinks, insisting that the “nanny state” needs to stop forcing people to live in the way they think they should. After all, most of us know that smoking is unhealthy, and that we should drink much less soda. Opponents of sin taxes suggest that the government stop trying to force people into living certain lifestyles.

Some opponents also argue that sin taxes disproportionately affect the poor, since they are often addicted to some of these behaviors, and are less able to afford the higher tax on the “vices.”

Which States Benefit Most from Sin Taxes?

There are several states that get a rather large chunk of their revenue from sin taxes. According to a recent Bloomberg article [6], here are 12 states that make money off of their taxpayers’ vices, and the percentage of revenue that comes from sin taxes:

  1. Delaware: 4.12%
  2. Maine: 4.22%
  3. Wisconsin: 4.39%
  4. Pennsylvania: 4.42%
  5. Oklahoma: 4.51%
  6. Michigan: 4.61%
  7. Washington: 4.66%
  8. Montana: 4.93%
  9. Texas: 4.97%
  10. South Dakota: 5%
  11. Rhode Island: 5.16%
  12. New Hampshire: 10.2%

The Bloomberg article points out that New Hampshire, though charging some of the lowest sin taxes in the country, still makes a pretty good portion of its revenue from these vices. Prostitution and gambling taxes aren’t included on the Bloomberg list, since they are often reported differently — which is why Nevada probably didn’t make the list. It also appears that Bloomberg didn’t include states with soda and/or sugar taxes.

No matter what’s included, though, it’s clear that vices can be major sources of revenue for some states. In fact, some states make $1 billion or more from the unhealthy habits of their taxpayers.

What do you think? Are sin taxes fair? Should they be levied?
(Photo: Stefan [7])

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[1] Tweet: http://twitter.com/share

[2] Email: mailto:?subject=http://www.bargaineering.com/articles/state-tax-sins.html

[3] slow economy: http://www.bargaineering.com/articles/strangest-economic-indicators.html

[4] unhealthy behaviors: http://www.bargaineering.com/articles/healthy-habits-healthy-wallet.html

[5] levy taxes: http://www.bargaineering.com/articles/50-fun-facts-about-taxes.html

[6] recent Bloomberg article: http://www.bloomberg.com/money-gallery/2013-06-26/the-dirty-dozen-12-states-that-bet-big-on-sin.html#slide1

[7] Stefan: http://www.flickr.com/photos/48889063272@N01/5867983

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