States Profiting the Most From Sin
By Grant Suneson
June 24, 2019
Methodology
To identify the states profiting the most from sin, 24/7 Wall St. reviewed state tobacco taxes, alcohol taxes, casino taxes, as well as proceeds from state-controlled liquor stores and state lotteries. States were ranked by sin taxes as a percentage of the state’s total tax revenue. Tobacco, alcohol, liquor store, lottery income, and total tax revenue came from the Census Bureau’s State Government Finances report. Casino taxes came from the American Gaming Association’s “State of the States” 2017 report, which includes 2016 data. All other figures are for fiscal year 2016, the most recent year for which all data in the index was available. 24/7 Wall St. also reviewed excise tax rates as of Jan. 1, 2019 from the Tax Foundation. We also reviewed alcohol consumption data and adult smoking rates from the Centers for Disease Control and Prevention.
- Tennessee
> Pct. total revenue from sin:4.0%
> Revenue from sin:$1.3 billion (15th highest)
> Most profitable sin: Lottery
> Lottery proceeds: $609.0 million (14th highest)
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
> Pct. total revenue from sin:4.1%
> Revenue from sin:$3.5 billion (4th highest)
> Most profitable sin: Lottery
> Lottery proceeds: $1.7 billion (3th highest)
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
> Pct. total revenue from sin:4.5%
> Revenue from sin:$4.1 billion (3th highest)
> Most profitable sin: Gaming
> Lottery proceeds: $1.1 billion (6th highest)
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.
- South Dakota
> Pct. total revenue from sin:4.7%
> Revenue from sin:$212.4 million (42th highest)
> Most profitable sin: Lottery
> Lottery proceeds: $115.9 million (31th highest)
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
> Pct. total revenue from sin:5.3%
> Revenue from sin:$475.1 million (36th highest)
> Most profitable sin: Liquor store profits
> Lottery proceeds: $89.1 million (32th highest)
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.
- New Hampshire
> Pct. total revenue from sin:5.8%
> Revenue from sin:$480.2 million (35th highest)
> Most profitable sin: Tobacco
> Lottery proceeds: $79.4 million (35th highest)
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.