Like the old adage…the only sure thing in life is death and taxes.  Now, I along with millions of other Americans pay their share of taxes and I do not usually complain about them because they are a means to raise monies to keep our cities, counties, and state governments financially afloat.  Unlike the recent occurrence in Detroit, who was forced to file bankruptcy due to continued debt surpassing $ 19 billion and a continued declining population of around 700,000 people able to pay those same taxes.  Much of the huge debt in a lot of our bigger cities is directly due to city employee pensions.  In Los Angeles, like Detroit, there debt is over $ 30 billion.

One of the ways that states try to suck more tax revenue out of your hard-earned fists, is through the enactment of what is called sin taxes.  Among tax levies, so-called sin taxes are among the most controversial. Critics argue that adding costs to alcohol, cigarettes, racetrack betting and the like, unfairly hurts lower-income people. Proponents say the taxes promote health — making cigarettes more expensive, for example, encourages people to stop smoking — which seems to be true, according to many studies.  States say they put the revenue to good use, for schools and health-care services.

Here are the 12 U.S. states that derive the greatest percentage of total tax revenue from “sin.”  In many cases, states with the lowest sin taxes actually haul in the most sin-based revenue, as they become meccas for fallen shoppers from across the state line.

Figures include tax revenue from tobacco, alcohol and pari-mutuels (betting, usually on horse racing, dog racing and jai-alai) provided by the State Government Tax Collections survey of the U.S. Census Bureau.  This survey does not include taxes from gambling, prostitution (where legal) and other vices because state governments account for such tax revenue in multiple ways, thus impossible to track.

No. 12: Delaware

Sin taxes, percentage of revenue: 4.12%
Total sin tax revenue (2012): $138.6 million

Gambling revenue, which is not accounted for here, generates about 8% of Delaware’s budget.  But that business is now slowing because of new casinos operating in nearby Pennsylvania and Maryland.  While sin taxes have increased 183.5% during the past 10 years, the state needs more revenue. In June, the Delaware General Assembly Revenue & Finance Committee tried to enact a 30% tax on electronic cigarettes and a doubling of the current tax on smokeless tobacco products. The bill was defeated.

No. 11: Maine

Sin taxes, percentage of revenue: 4.22%
Total sin tax revenue (2012): $159.46 million

In the past 10 years, Maine has not been big on increasing sin taxes — they’re up just 11.2%.  The state just shot down two possible tobacco tax increases.  One would have hiked the cigarette tax from $2 per pack to $3.50; the other would have increased taxes on all tobacco products to match the cigarette tax.

The focus has now shifted to alcohol, where taxes are higher.  When you buy a bottle of liquor in Maine, 67% of the typical purchase price of that bottle goes toward a tax of some kind.  Many want those taxes reduced — yet the cost of alcohol may still move higher.  Maine is considering raising the general sales tax rate to 5.5% from 5%, which would include alcohol sales.

No. 10: Wisconsin

Sin taxes, percentage of revenue: 4.39%
Total sin tax revenue (2012): $647.5 million

Sin taxes have risen 29.6% over the past 10 years in Wisconsin, which isn’t much compared with the growth in many other states.  Wisconsin may soon see a sin tax revenue boost, as a cigarette tax increase of $1.60 per pack went into effect in neighboring Minnesota on July 1, raising the tax on a pack there to $2.83.  While Minnesotans have been stocking up on tobacco in anticipation of the tax hike, eventually they may start heading to Wisconsin, where the cigarette tax is $2.52 per pack.  The cost of gas may make a difference.

No. 9: Pennsylvania

Sin taxes, percentage of revenue: 4.42%
Total sin tax revenue (2012): $1.46 billion

There’s lots of talk in Pennsylvania about getting the state government out of the booze business.  Today, if you want to buy a bottle of wine, you must go to a state-authorized store.  If you have wine shipped in from out of state, the law says you have to ship it to one of the 600 state stores for pickup — where you then pay state taxes and a state markup.

One tax, the 18% Johnstown Flood Tax, dates back to 1936 and is added to all state store purchases.  A new proposal would nix that tax and privatize alcohol sales.  Proponents of the plan say the increase in sales would generate $170 million in additional revenue, which could be used for property tax relief for senior citizens and to fund rape-crisis and domestic-violence programs.

No. 8: Oklahoma

Sin taxes, percentage of revenue: 4.51%
Total sin tax revenue (2012): $398.2 million

Oklahoma residents can buy a carton of cigarettes for $10 less if they head to a tribal smoke shop instead of other retailers.  The shops are allowed to charge “border” tobacco tax rates of only 6 cents per pack, compared with $1.03 at nontribal stores. The Governor wants to put an end to that.  If things go her way, new tax agreements may lead to increased revenue.

State lawmakers have also proposed a tax on e-cigarettes.  Electronic cigarette manufacturers claim that such a tax will only induce smokers to stick with tobacco.  Over the past decade, sin tax revenue has risen 182.1% in Oklahoma.

No. 7: Michigan

Sin taxes, percentage of revenue: 4.61%
Total sin tax revenue (2012): $1.1 billion

Michigan is one of the few states where sin tax revenue has declined.  Revenue from taxes on alcohol, tobacco and pari-mutuels fell 7.5% from 2011 to 2012, even though the state’s excise tax on cigarettes of $2 per pack is the 10th-highest in the nation. There has been a sharp decline in smoking in recent years.

Michigan’s tobacco tax revenue is under siege partly because many residents head to cheaper destinations to buy cigarettes.  In Indiana, for example, Michigan residents can save as much as $10 in taxes on a carton of cigarettes.  Tax revenue on all tobacco products totaled $968.5 million in 2012; the funds go to the school system, Medicaid and other health initiatives.  The state also refuses to step in to help save cities like Detroit.

No. 6: Washington

Sin taxes, percentage of revenue: 4.66%
Total sin tax revenue (2012): $821.6 million

Washington State privatized sales of alcohol last June and forced the closing of all the state’s liquor businesses. One year later, it looks like the strategy was a success.  Liquor is available at more than 1,400 retailers now instead of 329 state-run stores, and new fees, such as a 10% charge distributors have to pay, are adding to revenue.

The state projects that spirit taxes and fees will generate $425 million in revenue for fiscal 2013, up from $309 million in fiscal 2012.  Cigarette and tobacco taxes brought in $471.3 million in 2012, down 1.6% from a year earlier even though Washington has the fifth-highest tax on cigarettes, $3.025 per pack.  Sin tax revenue is expected to grow since Washington has legalized the recreational use of marijuana.

No. 5: Montana

Sin taxes, percentage of revenue: 4.93%
Total sin tax revenue (2012): $121.1 million

While revenue from alcohol and cigarettes has grown 108.7% in Montana over the past decade, the real standout in sin taxes is a 15% tax collection from video gambling machines.  In 2012 the state generated $53.7 million from such taxes, up 8.7% from a year earlier.  That compares with $79.3 million from alcohol taxes and $421 million from tobacco taxes.

No. 4: Texas

Sin taxes, percentage of revenue: 4.97%
Total sin tax revenue (2012): $2.4 billion

Texas takes pride in its low tax rates and lack of a personal income tax, but revenue from sin taxes has risen 107.7% during the past 10 years.  Taxes on alcohol alone brought in $930 million in revenue in fiscal 2012, up 42% from 2011.  Another $1.4 billion in revenue came from cigarette and tobacco taxes, which was down 8.4% from 2011.

No. 3: South Dakota

Sin taxes, percentage of revenue: 5%
Total sin tax revenue (2012): $76 million

South Dakotans can’t complain too much — there is no personal income tax in the state, but that is why, sin tax revenue, which has grown 124.9% over the past 10 years, is so important.  South Dakota also has a reliable source of revenue from gambling, which generated $107.3 million in 2012. (Tax revenue from gambling is not included in this ranking.)

Other major revenue generators are property taxes, a franchise tax on financial institutions and a contractors’ excise tax on construction for private and public use, which is often paid by counties, cities, schools, hospitals and churches.

No. 2: Rhode Island

Sin taxes, percentage of revenue: 5.16%
Total sin tax revenue (2012): $144.6 million

Rhode Island went through a sweeping change in its tax system in 2011, cutting its top personal income tax rate from 9.9% to 5.9%.  Sin taxes, meanwhile, have risen 31.1% in the past decade.  The state’s cigarette tax of $3.50 per pack is the second-highest in the country, behind New York’s tax rate.

The state is exploring a possible revenue boost of as much as $1 million from taxes on recent passage of, legally approved, medical marijuana dispensaries.

No. 1: New Hampshire

Sin taxes, percentage of revenue: 10.2%
Total sin tax revenue (2012): $225.4 million

The “Live Free or Die” state has among the lowest sin tax rates in the country, yet these taxes generated 10.2% of New Hampshire’s total tax revenue in 2012, by far the greatest percentage of any state.  This is likely the result of out-of-state purchases from residents of neighboring Massachusetts and nearby New York, where tobacco and alcohol are taxed at much higher rates.

When it comes to tobacco taxes, New Hampshire may have cut just a little too much.  In July 2011 the tax on cigarettes was cut from $1.78 per pack to $1.68, leading to a loss of $10.6 million in revenue.  The tax is going back to $1.78 per pack in August, and the New Hampshire House of Representatives voted in March to raise it, an additional, 10 cents.  The revenue goes to the state’s general fund and Educational Trust Fund.

So, there you have it…continue to pursue and partake in “sinful” activities and you are going to pay the price.  Both through taxes…while you are alive, and probably after death also.  Until then…rest in peace.

 

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