Among the most controversial taxes in the United States, “sin taxes”, or those taxes that are applied to revenue from tobacco, alcohol and pari-mutuels, are constantly varying from year to year and state to state. Some argue that imposing theses taxes can be unfair to those in the lower income brackets. That by making them more expensive, they are in turn making the sinful past times of smoking, drinking and gambling only accessible to those who can afford them effectively cutting off many Americans.
The overall goal of these taxes are to promote healthier living by creating incentive to stop consuming these products as well as better communities by implementing the revenue to better healthcare and education. President Obama, who supports the democratic preference of increasing taxes on cigarettes over those implemented on alcohol or soda, is in support of doubling the federal cigarette tax. This would mean a 94-cent increase on the previous tax, making it around $1.95 a pack. The Mayo Clinic came out in support of this new tax implementation, stating that it would cut back the use of these products, which would improve the overall public health of all Americans.
There are many states that bet big on the sin tax and have large amount of revenue annually that then get allocated to different programs through out each state. Each state has a different focus and tax rate, but overall due to the high tax rates combined with the high purchase rates they bring in more revenue then the rest. Below are the top five states that bring in the most revenue from sin taxes.
With 4.12 percent of the states tax revenue being from sin tax, Wisconsin brought in an annual sin tax revenue of $647.5 million in the 2012 calendar year. This is in part to the increase that has been taking place over the last 10 years. The growth rate has been 29.6 percent tax revenue increase since 2003. As of July 1, the cigarette tax alone went from $1.60 to $2.83, which is projected to increase the overall tax revenue in the state even higher.
In 2012, Washington had an annual sin tax revenue of around $821.6 million, which accounted for 4.66 percent of their overall tax revenue that year. This large revenue was in part to their recent change to the privatized sale of alcohol. The 10-percent distribution charge compiled with the legalization of marijuana accounts for the increase in tax revenue over the last to years and the projected increase in the near future.
Michigan, one of the only states to have really had a sin tax decline in the last couple years, still brings in a large sum of annual sin tax revenue. With 4.61 percent of its total tax revenue coming from sin tax, in 2012 the total revenue was $1.1 billion. The states cigarette tax fell 7.5 percent leaving it at $2 a pack, which was then coupled with a statewide decline in smoking overall. A portion of this trending decline is in part to Michigan natives going over to Indiana and other places to get their cigarettes for cheaper prices.
Pennsylvania is one of the 18 states where all liquor purchases have to be made in state authorized stores. As Pennsylvania brought in $1.46 billion in sin tax revenue last year, which accounted for around 4.42 percent of overall state taxes they are one of the top states bringing in the most money from the purchase of “sinful” items. As of 2013, the state of Pennsylvania is going through a sin tax restructuring with a new proposal that would potentially bring in around $170 million in additional revenue.
Texas is the state with the largest annual revenue of sin taxes with 4.97% of its tax revenue coming from sin taxes and total 2012 revenue of $2.4 billion. Though Texas in general is a state that prides themselves on having lower taxes, in the last decade there has been a 107.7-percent increase in sin taxes. There was a 42-percent increase last year on alcohol alone.
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