The Leaflet – Five States Most Dependent on “Sin Taxes”

Published August 28, 2015

Five States Most Dependent on “Sin Taxes”

Mike Maciag, data editor at Governingrecently published an article discussing the five states most reliant on sin taxes. “States collectively took in approximately $32 billion in taxes on tobacco, alcohol and gambling in fiscal year 2014,” wrote Maciag.

Facing budget shortfalls, many state legislatures have proposed increasing taxes on these products,  and some states and cities are considering new ‘sin taxes’ on popular goods, such as sugary beverages and candy.

The debate concerning sin taxes has existed since the country’s founding. For instance, Founding Father Alexander Hamilton cited fiscal and health benefits as a justification for imposing a tax on whiskey. “The consumption of ardent spirits particularly, no doubt very much on account of their cheapness, is carried on to an extreme, which is truly to be regretted, as well in regard to the health and the morals, as to the economy of the community,” Hamilton wrote.

Although sin taxes have been used by government to discourage what legislators believe to be bad or unhealthy behavior, studies have proven sin taxes do not make people healthier and fail and often result in financially irresponsible action by legislatures. When states become dependent on sin tax revenues to fund government services, they develop an interest in maintaining sales of a ‘sinful’ product. This often leads to the states’ financial interest conflicting with their own supposed interest in protecting citizens’ health.

According to Governing, the five states most reliant on sin taxes are Delaware, Nevada, New Hampshire, Rhode Island, and West Virginia. Sin taxes make up 9.4 percent of Delaware’s tax revenue, 14.8 percent of Nevada’s tax revenue, 9.9 percent of New Hampshire’s tax revenue, 15.9 percent of Rhode Island’s tax revenue, and 11.5 percent of West Virginia’s tax revenue.

Heartland Senior Policy Analyst Matthew Glans argues in a Research & Commentary sin taxes lead to budget shortfalls: “While sin taxes do sometimes result in increased revenue over the short term, they often lead to an even greater increase in expenditures that often cannot be supported by the tax over the long term, thereby creating budget shortfalls. High sin taxes by design aim to discourage certain product consumption or actions but they also encourage smuggling and other illegal actions.”

Glans continues, “Sin taxes should be avoided because they distort the market and encourage unsustainable increases in government spending while placing an unnecessary burden on lower-income taxpayers. Instead of creating and increasing discriminatory taxes, states should focus on tax reform that lowers rates, puts dollars back into the pockets of taxpayers, and tightens states’ budgets by creating new, reasonable limits on spending.”

Constitutional Reform
Heartland Institute Launches New Center for Constitutional Reform at Dallas Event
The Heartland Institute launched its new Center for Constitutional Reform in Dallas, Texas this week. The Heartland Institute’s new Center for Constitutional Reform was created to highlight individuals and organizations working to find solutions to the nation’s constitutional problems. It will not endorse one particular path to constitutional reform, seeking instead to support and promote constructive debate on all efforts to restore constitutional order.

Explaining why a Center for Constitutional Reform is needed, Heartland Institute President Joseph Bast said, “America is facing a constitutional crisis. Limits on the size and power of the national government intended by the Founding Fathers and placed in the Constitution have been violated repeatedly and with devastating consequences. The national government has grown to the point that it is now a clear and present danger to American life, liberty, and happiness.” Read More

Energy and Environment
Fracking on Federal Lands Should be Encouraged, Not Banned
In a recent article, Rep. Mark Pocan (D-WI) contends the government should ban hydraulic fracturing on public lands. Pocan cites concerns about potential environmental and economic impacts of horizontal hydraulic fracturing, also known as “fracking,” and raises concerns about fracking in national parks. The article has serious flaws regarding the environmental and economic impacts of fracking, and it misrepresents oil and gas activity in national parks. Heartland Research Fellow Isaac Orr responds in a recent article from The Hill stating, “Additionally, nearly all Americans – not just energy companies and their immediate suppliers – are reaping the benefits of increasing energy production. The Energy Information Administration (EIA) estimates low gasoline prices will save the average household $675 this year. A study conducted by the Brookings Institution estimates low natural gas prices are saving $181 to $431 dollars per person.” Read more

Florida Legislators Recognize Need for Flexibility, Choice in Special Education
Florida’s personal learning scholarship accounts program offers an education savings account for special-needs students. Parents initially pay for approved educational services and then are reimbursed. Funding provided through the program can cover expenses ranging from instructional materials to curriculum to approved specialized services and therapies. In this Townhallarticle, Research Fellow Heather Kays argues, “These changes show Florida legislators have recognized the need for flexibility and choice when designing special-education funding. The rest of country should consider enacting similar legislation, because a program such as this makes an enormous difference to each family it serves.” Read More

Budget and Tax
Research & Commentary: New Hampshire Tax Reform
Gov. Maggie Hassan (D) recently announced a new tax proposal that would lower the business profits tax, increase the threshold on who has to file and pay the business enterprise tax, and dramatically increase the state’s tobacco tax. While Hassan’s business tax cuts are a positive step forward, imposing excise taxes on e-cigarettes and other noncombustible products is not justified from a public health perspective, as it removes a prime economic incentive for smokers to improve their health by switching to e-cigarettes and other less harmful alternatives. In this Research & Commentary, Senior Policy Analyst Matthew Glans argues, “New Hampshire should continue its focus on lowering all forms of income taxes, which would put dollars back into the pockets of taxpayers and create new, reasonable limits on government spending.” Read More

Health Care
Nation’s Number of Uninsured Declines, Access to Care Worsens
In this Heartlander article, Health Care News Managing Editor Ken Artz discusses how the number of people who were uninsured declined from 36 million in 2014 to 29 million in the first three months of 2015 and how supporters of Obamacare claim this as proof of the law’s success. Artz speaks with several critics of the law who argue the changes emerged mainly due to the Obama administration’s expansion of Medicaid, not a rise in people obtaining high-quality insurance. “‘Most doctors don’t accept Medicaid patients, because the government’s rate of payment is so low. So even though people may have an “insurance” card in their wallet, they still don’t have better access to health care. As a result, hospitals are reporting substantial increases in the use of emergency rooms.'” Read More

From Our Free-Market Friends
The Center of the American Experiment’s 2015 Fall Briefing with Sen. Tom Coburn
Don’t miss this special opportunity to hear Sen. Tom Coburn (R-OK) speak about his book The Debt Bomb: A Bold Plan to Stop Washington from Bankrupting America at the Center of the American Experiment’s 2015 Fall Briefing. The event takes place on Tuesday, October 13th, 2015, at 6:00 p.m. at Orchestra Hall in in Minneapolis, MN. Register Here



The August issue of Environment & Climate News presents highlights of the Tenth International Conference on Climate Change, hosted by The Heartland Institute on June 11–12 in Washington, DC. The conference featured 51 speakers and attracted more than 400 attendees. To watch complete videos of the panels, speeches, and award presentations, visit climate

Budget & Tax News

Health Care News