Sin taxes are state-sponsored taxes that are added to products generally deemed harmful, like liquor and tobacco. Advocates of sin taxes argue that they discourage people from partaking in harmful behavior by hiking up costs. But critics lament the fact that such taxes are often regressive in nature, disproportionately affecting low-income people.
Regardless, sin taxes are a reality in every state, albeit to varying degrees. Using data from the Tax Policy Center and the Federation of Tax Administrators, the following is an analysis of tax data on tobacco, liquor, wine and beer in each state to create customized Sin Tax Scores.
Each state received a beer, liquor, tobacco and wine sin tax score, which measures how each state taxes in comparison to the national average tax rate for each sin category. If, for instance, a state charges a high beer tax relative to the national average beer tax, that state received a higher score for that category. For reference, here are the national average excise tax rates for each "sin" item:
- Tobacco — $1.58
- Liquor — $4.56
- Wine — $0.85
- Beer — $0.29
The four category scores were added together to create an overall sin tax score for each state. Keep in mind, the ranking here is not meant to be a comprehensive analysis of all sin taxes in a state, but rather aims to illustrate individual state taxes relative to the national averages on four common "sin" items. The data team also included the separate tax rates for each category, represented in dollars per unit, on each slide for context.
Note: In most cases, the N/A notation for a given tax designates that the state government controls all sales. Given the pricing controls that are in place for these states, no direct tax rate is calculated. The sin tax is then based on the tax rates for the other available categories. Data is current as of Jan. 1, 2017.