Drinking and smoking is one more way that Americans pay taxes.
Every state and Washington, DC, has selective sales taxes on alcohol and tobacco. And like sales tax, alcohol and tobacco taxes are paid by people who buy those items.
USAFacts looked at data from the Census Bureau and the Bureau of Economic Analysis to determine where people pay the most in tobacco and alcohol taxes, as a percentage of their per capita personal income in that state. (You can read our full report on Americans’ tax burdens here.)
It's important to note that the numbers below are based not just on the excise or sales tax rates in that state, but also on the population size and how much is purchased per person. So, for example, tobacco excise taxes range from 17 cents per pack in Missouri, to $4.35 per pack in Connecticut and New York, according to 2022 CDC data. And alcohol taxes can be either excise taxes (based on volume of alcohol sold at the wholesale level) or sales taxes (on the retail price of alcohol).
Where do people pay the most and least in alcohol tax?
In 2020, Alaska brought in an average of $63 in alcohol taxes per person, followed by Tennessee, which collected alcohol taxes that amounted to $62 per person that year. On the other end of the spectrum, Utah collected $2 per person in alcohol taxes — the lowest in the nation — in 2020. Wyoming had the second-lowest per-capita alcohol tax earnings at just $3.
Across all 50 states and Washington, DC, the average annual revenue from alcohol taxes amounted to $21.67 per person in 2020.
Where do people pay the most and least in tobacco tax?
Of all states, New Hampshire has the highest tobacco tax revenue per capita, collecting, on average, $153 per person in tobacco taxes in 2020. Alaska and Rhode Island follow, earning $132 and $130 per person, respectively.
Conversely, South Carolina had the lowest per-capita tobacco tax revenue at just $5 a person. The second-lowest state tobacco tax was Missouri, which raked in an average of $17 per person.
In 2020, the average state tax revenue from tobacco sales was $64.02 per person. That’s over three times the average per-capita state revenue from alcohol taxes.
What are ‘sin taxes’?
The federal government has long used tax policy to promote or deter certain behaviors. Tobacco and alcohol taxes are sometimes called corrective or “sin taxes,” which try to discourage people from partaking in substances or activities considered harmful.
The rationale behind sin taxes is that by making these products more expensive, people will be less likely to buy them, which can result in better public health outcomes and reduced healthcare costs. They can also generate revenue for governments that can be used to fund public health initiatives or other social programs.
More recently, local and state governments have levied corrective taxes on soda, recreational marijuana, e-cigarettes, and sports gambling.
Are sin taxes effective?
It depends on who you ask. Some people argue that these taxes unfairly target certain groups that may be more likely to use alcohol and tobacco, and like other regressive taxes, impact people with lower incomes disproportionately.
Other government studies have shown that corrective taxes can be effective in curbing use of targeted items. For example, researchers found that increases in cigarette taxes have led to reduced smoking rates. Another study revealed that higher soda taxes lowered sugar consumption and led to improved health outcomes.
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