My State Parties Harder Than Your State

Sales Taxes, State Taxes, Tax Laws, Taxes

Does your home state encourage or discourage partying? A simple way to assess the partying tolerance level is through “sin taxes.” Granted, low sin taxes do not necessarily equate to more partying, but they certainly don’t hurt.

Alcohol and tobacco taxes are huge cash generators for governments, adding $7.04 billion and $18.17 billion respectively to state and local coffers in 2015 (the latest year for cumulative data listed by the Tax Policy Center). So, as defined by sin taxes (or lack thereof), where can you party hearty? Thanks to the Tax Facts and Figures report for 2017 from the Tax Foundation, we can review current sin taxes for all 50 states to help us decide where to put on our party hats.

Using the gauge of low sin taxes, the Equality State has no equal. Wyoming taxes wine at 28 cents per gallon, spirits at around 95 cents per gallon, and beer at a mere 2 cents per gallon. Those are by far the lowest excise taxes on beer and spirits, and close to the bottom on wine (seventh lowest among the states). Cigarettes are taxed at the eighth-lowest rate at 60 cents per pack. If Americans are considered “party animals”, then why is the Cowboy State our least populated?

Midwesterners can flock to Missouri, which boasts the lowest state cigarette tax of just 17 cents per pack. That’s less than a penny a smoke! Missouri has the third-lowest beer and spirits taxes ($0.06 and $2.00 per gallon, respectively) and a low excise wine tax of 42 cents per gallon. (No, this is not how Missouri earned the nickname the Puke State.) But don’t order Cabernet in Kentucky; it’s the worst state for wine taxes at $3.17 per gallon, more than seven times higher.

Most states are a mixed bag, with high taxes in some areas but not others. For example, New York has the highest cigarette tax by far at $4.35 per pack, but low excise taxes on wine ($0.30) and beer ($0.14). Beer is taxed the most in Tennessee at $1.29 per gallon, where you’ll pay more excise tax on a single can than ten six-packs in Wyoming.

California defies its tax-happy reputation with relatively low excise taxes on wine ($0.20) and spirits ($3.30), and, until recently, one of the lowest cigarette taxes. A $2.00-per-pack increase last April moves California from the 36th-highest tax to the ninth-highest tax at $2.87 per pack.

What states profit the most from sin taxes? Using 2015 data from the Tax Foundation, the winner on both the alcohol and tobacco front is Texas. The Lone Star State generated $1.15 billion in alcohol taxes, compared to the measly $1.89 million of Wyoming. For tobacco, Texas again takes the title at $1.49 billion, compared to Wyoming’s $25 million.

Surprisingly, Alaska has high sin taxes across the board, with the second-highest beer ($1.07) and wine ($2.50) taxes, the seventh-highest spirits tax at $12.80 per gallon, the thirteenth-highest cigarette taxes at $2.00 per pack, 45% or 55% taxes on wholesale for vaping products (depending on area), and a $50 per ounce tax on recreational marijuana.

Traditionally, the term “sin taxes” has focused on alcohol and cigarette taxes, but marijuana and vaping are latecomers to the tax party. Colorado has already reached $200 million in annual tax revenue on recreational marijuana. The Tax Foundation estimates that a 25% tax on sales based on demand in Colorado and Washington could produce close to $9 billion for the states annually. While some states are kind to the bud, Washington’s whopping weed excise tax is a high 37%, more than three times the 10.75% rate Massachusetts plans to levy when recreational cannabis sales start next year. Leave it to California to institute different tax rates for “flowers” vs. “leaves” when they start harvesting – and taxing – recreational marijuana in 2018. CNN estimates that with California’s 15% excise tax on marijuana, state and local sales taxes of 7.25% to 9.25%, as well as cultivation taxes of $9.25 per ounce for flowers and $2.75 per ounce for leaves, it could push total taxes on cannabis up to 45% in some parts of the state.

For king of the party-hearty states, we’re crowning Wyoming; not only are the sin taxes low, but it shares a border with cannabis-friendly Colorado. Road trip! For the Big Buzzkill State, our vote goes to Alabama. In addition to ranking among the worst 5 states for spirits, wine, and beer taxes, it is one of the states that tax marijuana sales… even though the drug is still illegal in The Heart of Dixie. That’s right, Alabama drug dealers are supposed to buy official tax stamps before they break the law selling marijuana. As if “taxes” and “Alabama” haven’t been in the news enough lately….

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