South Dakota is not in the Top Ten for states relying on sin taxes. In FY 2014, we were #11:
- Rhode Island: 15.9% of state revenue
- Nevada: 14.8%
- West Virginia: 11.5%
- New Hampshire: 9.9%
- Delaware: 9.4%
- Louisiana: 9.0%
- Pennsylvania: 8.0%
- Indiana: 6.8%
- Iowa: 6.6%
- Montana: 6.5%
- South Dakota: 5.9%
Nationally, sin taxes—revenue from alcohol, tobacco, and gambling—produced 3.7% of all state revenue in FY 2014 ($32.3 billion out of $865.8 billion). Governing notes that tobacco and gambling don’t have great prospects for growth:
Cigarette taxes aren’t a promising long-term source of revenue, though, as consumption has been declining for years and tax hikes often don’t raise as much revenue as expected.
Although more casinos continue to open in different parts of the country, gambling doesn’t represent a fast-growing revenue source either. Real tax revenues from commercial casinos were flat last fiscal year before falling slightly over the prior year, according to the Rockefeller Institute of Government. Lucy Dadayan, a Rockefeller policy analyst, said she expects gambling collections to grow at a much slower pace than expenditures and other sources of revenue. When states do take in more gambling-related revenues, she said, much of it results from revenue shifts across state borders or different forms of gambling [Mike Maciag, “The States Most Dependent on Sin Taxes,” Governing, 2015.08.21].
Our friends in Minnesota rely on sin taxes for just 2.9% of their state budget. But interestingly, when I glance at population, I find that Minnesota generates $122 in sin taxes per capita, while South Dakota generates $111 in sin taxes per capita… which means either that Minnesotans are more sinful than South Dakotans or that we aren’t as serious as our neighbors about making people pay for the social impacts of their sins.