Pennsylvania's reliance on taxes and fees on tobacco, alcohol and gambling to balance its budget is no secret.

And its reliance on those so-called "sin taxes" is increasing as lawmakers avoid the more politically poisonous options of raising income or sales taxes.

In 2015, these taxes accounted for 7.3 percent of the state's revenues,  according to a study released Thursday by The Pew Charitable Trusts.

The "Are Sin Taxes Healthy for State Budgets?" study  looks at how Pennsylvania compares to other states -- and whether states can expect to keep relying on this revenue source.

Pennsylvania rank seventh among the 50 states for how much it relies on "sin tax" revenue, according to this report by The Pew Charitable Trusts and Rockefeller Institute of Government.

According to PennWatch, state government's transparency website, cigarette, liquor, malt beverage and gambling taxes generated nearly $1.4 billion in 2014-15, the year that the study's authors used for their report.  

With the addition in 2016-17 of a new tax on other tobacco products and higher cigarette tax, those revenue sources combined raised more than $1.85 billion, according to PennWatch. That figure dipped in  2017-18 by about $16 million.

Who is No. 1?
It probably comes as a shock to no one to learn that the state that leads the nation for having the largest share of its revenues coming from sin taxes is none other than the home of Sin City: Nevada.   

It's where whatever happens there, stays there -- including a lot of gamblers' money. Overall, 12 percent of that state's  revenues are generated by sin taxes. 

Who comes after that state?
The are the other states that the Pew study says relied  more heavily than Pennsylvania on sin taxes in 2015:

No. 2: Rhode Island - 11.1 percent

No. 3: West Virginia - 8.1 percent

No. 4: Louisiana - 8.1 percent

No. 5: New Hampshire - 7.9 percent

No. 6: South Dakota - 7.7 percent

In case you are wondering which state was ranked dead last, that would be North Dakota. Less than  1 percent of its revenues came from sin taxes in 2015, which leads House Appropriations Committee Chairman Stan Saylor, R-York County, to suggest, "I guess they hover in their houses and never leave."

As you can see , the portion of revenue that sin taxes generate in each state is relatively small.

Nonetheless, policymakers continue to explore or grab onto these taxes to plug budget holes. That has been the case particularly in recent years, which drew Pew and the Rockefeller Center's interest in looking into states' reliance on sin taxes, said Mary Murphy, project manager for this report.  

"If you look at historical data, we do see more state activity around raising tobacco tax rates or expanding gambling in particular in periods of recession, which suggests that these particular sources are seen as budget savers when under distress," she said. 

The Pew report specifically highlights Pennsylvania as an example.

 "For evidence, look no further than the explosion in casino openings over the past decade, exemplified by a bill passed in Pennsylvania in October 2017 to expand casinos[and other gambling options] to help plug the state's multibillion-dollar budget gap." 

'I think we've done it right'
Pennsylvania taxes tobacco and alcohol and levies taxes on casinos at rates higher than most other states.  So Saylor (shown above) said it's only logical that Pennsylvania would rank ahead of most states for the share of revenue that come from sin taxes.

"I don't want to balance our entire budget on sin taxes but we have a pretty balanced way of raising revenue in Pennsylvania," he said. "I think we've done it right. We've been very careful about how we structured our sin taxes so the people in Pennsylvania benefit."  

Not convinced
Saylor may think the General Assembly has done it right but Senate Appropriations Committee Democratic Chairman Vincent Hughes of Philadelphia is not buying it.   

Noting the regressive nature of sin taxes, he said Pennsylvania relies too much on taxing smokers, drinkers and gamblers and says that is a byproduct of Republicans' unwillingness to go along with other revenue sources that Democrats have suggested.

"We have proposed other avenues, including a shale tax and closing the  Delaware loophole, but those plans have been rejected by the Republican  majority," he said. "The problem in Pennsylvania is that low, moderate and  middle-income people are carrying the burden and the wealthiest can do a  much better job. We need more cooperation from the other side to  advance larger policy discussions and to reduce the pursuit of tax  avenues that disproportionately impact low-income people."

Breaking it down by "sin"
Of the three so-called sins (tobacco, alcohol, and gambling) that are ranked in the study, Pennsylvania's reliance on gambling taxes earned it its highest ranking. 

Pennsylvania is ranked sixth for having 4.7 percent of its total 2015 revenue come from gambling taxes.

Generally, state and local revenue from gambling comes almost entirely from lotteries, casinos and racinos, with lotteries accounting for two-thirds of those dollars, the study says. 

California, Florida, Illinois, New York and Pennsylvania collectively accounted for roughly a third of all gambling revenue in 2015, it found. 

How Pa.'s gambling revenue is raised and distributed
The state imposes varying tax rates when it comes to gambling and only a small portion of it actually winds up supporting the state's general fund budget. 

It collects 54 percent of slot proceeds and that is split with 34 percent going to property tax relief fund and the rest to  economic development grants, horseracing purses, and 1 percent each to a casino's host municipality and host county. 

With table games, a 16 percent tax is levied with 14 percent of that going to support the spending in the state budget and 1 percent each to the casino's host municipality and county. 

With online slot and table games, the tax rates mirror those listed above although the revenue is distributed differently.

As far as the Pennsylvania Lottery goes, all proceeds generated are used to support programs and services for senior citizens, namely prescription assistance, property tax relief, free- and reduced-fare transportation, home- and community-based services, and long-term care services. 

States relying on gambling revenue more than Pa. does
Here are the states that ranked ahead of Pennsylvania for having a larger share of their revenue come from gambling taxes:  

No. 1: Nevada - 10.2 percent

No. 2: Rhode Island - 7.9 percent

No. 3: West Virginia - 6.7 percent

No. 4: Louisiana - 6.7 percent

No. 5: South Dakota - 4.8 percent

Tobacco taxes
Pennsylvania ranked 13th for its reliance on tobacco taxes as a source of money, with 1.9 percent of its revenues coming from those taxes in 2015, according to the study.

However, it's possible the state's ranking rose the following year after an increase in the cigarette tax and new taxes on other tobacco products, including e-cigarettes, were approved.

Pennsylvania's tobacco taxes vary based on the form the tobacco product takes.

The current tax on a pack of cigarettes and little cigars is $2.60. The tax on smokeless, chewing, snuff, pipe, and roll-your-own tobacco products is 55 cents per ounce. The tax on e-cigarette devices and liquids they use is 40 percent of the purchase price that retailers pay wholesalers. 

New Hampshire is No. 1
According to the Pew study, New Hampshire, where the fall foliage on its mountains is a sight to behold, topped the rankings for the portion of state revenues that it claimed from tobacco taxes in 2015 with 5.7 percent.

Other states that the study ranks ahead of Pennsylvania in this category of tax revenue are as follows:  

No. 2: Rhode Island - 2.8 percent

No. 3: Wisconsin - 2.7 percent

No. 4: Maine - 2.6 percent

No. 5: Michigan - 2.4 percent

No. 6: Minnesota - 2.3 percent

No. 7: Florida - 2.2 percent

No. 8: Montana - 2.2 percent

No. 9: South Dakota - 2.2 percent

No. 10: Vermont - 2 percent

No. 11: Ohio - 2 percent

No. 12: Indiana - 1.9 percent

Then there's wine, liquor & beer
Pennsylvania ranks 15th for the portion of its total revenues collected from taxes on alcoholic beverages. Those taxes account for just seven-tenths of 1 percent of state revenues.

The state levies an 18 percent liquor tax and has a  malt beverage tax rate that is based on quantity, and ranges from  a 1 cent tax levied on a pint up to a tax of $2.48  on a barrel.

States where alcohol taxes or licenses raise a larger portion of their revenues
The state of Washington, home of Mount Olympus shown above, tops the rankings for having the largest portion of its state revenues that came from alcohol taxes/licenses in 2015 with 1.7 percent.

Other states with a higher percentage of state revenues generated from this sin tax than Pennsylvania had are as follows:

No. 2: Missouri - 1.5 percent

No. 3: Alabama - 1.2 percent

No. 4: North Carolina - 1.1 percent

No. 5: Kansas - 1.1 percent

No. 6: South Carolina - 1.1 percent

No. 7: Montana - .9 percent

No. 8: Tennessee - .9 percent

No. 9: Alaska - .9 percent

No. 10: Florida - .9 percent

No. 11: Kentucky - .9 percent

No. 12: Oklahoma - .8 percent

No. 13: Virginia - .8 percent

No. 14: Georgia - .7 percent

So what's wrong with taxing these vices?
The study's authors consider it risky business for states to look at existing sin taxes -- or new ones that have emerged on soft drinks and marijuana--  as silver bullets in addressing ongoing revenue needs. The societal or public health costs associated with them also has to be considered.  

They conclude they are unlikely to "prove a reliable or robust funding source over the long term, at least without continued growth or higher tax rates."

Why?

Kicking one habit and starting another
The population of cigarette smokers is on the decline. The Pew study notes that the smoking rate among American adults was 15 percent in 2016 compared to 40 percent in 1965. 
"If the Centers for Disease Control and Prevention meets its goal of driving smoking rates below 12 percent by 2020, the tax base will continue to narrow," it states. "These long-term trends should signal to policymakers that relying on this source could lead to structural challenges."
On the other hand, e-cigarettes are gaining in popularity and the study notes research shows adult cigarette smokers are switching to this different tobacco product. However, it suggests that there remains a degree of uncertainty about this evolving technology and federal policy regulating it. Moreover, wide disparities in state tax rates may incentivize smuggling and tax evasion. 
"High tax rates could fuel a black market," it states. "A shortage of data is the major obstacle to reliable forecasting, which makes it challenging for policymakers to base long-term budgeting decisions on this revenue stream." 

Is expanded gambling a risky bet?
While gambling represents the greatest share of sin taxes in this country, the report states that "gambling taxes also come with caveats, including almost no growth in lottery revenue, greater competition as casinos proliferate, and weakening growth in tax collections as a result."

It's unknown at this point what kind of revenue states like Pennsylvania that are moving into the sports betting market can expect to generate, said Murphy, the report's project manager. But if experience has taught us anything, new forms, ways or places to gamble has a tendency to cannibalize revenues from older or existing gambling options.

"These challenges, while distinct from those associated with tobacco and alcohol taxes, elicit the same caution: Short-term budget fixes could turn into long-term structural imbalances, depending on where gambling revenue is directed."

But this is where Saylor, the House Appropriations Committee chairman, believes Pennsylvania has put itself in a better position than other states by not structuring the revenues it raises from its sin industries to support taxpayers' basic needs, such as education and police.   

One other point to consider on this front is the Pennsylvania Lottery's addition this year of Keno and online lottery games that is anticipated will increase revenue. However, there is a certain unknown about that since the state's casinos are arguing that those online games are stepping into their turf and are contemplating filing a lawsuit to force the lottery to halt those games.  

Alcohol taxes more stable but ...
The report indicates that alcohol taxes tend to be a more stable revenue source than tobacco. Still, it goes on to say, "Despite gains in alcohol tax revenue tied to more imbibing, policymakers would be wise to take a long view. Alcohol consumption tends to be cyclical."

It cites national statistics that indicate the per capita alcohol consumption in 2015 was 2.3 gallons, down from the 1981 peak of 2.8 gallons but up from the low point in 1998 of 2.1 gallons. 

Given those ebbs and flows and consumer whims, the study says, "revenue gains may not always be a reality nor is increased usage desirable from a public health or safety perspective. Policymakers should therefore not rely on alcohol tax revenue for long-term budget commitments."

Where do our gubernatorial candidates stand on using 'sin taxes'?
Asking the two gubernatorial candidates their positions on sin taxes and whether they would turn to them to meet future revenue needs drew some oblique answers from campaign spokespeople for Democratic incumbent Gov. Tom Wolf (on the left in above photo) and his Republican challenger Scott Wagner.

This is what Wolf's campaign spokeswoman Beth Melena had to say about it in an emailed response minus the unsolicited shot she took at Wolf's opponent: "When Governor Wolf took office, Pennsylvania's finances were a mess  after years of budgets put together by band aids and scotch tape. Now,  in only four years, the governor, working with both parties, has fixed  the deficit through commonsense measures like cutting billions in waste  and inefficiencies and reducing the state workforce by nearly 2,000.  Just last week, Governor Wolf made the first deposit into the state's  Rainy Day Fund in 10 years."

Wagner's campaign spokesman Andrew Romeo said, "Scott's plans to boost revenue focus more on investing in job training to fill our  200,000 open skilled labor positions and cutting taxes for employers in  order to grow the overall economy." 

So we asked again
We asked each campaign for a more direct answer to the question : Does your candidate see taxing our 'sins' as playing a bigger role in Pennsylvania's path forward to meet future revenue needs?

This time, Wagner's campaign spokesman said no. Wolf's campaign spokeswoman said she had nothing more to add to her previous response. 

This article is a reprint from PennLive.com.  To view the original story and comment, click here.