Lawmakers tackle raising the alcohol tax

The alcohol department at a grocery store Albuquerque, NM. CREDIT: Adria Malcolm for New Mexico In Depth

By Trip Jennings/ NM in Depth

A bill to impose a 25-cent tax on alcoholic drinks goes before its first legislative hearing of the session Friday. Looming over it is the 2017 defeat of a similar bill by the alcohol industry.

Much has changed in six years. The mood of the Legislature appears different in 2023. Greater awareness of alcohol’s harms seems to have permeated the legislative body. Partly because the stats are so stark. Statewide alcohol-related deaths rose more than 32% between 2019 and 2021 — a punctuation mark on a already-existing reality borne out by data: New Mexicans die of alcohol-related causes at nearly three times the national average and alcohol is involved in more deaths than fentanyl, heroin, and methamphetamines combined.

Before lawmakers are a suite of bills that would address the state’s alcohol crisis as well as a draft state budget that contains $5 million for a new Office of Alcohol Prevention, which would represent a significant increase in resources and personnel focused on the crisis.

Some proposals aren’t generating significant opposition. They seek arcane budgetary changes to ensure all dollars generated by the state’s alcohol excise tax go toward programs to help New Mexicans rather than half going to the state’s general fund to pay for general operating expenses. 

But a bill sponsored by Rep. Joanne Ferrary, D-Las Cruces, and Sen. Antoinette Sedillo Lopez, D-Albuquerque, stands out from the rest. Both for what it proposes — a tax increase on alcohol — and the likelihood of robust opposition.

The lawmakers want to raise 25 cents in taxes on alcoholic drinks statewide. Specifically, 25 cents per one and a half ounce serving of what the state calls spirituous liquors, 25 cents per twelve ounce servings of beer and cider, 25 cents per a 5-ounce serving of wine, and 25 cents on a 3.5-ounce serving of fortified wine. Currently, alcohol is taxed at much lower rates per drink, depending on the type.

In New Mexico, as with many states, alcohol is taxed by the volume sold rather than as a percentage of its price. And the tax per volume hasn’t been increased for decades. 

“I’m kind of frustrated with the questions and doubts because it’s way overdue,” Sedillo Lopez said.

“We haven’t raised the excise tax in 30 years,” Ferrary said.

In 2017 New Mexico legislators tabled a similar bill at its first hearing and the proposal was never heard from again due to vigorous opposition from the alcohol industry that at least one lawmaker called overly aggressive.

Will lawmakers see a repeat of history? Friday morning, when House Bill 230 is scheduled to go before the House Health and Human Services committee for a first hearing, might hint at what is to come.

Ferrary is optimistic.

“From other committee members, I think that there is a lot of support for what we want to do,” Ferrary said.

Sedillo Lopez is hopeful too, but admits “I’ve been told it’s a heavy lift,” legislative lingo for a bill whose path to success isn’t assured, and, in fact, could be extremely rocky.
Advocates of the bill lean on research to push for the tax hike. Study after study has shown that higher alcohol prices curb cirrhosis deaths, drunk driving, violence and crime, and even sexually transmitted disease. One of the most effective ways to raise alcohol prices is to increase taxes on alcohol. Under their proposal, for instance, people buying a six pack of 12-ounce beers would pay about $1.20 more in taxes. A pint of Vodka would cost about $2.66 more. 

Advocates can point to states where higher prices have led to lower consumption. When Alaska raised its alcohol taxes by a few cents a drink in 1983 and again in 2002, a study found it cut alcohol-related mortality by a total of 40%. In 2009 when Illinois raised taxes on a drink of liquor by less than a nickel, with smaller hikes for beer and wine, it cut fatal alcohol-related crashes by 26%, with an even larger reduction among drivers under 30. And in 2011 in Maryland, where advocates raised the sales tax levied on alcohol, the change reduced alcohol sales, accelerated a decline in binge-drinking, and cut alcohol-involved crashes and unsafe sex

Not everyone agrees with this analysis, however.

Dan Weaks, a lobbyist for the New Mexico Wine and Grape Growers Association and the California-based Wine Institute, said higher taxes don’t always lead to lower consumption.

“Any time you raise the price point, it affects different people” differently, he said, adding that there are studies that call into question whether increasing taxes on alcohol definitively leads to reduced consumption.

Often pricier drinks lead people to “downshelf,” he said, that is, buying lower-costing brands than more expensive ones. ”That’s particularly true with young people.”

He contends too that the 25-cent-across-the-board tax on drinks will affect smaller businesses more than larger producers because under the current excise tax they pay less than larger producers.

Friday’s hearing will showcase these competing perspectives.

Likely to surface too is New Mexico’s sunny economic picture. Robust oil and gas production and the revenues it generates for the state means New Mexico is sitting on $3 billion in excess of current expenses.

The big debate during this session will be what to do with the surplus money. Some lawmakers are likely to wonder if generating extra dollars by raising a tax on alcohol is necessary, even if advocates argue that generating extra dollars for New Mexico is not the point: It’s about changing the behavior of certain New Mexicans, particularly heavy and youthful drinkers.

Speaker of the House Javier Martinez, D-Albuquerque, said he didn’t want people to think a tax on alcohol would be a “silver bullet” to solve the state’s high alcohol mortality rate.

“It’s never easy to do tax increases,” even when the state is looking for money during lean budget years, said Sen. Majority Leader Peter Wirth, D-Santa Fe.

Wirth predicts a friendlier reception for an alcohol bill sponsored by Sen. Gerald Ortiz y Pino, D-Albuquerque. That legislation, Senate Bill 220, would earmark all of the revenue generated by the state’s alcohol excise tax to pay for drug and alcohol treatment rather than sending half of it into the state’s general fund.

“That has got to be fixed” first before the tax increase discussion, Wirth said, indicating he thought lawmakers in charge of crafting the state budget seemed friendly to the idea. .
Ortiz y Pino said he didn’t include a proposed tax increase in his legislation because he didn’t want to jeopardize it.

Indeed, Weaks, the lobbyist for the wine industry, said his clients support Ortiz y Pino’s bill.

The Albuquerque senator hasn’t heard much from his fellow lawmakers about his legislation, but it hasn’t had its first hearing yet, he said.

Nor has there been a hearing on a competing alcohol bill from Sen. Bill Tallman, D-Albuquerque. Senate Bill 61 would shift the revenues from the general fund to a new domestic violence victims fund, and rather than raise taxes, would simply allow all counties in the state to impose a local alcohol tax, which is only currently allowed in McKinley County.

As for Friday’s tax bill, Ferrary said she’s “hoping we have a really good committee.” If the bill gets out of that committee, it heads to the House Tax committee.

“Hopefully they’ll be open,” Ferrary said. 

Correction: This article was corrected to clarify that the proposal raises a variety of current tax rates to a flat tax rate of $0.25 per drink.

This story was originally published by New Mexico In Depth