Alcohol tax hike on the table as New Mexico takes aim at excessive drinking

Feb. 10—SANTA FE — Democratic legislators launched an emotional push Friday to establish a flat 25-cents-a-drink tax as part of a strategy to combat New Mexico's incredibly high alcohol death rate — the worst in the nation.

Pausing to compose herself, state Rep. Joanne Ferrary explained in a public hearing that her niece was buried last month, dead after an alcohol-related fall.

"We've been working on this a long time," she said, "but we keep losing people along the way."

The legislation narrowly survived its first committee Friday, advancing on a 6-4 vote.

If it advances through the Capitol, New Mexico would raise alcohol taxes and dedicate an extra $155 million in new revenue to support health, treatment and other programs.

Perhaps more important, supporters said, the higher prices would reduce alcohol consumption in New Mexico.

The proposal faced blunt opposition Friday from the national alcohol industry, local breweries and others.

Al Park, a lobbyist for the New Mexico Brewers Guild, said the changes would undo incentives that helped the state grow its craft beer scene.

The bill would damage local breweries that already impose two- or three-drink limits on customers and are "among the leading proponents of responsible drinking," he said.

After Friday's hearing, even proponents acknowledged the bill will face powerful opposition. But they expressed optimism the proposal can succeed this session as a growing number of lawmakers recognize the harm caused by excessive drinking.

Ferrary, D-Las Cruces, said the state hasn't raised its liquor tax in decades, allowing its value to be eroded by inflation.

Alcohol "has a such an enormous cost to our state," Ferrary said. "We are basically subsidizing the profits of the alcohol industry. We're suffering by losing the lives and productivity of so many of our constituents."

Alcohol would still be subject to state GRT

The flat tax would represent a sharp jump in taxation on liquor, beer and wine, especially for craft distillers and brewers.

New Mexico now taxes alcohol by the liter or gallon. The amount varies based on the type of booze, how much of it is sold and who made it.

Local breweries and small winegrowers, for example, face lower taxes than big national companies.

But the legislation, House Bill 230, would shift to a flat tax per serving regardless of what the customer is buying.

The goal, supporters say, is to avoid favoring any particular drink.

"The path to abuse takes many forms," Democratic Sen. Antoinette Sedillo Lopez of Albuquerque said.

Under the bill each 12-ounce can of local beer, for example, would see its tax set at 25 cents — rather than ranging from less than 1 cent now to 4 cents. A can of, say, Budweiser is now taxed at roughly 4 cents a drink.

Wine is now about 7 cents a drink, with small winegrowers taxed at just 2 to 5 cents. Under the bill, the tax would go to 25 cents.

The per-drink tax would be incorporated into larger purchases. A six-pack of beer, for example, would come with a $1.50 tax, and a 25-ounce bottle of wine would be taxed at $1.25.

Alcoholic drinks are also subject to the state's gross receipts tax.

The new taxes would kick in this summer. An inflation adjustment — likely raising the tax beyond 25 cents — would begin in 2027.

About $180 million of revenue would flow into a new Alcohol Harms Alleviation Fund. The state's general fund, which now receives some of the alcohol tax revenue, would lose about $25 million.

The new alcohol fund would pay for prevention, treatment and recovery services; behavioral health programs for individuals not covered by Medicaid or other health insurance; and services to help victims of domestic violence, sexual assault or other alcohol-related crimes.

Sen. Shannon Pinto, D-Tohatchi, said the legislation could make a real difference in her part of the state — preventing problems on the front end by reducing consumption — without imposing an excessive cost on consumers.

"This is just a drop in the bucket to me to battle this," she said.

David Jernigan, a professor at the Boston University School of Health, said increased alcohol taxes are associated with a number of positive health outcomes, including less underage drinking and fewer drivers with alcohol in their system.

"The message of the science is clear," he said. "Alcohol taxes save lives."

Several lawmakers credited a series published last summer by New Mexico In Depth, a nonprofit news organization, with boosting awareness of the state's alcohol problem. The series, "Blind Drunk," concluded the state has largely neglected the crisis even as it grows worse.

Tax increase called unnecessary

Opponents say increased taxes aren't necessary to address New Mexico's alcohol problem.

State revenue is hitting record highs amid an oil boom and uptick in consumer spending, providing financial flexibility, opponents said, to launch new health programs without tax changes.

"We won't dispute that our state has a drinking problem," said Sara Fitzgerald, senior vice president at the Greater Albuquerque Chamber of Commerce. But "simply ratcheting up a tax isn't the answer to combating alcohol abuse."

Jason Weaks, a lobbyist for the New Mexico Distillers Guild, said the industry has been an economic bright spot — the kind of manufacturing work that sends locally made products out of state and injects new money into the economy.

"These are good jobs," he said.

The proposal cleared the House Health and Human Services Committee over the objection of three Republican members, plus Democratic Rep. Tara Jaramillo, of Socorro.

It advances next to the House Taxation and Revenue Committee, which would be empowered to send it to the full chamber for consideration.

Data shared with New Mexico legislators last year showed the state had the nation's worst alcohol-related death rate, almost twice the national average.

And the problem is getting worse.

The death rate jumped from alcohol-related causes per 100,00 residents jumped from about 66 in 2017 to 103 in 2021, according to the state Department of Health.