New Mexico

A proposal to hike New Mexico’s liquor taxes in an effort to curb problem drinking has hit a significant roadblock, as opposition to the measure continues to mount. While advocates of the tax increase remain persistent, the controversial proposal faces significant hurdles in the Legislature.

House Bill 417, which would impose a new surtax on the sale of beer, wine, and spirits, stalled in the House Taxation and Revenue Committee on Monday after a deadlocked vote. Despite this, one of the bill’s sponsors, Rep. Cristina Parajón, D-Albuquerque, insists the fight isn’t over.

“We still have two weeks left in the session,” Parajón told the Journal, emphasizing that other alcohol-related bills are still in play. She also argued that young people in New Mexico would be especially deterred by increased alcohol prices, a claim that opponents strongly dispute.

However, the New Mexico Restaurant Association, along with numerous small businesses, has voiced serious concerns over the proposed tax hike, arguing that it would place an undue burden on both consumers and business owners. Given this strong opposition, backers of the tax increase attempted to modify the bill ahead of Monday’s hearing. The revised version proposed a 3% surtax on alcoholic beverages sold and consumed on-site at restaurants and breweries, while a 6% surtax would apply to all other alcohol sales. This would come on top of the existing state and local liquor taxes, further increasing costs for consumers.

Critics warn that such a measure would be difficult for retailers to implement and would drive up the price of alcohol at a time when New Mexico is already benefiting from significant oil revenue. With the state in a strong financial position, many argue that now is not the time to impose additional taxes that will hurt local businesses and working-class consumers.

Two key Democrats, Reps. Patricia Lundstrom of Gallup and Doreen Gallegos of Las Cruces joined Republicans in blocking the measure. Lundstrom, a former chair of the House budget committee, pointed to McKinley County’s existing 5% local liquor excise tax and questioned the lack of clarity on how much revenue the new proposal would generate.

“I don’t think a bill should be considered at this point if we don’t know how much money it is going to raise,” Lundstrom said.

Despite McKinley County being the only county that has additional taxes on alcohol, it remains the county with the highest alcohol-related fatalities, per the New Mexico Department of Health.

Despite claims by the sponsors that the tax hike is necessary to address New Mexico’s high rate of alcohol-related deaths, data from the state Department of Health shows that the total number of such deaths has actually decreased for two consecutive years, dropping from 2,274 in 2021 to 1,896 in 2023. This raises questions about whether increasing taxes on alcohol is truly the most effective approach to addressing the issue.

Supporters of the tax hike cite a University of New Mexico study suggesting that a 25-cent per drink tax increase could reduce alcohol consumption by 1.7% and generate $132 million in revenue. 

Actually, the UNM study referenced notes, “A hypothetical ten-cent per-gallon increase in beer excise taxes could reduce 2.84 alcohol-related traffic fatalities in New Mexico each year,” showing statistically insignificant findings that such a tax would do anything at all or even save a single life.

“Despite recent increases in the total number of liquor licenses, there has not been a statistically significant increase in alcohol-related traffic fatalities at the state-wide level,” the study also found.

Since 1981, New Mexico’s alcohol-related death rate has ranked among the top three in the United States, holding the first position from 1997 through 2010. Despite massive increases in alcohol taxes and the creation of programs in 1993, New Mexico’s alcohol-related death rate increased from 39.3 deaths per 100,000 in 1994 to 86.6 in 2020, despite these programs, according to the New Mexico Department of Health.

Also, “New Mexico has one of the higher liquor excise tax rates in the region,” and despite its high tax rate, it has the highest fatality rate relating to alcohol, meaning there is absotuly no correlation whatsoever between increased taxes and fewer alcohol harms, per the Legislative Finance Committee’s fiscal impact report (FIR) on another bill.

Statistics and peer-reviewed studies show that a tax increase will disproportionately impact responsible consumers while failing to adequately address problem drinking.

The same FIR noted, “Excise taxes are generally considered regressive, meaning lower-income individuals pay a higher proportion of their income in taxes. Eliminating the tax would reduce overall regressivity in the tax code.”

“This is one of the most important policies that we can do for public health,” Parajón said, pointing to Maryland’s 2011 alcohol tax increase as a precedent. But critics remain skeptical, questioning whether higher prices will truly deter excessive drinking or simply push consumers to purchase alcohol from out-of-state sources.

Multiple natuonal studies also find that alcohol tax hikes do nothing to curb alcohol-related fatalities and harms, including “Does Heavy Drinking by Adults Respond to Higher Alcohol Prices and Taxes? A Survey and Assessment” by Jon P. Nelson in Economy Analysis and Policy, The Effects of Prices on Alcohol Use and its Consequences by Xin Xu and Frank J Chaloupk published by the National Insitutes of Health (NIH), among many others. 

With growing bipartisan opposition, House Bill 417 appears unlikely to advance, and for good reason. Raising taxes on alcohol would hit consumers and businesses hard while offering no guarantee of reducing alcohol-related harm in any way, shape, or form. 

Rather than imposing another financial burden on New Mexicans, lawmakers should focus on targeted prevention and treatment programs that address the root causes of problem drinking without penalizing responsible consumers.
Piñon Post editor and state Rep. John Block (R-Alamogordo) proposed H.B. 460, which would have removed these ineffective alcohol taxes from state statutes. The bill was quickly tabled in the House Health and Human Services Committee on a party-line vote — a committee comprising many of H.B. 417’s sponsors and proponents.