Bill To Create New Alcohol Tax Faces Industry Opposition

Lawmakers are taking another run at driving up the cost of alcohol in New Mexico this year, with a bill to do just that surviving its first hearing on Wednesday.

House Bill 417, which would impose a new 6% retail tax on all alcoholic beverages sold in the state and use the money to address the impacts of addiction, is moving forward despite vocal opposition from business owners and alcohol lobbyists.

“We are talking about a tax increase not to raise revenue but to try to control behavior,” said Brent Moore, a lobbyist for beer giant Anheuser-Busch. “This is a tax to try to prevent folks from consuming more alcohol.”

The bill was approved on a 6-4 party-line vote in the House Health and Human Services Committee and now heads to the House Taxation and Revenue Committee.

The surtax would be paid by consumers at the register when purchasing any alcoholic beverages, including drinks at a bar, restaurant, supermarket or liquor store; the current liquor excise tax would not change.

Supporters say the measure could make a dent in the state’s high rates of alcoholism and drunken driving. New Mexico has had the highest alcohol-related death rate in the country for over a decade, according to a bill analysis from the Legislative Finance Committee. The state’s alcohol-related death rate grew by 32.4% between 2019 and 2021, the report reads, although it has declined since then according to data the state Department of Health released last month.

Measures to raise alcohol taxes in New Mexico have been introduced for the past two years but have failed. Gov. Michelle Lujan Grisham vetoed a tax increase in 2023 and bills to raise alcohol taxes in 2024 stalled.

New fund would help Native communities

The measure seeks to create a new revenue stream devoted to increased funding for prevention and treatment, with a particular emphasis on helping Native American communities.

“In our state, much of that harm [from alcoholism] is held by Native people, Indigenous people,” said Rep. Micaela Lara Cadena, D-Mesilla, one of the sponsors of the bill. “Instead of in a patronizing way saying that we, the state, are going to save anybody or care for anybody, what this proposal does is actually say that net receipts attributed to the new tax go to the Indian Affairs Department.”

The bill would create what would be called the Tribal Alcohol Harms Alleviation Program and fund, designed to make grants to Indian nations, tribes, pueblos and local governments serving Native American communities to tackle substance misuse. Revenue generated by the new tax would not go to the general fund but would be diverted to Native communities through a new council created by the Indian Affairs Department that would be responsible for getting the money to communities.

The bill would also change how liquor excise tax revenues are distributed. In particular, it would replace the Local DWI Grant Program with the Alcohol Harms Alleviation Program, which would expand on the grants currently made by the DWI program, according to a Legislative Finance Committee report.

According to the state Taxation and Revenue Department, spirituous liquors are taxed currently at $1.60 per liter while beer is taxed at $.41 per gallon and wine at $.45 per liter. Craft distillers and small winegrowers are taxed at a lower rate.

Mix of views at hearing

While Democrats on the committee supported the bill, Republicans were skeptical about how effective it would be in curbing addiction and alcoholism and expressed concern about the impact on local businesses and tourism.

“It just feels like raising taxes won’t deter the heavy drinkers or alcoholics but really will overburden low-income constituents,” said Rep. Nicole Chavez, R-Albuquerque, adding the legislation would “punish the responsible ones with higher prices.”

A stream of people representing various groups spoke both for and against the proposal during Tuesday’s hearing. Representatives of business and the service industry voiced concerns about it hurting their ability to turn a profit on the heels of the COVID-19 pandemic.

“This bill from the representatives here was really a brilliant vision. We could have supported that vision at 3% … but unfortunately at 6%, this is going to put us at an uncompetitive point,” said Ron Brown, the owner of Latitudes, a gas station and convenience store in Rio Rancho.

Conroy Chino, a lobbyist representing Taos and Acoma pueblos, said the bill would help Indigenous communities.

“We need the funding that is contained in this bill and the fund that will be created when this bill becomes law to address the harms caused by alcohol,” Chino said.