Democratic legislators search for agreement on alcohol tax hike

By Ted Alcorn, New Mexico In Depth
New Mexico In Depth

ALBUQUERQUE, NEW MEXICO - JUNE 26, 2022: The alcohol department at a grocery store Albuquerque, NM on June 26, 2022. CREDIT: Adria Malcolm for New Mexico In Depth

For the third straight year, lawmakers are trying to raise taxes on alcoholic drinks, in an attempt to reduce New Mexico’s worst-in-the-nation alcohol-related death rate.
This time, they just might succeed.

New Mexico has the highest rate of alcohol-related deaths in the country. In 2023 excessive drinking killed just under 1,900 people in the state, according to previously unreported data from the health department, about double the national death rate.

Powerful lawmakers have said the state needs to act, including House Speaker Javier Martinez, D-Albuquerque, and Rep. Derrick Lente, D-Sandia, who chairs the House Taxation and Revenue Committee. But Democrats, who control both chambers, have been at odds about the best approach, and even the basic purpose of alcohol taxes, despite reams of evidence from across the globe that raising prices deters excessive drinking and reduces injuries and illnesses.

The World Health Organization recommends raising alcohol taxes as a “best buy” for reducing deaths due to drinking. In New Mexico, lawmakers have done the opposite, allowing tax rates to fall by more than half since they were last revised over 30 years ago, after adjusting for inflation.
During the last two legislative sessions, lawmakers with competing visions for alcohol policy have effectively undercut one another.

In 2023 and 2024, a group of legislators co-sponsored bills that would have raised taxes paid by wholesalers of beer, wine, and spirits by 25¢ a drink. Their most recent effort was supported by the New Mexico Alliance of Health Councils, Mothers Against Drunk Driving, and League of Women Voters.

But critics assailed the proposal as too large a jump from current rates, which range from 4¢ per drink of beer to 7¢ per drink of spirits. The first time, lawmakers watered down the tax hike to a penny-per-drink increase, which Gov. Michelle Lujan Grisham vetoed. Last year, it foundered in the tax committee, where vice-chair Rep. Micaela Lara Cadena, D-Mesilla, has voiced skepticism that higher alcohol prices deter excessive drinking at all.
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“We need New Mexico-grown research that understands the complexities of our poverty and our trauma and our truth and can help represent the impact that tax may or may not have on people’s behavior, especially when they’re navigating the disease of addiction,” she said at a December hearing of the Revenue Stabilization and Tax Policy Committee.

In the 2024 legislative session, Cadena and another group of lawmakers pushed for eliminating the existing wholesale taxes and levying retailers 3% of alcohol’s sales price. This change would effectively raise taxes on higher-priced drinks, particularly those sold at restaurants, while reducing rates on cheaper drinks.

The New Mexico Alcohol Alliance, an industry group that has expressed openness to a “reasonable” increase in alcohol taxes, opposes shifting them to retailers as “an undue burden” on businesses.

Debated in lengthy hearings, neither of the competing bills advanced to a floor vote. But in interim hearings throughout the fall, the legislators made efforts to find common ground.

Lawmakers who sponsored the 25¢-per-drink tax hike last year have been circulating what they call a “hybrid” bill. It would raise wholesale taxes by 4¢ to 8¢ per drink as well as introduce a new tax on retailers, like that proposed by Cadena, but at a higher 12% rate, the same percentage that cannabis is taxed.

By retaining the wholesale tax, the hybrid bill would not allow rates on the cheapest drinks to fall, a distinction the sponsors have previously called “a moral issue.”

“The reason I’m co-sponsoring is that if I can add another day, another month, another year to any of my constituents’ lives, that is probably the most important thing I can do,” said Sen. Shannon Pinto, D-Tohatchi, as she presented the bill during the December hearing.

The bill would direct a quarter of the $200 to $260 million the sponsors estimate it would raise to the state’s tribes and Pueblos for prevention programs, “including culturally relevant practices.” Native people in New Mexico are less likely to drink than Anglos, but die from alcohol-related causes at much higher rates. Both the Indian Affairs Committee and the Legislative Health & Human Services Committee have endorsed the bill.

In a nod to Cadena’s concerns that raising the price of alcohol could inadvertently harm people who are deeply dependent on it, supporters of the bill also suggested funding go to “managed alcohol programs,” which provide clients doses of alcohol in addition to housing and medical services as a form of “harm reduction.”

Dozens of such programs have been established, mainly in Canada, and research suggests they are a “promising” intervention for homeless people with severe alcohol use disorder.

During the December hearing, Cadena said she was working on her own alcohol tax bill for the 2025 session, but praised Pinto and her co-sponsors for making some compromises, including incorporating a retail tax. She expressed determination to find agreement. “We need to send a bill to the fourth floor,” she said repeatedly.

Points of contention remain, including what rate to tax retailers, whether to retain a wholesale tax, and whether to adjust it for inflation.

For his part, Lente signaled that both approaches would be debated and voted on as standalone bills, rather than buried in an omnibus tax package crafted behind closed doors. “That’s the commitment that we are making, to ensure that this issue that plagues New Mexico is one that we are taking seriously,” he said during the hearing. “We will send a message to the alcohol industry that we will be taking action in one way or another.”

Speaker Martinez also pressured the vying camps of lawmakers to come to an agreement, convening them for a four-hour meeting in early January in hopes of hammering out a single bill, according to multiple legislators in attendance.

Alcohol kills more New Mexicans than all illegal drugs combined, and such deaths rose significantly during the COVID pandemic, as they did elsewhere in the country. Now, that pandemic surge seems to be moderating. Between 2022 and 2023, alcohol-related deaths in New Mexico fell 9%, according to the latest data from the health department, but they remained higher than any year before 2020.​

In other states that have reported comparable data such as Oregon and North Carolina, increases in alcohol-related deaths also accelerated in 2020 and 2021 before slowing or reversing in 2022.

Gov. Michelle Lujan Grisham has not prioritized tackling the state’s epidemic of alcohol-related deaths. In 2021, as many states relaxed long standing restrictions on alcohol deliveries and “to go” sales, New Mexico’s hospitality industry pressed her to sign a bill loosening alcohol sales. She did so over the objections of the state’s alcohol epidemiologist, who said that by promoting drinking the bill “would likely increase harms” including violent crime and child abuse.

In 2023, when she vetoed a  penny-per-drink increase in alcohol taxes, it disappointed lawmakers and her own former health officials.
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She instead directed her health department to fund a $2 million Office of Alcohol Prevention. Nearly two years later, of the 11 positions allocated to the department, six remain unfilled.