Need for Raising Alcohol Taxes Becomes Focus of Law Makers in New Mexico

Law makers in New Mexico who are concerned about the state having the highest alcohol death rate are planning on raising alcohol taxes.

In September, 2022 the Legislative Health and Human Services Committee decided on an alcohol tax increase as one of its top priorities for 2023. In the first week of October another committee heard tax experts present on the topic.

Earlier in September, Movendi International reported on the the devastating impact of alcohol in New Mexico. Nearly three times more people die due to alcohol in New Mexico than the U.S. national average.

Alcohol taxes have historic lows in New Mexico

While lawmakers are interested in raising alcohol taxes they are unsure of how much to raise them, whether to change the way alcohol is taxed, and what to do with the revenues raised.

Raising alcohol taxes is an alcohol policy solution recommended by the World Health Organization as the most effective and cost-effective way to protect more people from alcohol harm.

In New Mexico, as in many U.S. states, alcohol wholesalers are taxed a fixed amount per volume of beverage sold to retailers, who in turn raise the prices of alcohol products to cover the taxes.

New Mexico does not adjust tax rates for inflation. This means as inflation rises alcohol product prices increase but taxes erode automatically. Currently, alcohol taxes in the state are at 7 cents per beverage for wine and spirits and 4 cents per beverage for beer. This is a historic low for alcohol taxes.

If there was preventive power in the New Mexico alcohol tax, it has lost almost all that power in the last 30 years,” said Prof. David Jernigan, at Boston University School of Public Health, as per Santa Fe New Mexican.

Prof. David Jernigan, Boston University School of Public Health

Not just in New Mexico, alcohol taxes have hit historic lows in all of the U.S. as Congress continues to give tax breaks to Big Alcohol.

U.S. states are not committed to protecting public health through raising alcohol taxes. Only a few have done so in recent years. This includes Maryland in 2011 and Delaware in 2017. Additionally, in 2021, Anchorage, Alaska, began collecting a 5% tax on retail alcohol sales to invest in resolving three core problem areas in the community with a focus on prevention and support.

New Mexico lawmakers are unsure of how much alcohol taxes should be raised. Prof. Jernigan provides a logical solution to this question, from an economic perspective, alcohol should pay for itself.

According to the Centers for Disease Control and Prevention, an average alcoholic beverage imposed $2.77 in costs on New Mexico’s taxpayers ($3.71 in 2022 dollars). However, neither New Mexico nor any U.S. state comes close to taxing alcohol products at this level.

Alcohol industry interference in New Mexico

A group of advocates attempted to raise alcohol taxes by a quarter per alcoholic beverage. The campaign included an analysis by Catherine Richards, a consultant specializing in public health and economics who predicted that such a tax increase could:

• Prevent over 12,000 new cases of alcohol dependence,
• Save 52 lives, and
• Raise $154 million for New Mexico.

Nevertheless, the bill failed due to heavy and systematic alcohol industry lobbying. The Big Alcohol lobbyists were known to treat legislators with meals and alcohol at local restaurants and pubs during their lobby campaign against the tax increase. AB InBev, one of the key opponents of the alcohol tax increase in New Mexico, made $30,000 in political contributions to legislators during re-election later in 2017.

Alcohol industry interference has not only killed the alcohol tax bill in New Mexico. The alcohol lobby’s influence is also the reason for the worsening of alcohol policies in 2021’s Liquor Control Act. While the Act did ban the sale of miniature bottles of liquor for off-site consumption, the other measures were disastrous:

• Making it easier for restaurants to acquire licenses to sell liquor. 
• Allowing existing license holders to make home deliveries of alcohol.
• Allowing restaurants and bars to sell beer, wine, and cocktails starting at 7 a.m. on Sundays rather than 11 a.m. 
• Giving the McKinley County retailers the choice to sell either gas or liquor, but not both leading them to pick liquor.

Debate on alcohol taxes in New Mexico

Rep. Antonio “Moe” Maestas, D-Albuquerque has suggested altering how alcohol taxes are calculated. Instead of taxing alcohol by the volume sold, he suggests taxing it as a percentage of its sales price, known as an ad valorem tax. This type of tax would keep pace with inflation and pass the cost directly to consumers and relieve wholesalers of paying tax.

It is noteworthy that Rep. Antonio “Moe” Maestas, D-Albuquerque in 2021, led the efforts which adjusted alcohol laws in New Mexico to allow home delivery. He claimed this would reduce driving under the influence (DUI) rates. But Prof. Jernigan had pointed out the error in this logic as increasing alcohol availability would increase alcohol harms.

Experts address the weaknesses in ad valorem taxes. Prof. Frank Chaloupka, a professor emeritus at the University of Illinois Chicago and one of the world’s foremost experts on fiscal policy and health explains that changing how alcohol is taxed in New Mexico would be a bad idea.

This is because ad valorem taxes have the least impact on the price of the cheapest alcohol products which cause the highest harms. Cheaper alcohol products are most used by heavy alcohol users and young people. Policy makers usually want to reduce alcohol consumption of these two groups hence ad valorem tax would not be effective in this regard.

Prof. Chaloupka emphasized that law makers in New Mexico can adjust the state’s current alcohol taxes to automatically keep up with inflation, like Minnesota and Washington, D.C. have done for their tobacco taxes.

Policy makers in New Mexico are also debating about what to do with the revenues if alcohol taxes are raised. Currently, the New Mexico State government obtains about $50 million in alcohol tax revenues annually. Out of this 45% is allocated to local DUI grant councils, 5% to drug courts and the remainder to the state’s general fund.

An influential New Mexico politician on tax policy, Rep. Jason Harper, R-Rio Rancho, has called for 100% of alcohol tax revenues to go to prevention and treatment programs.

Rep. Christine Chandler, D-Los Alamos, who chairs the Revenue Stabilization and Tax Policy Committee, has questioned whether the councils are the best recipient for the funds from alcohol tax revenues.

Rep. Chandler’s questions are not unfounded since a 2014 report by the Legislative Finance Committee found the councils rarely used evidence-based programs or reported outcome-oriented performance measures to gauge their impact.

The councils also continue to narrowly focus on DWI and ignore alcohol’s broader impact on the state such as fuelling violence including on women and children and the impact caused by heavy alcohol use.

Policy makers in New Mexico also think that allocating the tax revenues to prevention and treatment would alleviate any criticism that taxes are regressive meaning that they are a higher burden on people with lower income. In the case of alcohol taxes.

Alcohol taxation: A triple win measure

As Movendi International has consistently reported, alcohol taxes have a triple win benefit for public health and sustainable development.

Sources

AP News: “Some New Mexico lawmakers debate higher tax rate for alcohol“

Santa Fe New Mexican: “Raising New Mexico taxes on alcohol up for debate“