Chances for House bill to increase alcohol tax 'slim' after tabling

Feb. 20—An effort to increase New Mexico's alcohol excise tax for the first time in 30 years — a measure intended to help the state rein in a problem that takes the lives of more than six people a day — stumbled Monday when the House Taxation and Revenue Committee unanimously voted to table the bill.

House Bill 230 calls for a flat 25-cent tax per serving, starting in July — a hefty change from tax rates that now range from a high of 15.5 cents for a serving of "fortified wine" to a low of 0.4 cents for a serving of spirits by a craft distiller that has sold less than 250,000 liters of alcohol. Most liquors are taxed at 7.1 cents per serving, wine at 6.7 cents and beer at 3.9 cents, according to state law.

Advocates say the excise tax increase would lead to a drop in alcohol consumption and, therefore, save lives.

The bill's fiscal impact report, citing data from the New Mexico Department of Health, says 2,273 New Mexicans died from alcohol-related causes in 2021. "This means that approximately 1 in 11 deaths in New Mexico were due to alcohol-related causes," the report says.

But HB 230 faces two steep hurdles: a powerful lobbying effort by the booze industry and doubts among lawmakers about whether a higher tax would curb drinking.

While the committee's action Monday was a blow to HB 230 — and an ominous sign for a similar bill in the Senate — it doesn't mean the measure is dead, the committee chairman said.

Rep. Derrick Lente, D-Sandia Pueblo, said it is the tax committee's policy to temporarily table any bill that would have an effect on the state's general fund. Going forward, he added, "It's yet to be seen" if a compromise could be reached between the committee and the bill's sponsors.

The alcohol excise tax could be wrapped into a larger tax policy measure still being developed, Lente said.

He also lamented the sponsors didn't talk more with New Mexico's business community about the potential effects of the higher excise tax. "There was little or no discussion related to the fiscal impact or tax implications that a bill like this may have on New Mexico," he said.

Rep. Joanne Ferrary, D-Las Cruces, one of the sponsors of HB 230, said in an interview after the hearing the bill's chances of becoming part of the omnibus tax package were "slim." But she said she was open to a compromise to revive the bill.

Some lawmakers remain "barriers to progress and helping people," she said.

"We're No. 1 in the nation for alcohol-related deaths, and people are drinking themselves to death," Ferrary told committee members during Monday's hearing.

Lawmakers liked a provision that would funnel over 86% of the money raised by the tax to a new fund aimed at alleviating alcohol's harms. The fund would draw close to $180 million, according to the fiscal impact report.

As a result, however, the state's general fund would no longer receive revenue from the alcohol excise tax, as it does now. This could lead to a $25 million drop for the general fund, the fiscal report says.

The report says studies are "mixed" on whether a rise in alcohol taxes leads to a drop in drinking.

Several lawmakers on the committee said they were not convinced the state would see such an effect, and some argued the higher tax would harm small breweries and wineries that are still trying to dig out from the effects of the coronavirus pandemic.

"It doesn't matter what the price is, people are still going to find it and consume it," said Rep. Jason Harper, R-Rio Rancho.

Others said the price increase would lead addicts to turn to cheaper booze or products containing alcohol that are dangerous to drink.

"I have seen people drink mouthwash ... rubbing alcohol," said Rep. Cynthia Borrego, D-Albuquerque, one of several committee members who said they have family members and friends who struggle with alcoholism.

"This discussion needs to occur," Borrego added. "It's not as simple as, 'Let's raise the rate to decrease the consumption.' It's a very complicated issue."

Several lobbyists for the wine and beer industry spoke against the bill.

Sam DeWitt, representing the Brewers Association, said it could have a "devastating impact" on the industry.

J.D. Bullington, speaking for the Greater Albuquerque Chamber of Commerce, said breweries would be put on "the path of drying up" if the bill becomes law.

Sen. Shannon Pinto, D-Tohatchi, a co-sponsor of Senate Bill 259, which also would raise the alcohol excise tax to 25 cents per serving, said she was "a little disappointed" HB 230 got tabled. She said the initiative, like SB 259, "goes hand in hand with health care. If we are trying to get people behavioral health care to deal with this problem, we have to pull the money from somewhere."

Two other bills — Senate Bills 61 and 220 — would appropriate part of the current alcohol excise tax to local substance abuse programs or a new domestic violence victims fund. Those could find more favor among lawmakers because they do not raise the tax.

Ferrary, who told committee members she lost a niece to an alcohol-related fall just two months ago, said in the interview HB 230's provisions are "something we really need to do to save lives and reduce consumption. Why aren't we doing something about it? Why can't they have the courage to stand up to a whole quarter increase?"