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Tobacco, alcohol in cross hairs for tax increases

SANTA FE – New Mexico’s sobering budget crisis has prompted calls for an increase in “sin” taxes – specifically, taxes on alcohol and tobacco purchases.

Tax hikes on booze and cigarettes likely wouldn’t solve the state’s entire $589 million budget shortfall for the current and just-ended fiscal years, but groups promoting them in recent weeks say they would bring in revenue that could help close the gap.

Most recently, the director of a group that favors higher alcohol taxes asked Gov. Susana Martinez this week to consider adding an alcohol excise tax increase of 25 cents per drink to the agenda of a possible legislative special session focused on balancing the budget that’s expected to be called this month.

Peter DeBenedittis, the director of Alcohol Taxes Save Lives and Money, said such a tax increase would generate more than $154 million annually and would help offset costs to the state imposed by excessive drinkers in the form of law enforcement efforts, court cases and medical treatment.

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He also said the tax increase would apply to all types of alcohol sales, and would amount to a $1.50 increase for a six-pack of beer or $1.25 more for a bottle of wine.

“Given our budget deficit, it makes sense to require the drinkers causing these problems to pay for a portion of them, rather than cutting the jobs and services provided to all New Mexicans,” DeBenedittis said.

Meanwhile, a separate group, the American Cancer Society Cancer Action Network, has advocated for a dollar-a-pack tobacco tax increase that, it claims, would generate about $33 million annually.

The proposal would mean an increase on the tax for a pack of cigarettes from $1.66 to $2.66, taking the cost of a pack to about $7. It could also mean an increased tax rate for cigars, chewing tobacco and other tobacco products.

While backers say recent polls show broad support for their efforts, the push for higher alcohol and tobacco taxes appears politically untenable because Martinez has maintained a “no tax increase” stance since taking office in 2011. Many legislators have also expressed a reluctance to use tax hikes to help bridge the state’s budget gap.

In a recent interview, Rep. Jimmie Hall, R-Albuquerque, deputy chairman of the House Appropriations and Finance Committee, said, “I’m very hesitant to jump on the bandwagon of new taxes.”

Meanwhile, Martinez spokesman Michael Longergan reiterated Wednesday that the two-term GOP governor is still opposed to tax hikes.

“Gov. Martinez isn’t going to raise taxes; she believes we can solve our budget challenges by making tough decisions and tightening state government’s belt,” Lonergan said. “Taking the easy way out by raising taxes is nothing more than the Washington way, and that’s a route she isn’t going to take.”

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Sen. Howie Morales, D-Silver City, who sponsored tobacco tax legislation during this year’s regular 30-day session, acknowledged Wednesday that the proposal might be a long shot during a special session, given the governor’s tax stance.

But he indicated he still supports the measure and plans to reintroduce it during next year’s 60-day session, saying, “The data shows that it saves lives and dollars.”

“I still very strongly believe we’ve got to put all the options on the table (to solve the budget crunch),” Morales added.

New Mexico has overbudgeted by more than $1 billion in the just-completed and current budget years, as lower oil and gasoline prices caused the state’s tax collections to fall far short of what had been expected. State lawmakers have in recent years approved tax cuts aimed at stimulating the state’s economy, but New Mexico still has one of the nation’s highest jobless rates.

As a result, the state has already exhausted its main cash reserves and is still facing a projected $458 million shortfall for the budget year that started in July, as well as a $131 million deficit for the fiscal year that ended in June. Cutting spending, tightening existing tax breaks and taking money from government accounts are among the budget-balancing measures floated by lawmakers in recent weeks.

In New Mexico, all so-called sin taxes, including those on alcohol, tobacco and gambling, amounted to roughly $193 million in the 2014 budget year, according to Governing magazine. That figure made up just 3.4 percent of the state’s total tax revenue for the year.

Despite the current political headwinds, New Mexico does have a recent history of using sin taxes to help balance the budget.

In 2010, legislators approved and then-Gov. Bill Richardson signed into law a 75 cents-per-pack increase in the state’s cigarette tax as part of that year’s budget-balancing package. Alcohol excise taxes haven’t been raised in the state since 1993, DeBenedittis said.

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