Bill to impose 6% alcohol sales tax passes first committee

SANTA FE — Democrats are trying once again to impose a tax on alcohol sales in the hopes of addressing one of the leading causes of death in New Mexico. The legislation might have enough support this year to get to the governor’s desk after failing in past years.

The House Health and Human Services Committee passed House Bill 417 Wednesday morning by a vote of 6-4. All committee Republicans voted against the measure that would institute a 6% tax on alcohol sales at the register, on top of the state’s current wholesale liquor excise tax, starting in July 2025.

The effort aims to discourage New Mexicans from buying alcohol. The proposed 6% alcohol tax is estimated to reduce the consumption of spirits by 1.2%, wine by 1.14% and beer by 0.66%, according to a legislative analysis of the bill.

HB418 would also redirect where money from the current liquor excise tax goes, sending the annual $25 million to $50 million to local harm alleviation funds instead of the state’s general fund. The surtax revenue, an estimated $30 million to $60 million annually, would go to the Indian Affairs Department for tribal prevention and help efforts.

Bill sponsor Rep. Micaela Lara Cadena, D-Mesilla, said New Mexico would become the second state to impose such an alcohol surtax. Legislative finance and tax officials would be required to review the tax and surtax rates as well as the distributions before 2033 to consider if any changes should be made.

“We have enough humility to say we are not projecting that we’re getting this exactly right, but we know we need to go in a new direction,” Cadena said in a news conference after the committee meeting.

The legislation came after failed attempts in past years to impose new alcohol taxes. The state hasn’t changed its liquor excise tax in 30 years, said bill sponsor Rep. Joanne Ferrary, D-Las Cruces.

Cadena explained that she joined onto the bill this year because she thought it was more reasonable than last year’s proposed 12% tax. The proposal started over the summer as a 3% surtax from Reps. Cadena and Christina Parajón, D-Albuquerque, and the bill’s seven sponsors landed on a flat 6% as a compromise, Cadena said.

“We’ve spent many contentious hours looking at research around the country, like what impact do we think we can have? My argument continued to be before we go to a sky-high rate, I need to see that we’re even changing consumption,” she said. “Six was about as low as they would go, and we said we couldn’t go higher.”

Many liquor and restaurant industry representatives showed up to oppose the bill. Ron Brown, who owns the convenience store Latitudes in Rio Rancho, said the legislation “was a brilliant vision” at 3%.

“And we could have supported that vision at 3% as it was this summer. It would have helped out retailers with cash flow,” he said. “But unfortunately at 6% this creates a giant bureaucracy ... and it’s going to put us in an uncompetitive point.”

He also brought up that alcohol consumption and charges for driving while intoxicated are down. Data from the New Mexico Department of Health indicates that alcohol-related deaths have dropped over the past two years.

However, New Mexico is still consistently at the top in the nation for alcohol-related deaths and had twice the national average in 2021, when the number peaked at 2,274 deaths. The pandemic worsened the rate of alcohol deaths. In 2023, nearly 1,900 people in New Mexico died as a result of alcohol, according to DOH.

Rep. Jenifer Jones, R-Deming, said she wasn’t completely confident in the accuracy of New Mexico’s data tracking deaths directly caused by alcohol.

“I have a feeling that we are reporting alcohol-related deaths, like in cirrhosis of the liver, that perhaps have nothing to do with alcohol. … We may not really be that far ahead of anybody. We may not even be at the top of the list,” she said.

The bill is expected to be heard in the House Taxation and Revenue Committee Friday or Monday, Cadena said.