Prospects dim for proposed NM liquor tax increase after bill stalls in House committee

SANTA FE — A proposal to curb problem drinking in New Mexico by increasing the state’s liquor tax rate is facing long odds for approval during this year’s 60-day legislative session.

But backers say they’re not giving up after a bill that would impose a new surtax on the sale of beer, wine and spirits stalled Monday in a House committee on a tie vote.

Rep. Cristina Parajón, D-Albuquerque, one of the bill’s sponsors, said after the vote she’s committed to working on the issue.

“We still have two weeks left in the session,” she told the Journal, citing several other alcohol-related bills that are still pending at the Roundhouse. “There are other options for us still.”

One of the state’s youngest legislators, Parajón also said younger New Mexicans are especially sensitive to pricing for products, saying higher alcohol prices would lead to a drop in drinking in that population.

However, the New Mexico Restaurant Association and numerous local eateries had expressed opposition to House Bill 417, the proposed alcohol tax increase.

Given that opposition, Parajón and other backers of the measure had sought to rework the bill in the lead-up to Monday’s hearing in the House Taxation and Revenue Committee.

Specifically, the new-look legislation would impose a 3% surtax on all alcoholic drinks sold and consumed on site, such as at a restaurant or brewery, while a 6% surtax would be imposed on all other alcohol sales. That surtax would be imposed on top of existing state and local liquor taxes.

Critics of the approach said the revised bill could be difficult for retailers to implement and would contribute to rising consumer costs.

They also questioned the need for tax increases at a time when New Mexico has been riding an ongoing revenue wave prompted by increased oil production.

Two Democrats — Reps. Patricia Lundstrom of Gallup and Doreen Gallegos of Las Cruces — ultimately joined with the committee’s Republican members on Monday in voting to block the measure from advancing.

Lundstrom, the former chairwoman of the House budget committee, pointed out McKinley County already has a 5% local liquor excise tax and said it was unclear how much money the new proposal would generate.

“I don’t think a bill should be considered at this point if we don’t know how much money it is going to raise,” she said.

This year’s bill marks the latest attempt to raise New Mexico’s alcohol tax rate in a state with one of the nation’s highest drunken driving fatality rates.

Under the proposal, the tax dollars raised by the tax hike would be split between a local alcohol treatment fund and a new tribal prevention fund.

New Mexico’s total number of alcohol-related deaths recently declined for two consecutive years, falling from 2,274 such deaths in 2021 to 1,896 alcohol-related deaths in 2023, according to state Department of Health data.

However, New Mexico still had the nation’s highest per capita rate of alcohol-related deaths in 2022, with 42.7 deaths per 100,000 people, per Kaiser Family Foundation data.

University of New Mexico researchers this year projected a 25-cent per drink alcohol tax increase would reduce alcohol consumption by more than 1.7% and could generate $132 million in additional revenue.

“This is one of the most important policies that we can do for public health,” Parajón said, citing a similar tax enacted in Maryland in 2011 that has led to a decrease in alcohol consumption.