EDITORIAL:Jacking up alcohol taxes is the last thing local restaurants and bars need

Advocates pushing for a quarter-a-drink alcohol tax increase will have taxpayers believe the move is the solution to curbing alcoholism and lowering the rate of alcohol-related deaths.

The idea is that by raising the state’s alcohol tax to a quarter per drink that it will make it less affordable to consume alcohol and encourage people to reconsider spending their hard-earned dollars on alcohol. Instead, raising the tax will force people who abuse alcohol, and who use it to self-medicate, to seek out a cheaper way to satisfy their addiction, which could mean turning to fentanyl or other quick fixes to feed their addiction at a fraction of the cost.

Truth be told, increasing liquor excise taxes “constitute hidden fees on New Mexicans that are regressive and create pyramiding taxation,” according to the New Mexico Restaurant Association, which is opposed to the tax increase. It is impossible for an excise tax to be levied at a wholesale level without creating a substantial pyramid effect. Higher taxes equate to higher prices for consumers.

The tax is regressive and impacts lower wage earners. A 25-cent drink tax would raise $275 million at the taxpayers’ expense.

Tax increases are the last thing local restaurants, bars, and hospitality businesses need. It would be a nail in the coffin for many who are struggling to keep their head above water with inflation on the cost of ingredients and equipment while also struggling with employee shortages and supply chain issues. Increasing taxes would make investing in rehiring, purchasing new equipment, and expansion extremely difficult. New taxes would result in higher prices for consumers, which could be detrimental to the restaurant and hospitality industry, with patrons visiting less frequently or deciding to stay home and entertain.

Despite not having an alcohol tax increase since 1993, New Mexico currently has the highest excise tax regionally and one of the highest nationally. New Mexico has the fourth highest liquor excise tax on wine, the ninth highest on beer, and the fifth highest on liquor in the nation.

If the concept of increasing taxes to decrease alcohol consumption was an effective measure, then New Mexico would currently have one of the lowest consumption rates in the United States, which is not the case.

The real issues are New Mexico’s shortage of behavioral health providers and its failure to offer services to the addicted community. There is a shortage of resources to address addiction. The Legislature must focus on directing funding to help curb substance abuse and get to the root of the problem that entails a number of factors including poverty and unemployment.

Advocates, who support increasing the liquor excise tax, insist the move will generate hundreds of millions of dollars for treatment and prevention programs. However, the money has been available for the past four years with alcohol excise taxes raising about $50 million annually, with about 45% of that revenue going directly to local DWI grant funds, another 5% going to drug court funds, and about 50% going to the state’s general funds. The remainder is issued to counties for alcohol treatment and rehabilitation services.

“Alcohol is not the harm; it’s the self-medication,” Rep. Micaela Lara Cadena said last month at an Interim Revenue Stabilization and Tax Policy Committee hearing. She argued that a tax increase would not address the root causes of excess drinking, according to a New Mexico InDepth report.

In comparison, the state has continuously raised cigarette taxes and people continue to smoke. Many New Mexico smokers also have discovered less expensive tobacco products sold on Pueblo land and younger smokers, with less disposable income, have turned to vaping. There also is the question as to why the state advocates for one inebriating industry such as cannabis over another such as alcohol.

A much-needed conversation should take place between advocates of the liquor excise tax increase and opponents. The industry and activists need to negotiate an agreement and welcome dialogue. Raising liquor taxes will not make issues with alcohol suddenly disappear. Alcohol abusers will not put down the bottle or stop self-medicating because it is hitting them in the pocketbook. People will seek alternative ways to get their fix, which could be more damaging, not only to themselves but also the community.

Studies need to be done to find out why New Mexicans are self-medicating, and the Legislature needs to support policies that address the cause rather than the symptoms. New Mexico has seen more than $7 billion in budget surpluses over the past three legislative sessions. In 2021, local DWI funding reverted more than $3.61 million back to the state. In 2022, about $3.80 million in local DWI funding was reverted to the state.

Reallocating monies rather than creating a new tax increase is the direction the Legislature should be taking. Lawmakers need to direct funding to help the addicted community and not place a greater burden on the backs of taxpayers, especially in an era of record budget surpluses.