Rift between Democrats dooms this year’s alcohol tax push

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ALBUQUERQUE, NEW MEXICO - JUNE 26, 2022: A man walk shops in the alcohol department at a grocery store Albuquerque, NM on June 26, 2022. CREDIT: Adria Malcolm for New Mexico In Depth

The push to change the state’s taxes on alcohol all but ended Friday when the House Taxation & Revenue Committee voted down one bill and declined to take action on another. Chairman Rep. Derrick Lente, D-Sandia Pueblo, encouraged the bills’ sponsors to re-work their proposals in the coming months. But with no other measures advancing to address the state’s worst-in-the-nation rate of alcohol-related deaths, the Legislature kicked the can down the road on one of the state’s leading public health crises.

Unlike last year, when an effort to raise alcohol taxes provoked vociferous opposition by beverage makers and retailers, dooming the proposal, the most important fissure this year was within the group supporting changes in alcohol taxes.

In deliberations that stretched over two days, the tax committee considered divergent proposals. Proponents of last year’s bill, led in the House by Rep. Joanne Ferrary, D-Las Cruces, sought to hike alcohol taxes 25¢ and devote $200 million in new projected revenue to treatment and prevention. 

But they shared the stage with lawmakers who argued the state’s alcohol tax is itself the problem, due to falling more heavily on lower-income people. Led by Rep. Micaela Lara Cadena, D-Mesilla, this group sought to replace the state’s alcohol tax, which is levied on alcoholic beverages by their volume, with one calculated as a share of their price. At the rates they proposed, this would have the effect of raising taxes on expensive beverages while reducing them on the cheapest ones. Their proposal would also reform how the tax revenues are spent in lieu of raising substantial new resources.

The debate was wide-ranging. Lawmakers discussed alcohol taxes’ effect on drinking, the best use of the revenues, and whether it would be beneficial or even feasible to shift the tax, as Cadena’s bill proposed, from wholesalers to retailers.

As the discussion wound down, Cadena, who is also vice chair of the committee, did not ask for a vote on her bill. Ferrary asked for a vote on hers and it fell well short of passage: Cadena, Lente, and three other Democrats joined all the Republicans to vote it down 10 to 4.

There were early indications the measures might be on a collision course. Ferrary and Cadena represent neighboring districts in Dona Aña County and both hail from the progressive wing of the Democratic caucus, but do not share a vision of how to curb the state’s sky-high rate of alcohol deaths.

Ferrary has long been an advocate for preventing teen drinking and intoxicated driving and has pursued an alcohol tax hike since 2016. Cadena previously worked as a researcher and grassroots organizer with Bold Futures, an advocacy organization that works with young women of color, including on reproductive health and substance use. In recent years as a legislator, she captained changes to make the state tax code more progressive.

When Cadena introduced an alcohol tax bill at the outset of the session, it seemed to signal broadening support for adjusting the state’s rates, which have stagnated for 30 years. But last week in hearings of the House Health and Human Services Committee, the distance between the lawmakers became clear. That committee approved Ferrary’s bill but passed Cadena’s without a recommendation, a signal of unease. Last Saturday, Ferrary and Cadena and other Democratic lawmakers met for hours seeking a compromise but emerged without any agreement.

On Wednesday, during the first of the tax hearings, Ferrary offered an olive branch, halving her proposed tax to 12¢ per drink and eliminating a clause that adjusted the tax with inflation. Substance abuse researcher Marlena Lira, who served as one of Ferrary’s expert witnesses, proposed a hybrid approach that would retain the state’s existing alcohol tax on wholesalers and add a new percentage tax on retail prices, like the one in Cadena’s bill.

That’s roughly how alcohol taxes are structured in Maryland, which Cadena’s co-sponsor, freshman lawmaker Rep. Cristina Parajón, D-Albuquerque, cited favorably during her testimony. Retaining the existing wholesale tax would ensure the change did not lower alcohol taxes on the cheapest beverages.

During the hearing, some groups that supported Ferrary’s bill lambasted Cadena’s proposal. Katrina Latka, executive director of the state chapter of Mothers Against Drunk Driving, said that by lowering taxes on cheaper alcohols, the bill “will especially hurt youth, heavy drinkers and low-income populations, which would directly affect DWI crashes on our roadways.”

Cadena and her cosponsors, however, seemed equally opposed to Ferrary’s approach. Citing a scarcity of studies on how alcohol taxes affect Hispanic, Black, and Indigenous people, Cadena said she was unconvinced that raising alcohol taxes in New Mexico would curb drinking.

Parajón highlighted the financial impact alcohol taxes have on people who are dependent on drinking and unable to quit. “We’re looking at putting those folks in a dangerous situation,” she said.

Reached by email, Frank Chaloupka, a professor emeritus at the University of Illinois Chicago who has advised governments around the world about tobacco and alcohol taxation, heartily agreed that there was “a big gap in the literature” on how such policies impact communities of color. But he maintained that Cadena’s bill was “particularly problematic” in light of how it reduces taxes on cheaper alcohol. “This could actually result in consumption increasing,” he wrote.

After Friday’s hearing, Ferrary and Sen. Antoinette Sedillo Lopez, , D-Albuquerque, who sponsored companion legislation in the Senate, expressed disappointment. Had Cadena and her co-sponsors worked with them, said Ferrary, “we could have had a bill.”

But the pair objected to lowering the price of cheap alcoholic beverages. “That’s a moral issue for me,” said Sedillo Lopez. “Decreasing the price means increased consumption.”

In an interview, Cadena thanked Ferrary, Sedillo Lopez and others for starting the conversation about alcohol policy. “That is their leadership, 1,000%,” she said. But she distinguished her proposal from theirs as being “about modernizing what I would call a regressive tax.”

In the meanwhile, alcohol will continue to take an outsize toll on the state. At present rates, in the eleven months between now and the opening of the 2025 legislative session, drinking will likely kill another 1,965 New Mexicans.

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