| New Mexico In Depth
Alcohol costs New Mexico dearly. It killed 1,878 residents in 2020, three times the nation’s rate.
But getting hammered here is cheap.
At the Shop-N-Save on Gallup’s west side, a thirty-rack of Natural Ice beer sells for $24.95 after tax, a little over two hours’ earnings at minimum wage. Total Wine in Santa Fe offers a five-liter box of Franzia Crisp White wine for $15.15, or 45 cents per drink. And you can’t do better than Wal-Mart in Rio Rancho, where a 1.75-liter handle of Aristocrat vodka sells for $11.84, just 30 cents a drink.
Rock-bottom prices, experts say, are at the heart of the state’s drinking problem.
Other factors also contribute to New Mexico’s high rate of alcohol-related deaths: cycles of violence and trauma that perpetuate alcohol-dependence, opiates and methamphetamines that make for a toxic mix with drink, and the unequal treatment of Native communities that produces yawning disparities. But the easy availability of cheap alcohol makes all this worse.
And over the last 50 years, the price of alcohol has declined dramatically compared to the average person’s income. According to one study, in order to drink heavily of even the cheapest liquor in 1970, a person would have to spend 22% of average after-tax income. By 2010, doing so required just 3%.
To reverse the state’s ballooning rate of alcohol-related deaths, experts say New Mexico has to make drinking more expensive. That can be done by taxing it at a higher rate — but the politics of doing so are difficult. The most recent push to increase alcohol taxes, in 2017, demonstrates the feeble advocacy for change, the robust opposition to it, and the powerful inertia of the status quo.
Basic economics and public health
Alcohol taxes have been around since the birth of the country — the first U.S. Congress placed a tax on imported alcoholic drinks on July 4, 1789. New Mexico’s Liquor Excise Tax Act, drafted shortly after the repeal of Prohibition, reflects its age in arcane terminology like “spirituous liquors.” The statute sets rates by the liter or gallon but converted to “standard drinks” the state taxes beer at 4 cents per 12-ounce can, wine at 7 cents per 150-milliliter glass, and liquor at 7 cents per 1.5-ounce shot.
These tiny amounts add up, netting the state just shy of $50 million a year. This revenue is what alcohol taxes are best known for, but they are also a tool of public health.
“Back in the day when I got started on this, nobody thought tax mattered,” said Philip Cook, a professor emeritus of economics at Duke University who has studied alcohol policy all his career. But his research, and that of other scholars, demonstrates the way governments tax alcohol also affects how people drink.
It is a basic economic principle that when the price of a normal good rises, consumers demand less of it. Over 100 studies have shown this is true of alcohol: when governments raise alcohol taxes, businesses that sell alcohol raise prices, and consumers respond by drinking less. (Bars and restaurants have turned this logic on its head by lowering prices during “happy hour” to encourage customers to drink more and earlier.)
The same economic principle has been used to reduce smoking by raising taxes on cigarettes. When it comes to alcohol, studies generally find a 10% increase in price results in a 5% reduction in overall demand.
Not all drinkers react to price changes in the same way. Young people typically have less money to spend so price increases prompt sharp reductions in consumption or delay the age at which they start to drink. Contrary to conventional wisdom, even heavy drinkers consume less as prices rise, in part because the hit to the pocketbook is greater when you buy greater volumes of alcohol. “It’s people who drink a lot that are likely to be sensitive, not the people who drink on Christmas and Easter,” Cook said.
Most important are the impacts alcohol taxes have on health, and they are sweeping and unequivocal.
Study after study has shown that higher alcohol prices curb cirrhosis deaths, drunk driving, violence and crime, and even sexually transmitted disease. When Alaska raised its alcohol taxes by a few cents a drink in 1983 and again in 2002, a study found it cut alcohol-related mortality by 40%. In 2009 when Illinois raised taxes on a drink of liquor by less than a nickel, with smaller hikes for beer and wine, it cut fatal alcohol-related crashes by 26%, with an even larger reduction among drivers under 30. And in 2011 in Maryland, where advocates raised the sales tax levied on alcohol, the change reduced alcohol sales, accelerated a decline in binge-drinking, and cut alcohol-involved crashes and unsafe sex.
But opportunities to study increases in alcohol taxes are rare because these rate increases are the exception across the country. The overwhelming trend has been for states to let real tax rates fall, and legislators typically needn’t lift a finger to do it.
That’s because of inflation. Both federally and in almost all states, alcohol is taxed by the volume sold rather than as a percentage of its price. So over time as inflation pushes alcohol prices higher, the taxes are unchanged and the real tax rates slowly erode. A six-pack priced at $5.99 25 years ago is taxed the same amount as a $10.99 six-pack is today.
Between 1970 and 2010, total federal and state excise tax rates fell by nearly two-thirds after accounting for inflation. In New Mexico, where legislators last raised alcohol tax rates in 1994, they are the lowest they’ve been in a generation — even as the harms that alcohol imposes on the state have risen exponentially.
And scientists say these harms are the best measuring stick for judging how far current tax rates fall short.
For a market to work efficiently, people choosing what to consume must face the full price of that decision. But for a significant share of the costs of drinking, the whole of society picks up the tab — economic losses due to sick or injured workers, healthcare expenditures by public programs, criminal justice responses to alcohol-fueled crimes.
Federal and state researchers calculated these costs at $2.77 per drink in New Mexico as of 2010 ($3.71 in 2022 dollars), the highest of any state and far in excess of what alcohol is taxed anywhere in the United States. When drinkers don’t have to factor these consequences into their actions, they are prone to consume more than they would otherwise. According to Tim Naimi, director of the Canadian Institute for Substance Use Research, that leaves non-drinkers with the bill. “The taxpayers of New Mexico are massively subsidizing alcohol consumption.”
Passionate but inexperienced advocates
Peter DeBenedittis might not have been the champion for raising alcohol taxes New Mexico needed, but he was the one it got.
Originally from Colorado, he’d earned a doctorate in communications and had a varied career. He’d worked in advertising and staffed a successful gubernatorial campaign in the remote island territory of Guam, been a motivational speaker,and taught media literacy. He had an idealism that sometimes bordered on grandiosity. On a month-long retreat he once undertook at a temple in India, a monk asked him to envision the biggest thing he could think of. DeBenedittis answered, and the monk responded: think bigger. “That was influential,” DeBenedittis recalled.
After resettling in New Mexico, and drawing in part on his own struggle with alcoholism, he built a business marketing a trademarked curriculum for preventing substance misuse, the Alcohol Literacy Challenge. That’s why he was at a public health conference in 2014, where he saw a presentation about alcohol taxes.
DeBenedittis could point to a handful of studies that found his program was effective at reducing underage drinking, but he could only influence people who took it. A self-professed “research geek,” he also recalled being stunned by calculations showing the number of lives saved for each additional penny of tax imposed on alcohol. When he got home he called acquaintances, hoping to motivate one of them to pursue an increase in New Mexico’s tax rate. But he found himself leading the campaign.
“It became my mission,” he recalled.
The first person he recruited was Shelley Mann-Lev, the founder of the Santa Fe Underage Drinking Prevention Alliance. They dubbed their new coalition Alcohol Taxes Save Lives and Money.
The two had helped the city of Santa Fe pass a smoke-free ordinance a decade earlier, but alcohol taxes were a bigger challenge. Sporadic efforts to raise them in the state legislature had repeatedly sputtered.
A decade earlier when then-Gov. Bill Richardson was exploring reforms to the tax code, he proposed a dime-a-drink increase in the alcohol tax but dropped the proposal after key legislators resisted.
In 2009, Brian Egolf, newly elected to the House of Representatives, endorsed a dime-a-drink increase but the measure quickly died. He told a newspaper “an unholy alliance” of liquor interests, the hospitality industry, and grocery and convenience stores scuttled the bill.
Then for a few years Democratic Attorney General Gary King lobbied to allow counties to impose their own local tax of up to 4 cents per drink, but members of his own party bottled up the bill.
“Democrats are fluent at discussing prejudice and social inequality,” King’s chief lobbyist Phil Baca told New Mexico In Depth of the loss, but they are “completely unwilling to take on predatory industries like the liquor industry.”
Chances for a higher levy on alcohol in 2017 weren’t promising. Plunging oil and gas revenues meant the state was running a $600 million budget deficit and higher alcohol taxes were viewed by some as a way to raise revenue — but Republican Gov. Susana Martinez opposed increasing state taxes of any kind.
DeBenedittis was undaunted. To lay the groundwork for a legislative campaign, the coalition asked for and received money from Bernalillo County to project the impact of raising alcohol taxes by a quarter a drink — an amount far greater than lawmakers in other states had ever considered. But the advocates focused on the science, not the politics.
“We considered a dime but felt like to get the kind of impact — both in terms of the reduction of underage drinking as well as the revenues — that it needed to be meaningful,” said Mann-Lev. Each year, the report concluded, the tax increase would prevent over 12,000 new cases of alcohol dependence and save 52 lives. It would raise $154 million for New Mexico, too.
DeBenedittis published op-eds in local newspapers, launched a Facebook page, and crisscrossed the state educating audiences and recruiting volunteers to help.
But none of the advocates were familiar with how the Legislature works, recalled Holly Mata, then a public health specialist in Alamogordo. ”People get involved in advocacy because they’re passionate about something, but very few people have training or experience in navigating the ins and outs of political systems,” she said.
A majority of the public supported increasing taxes on alcohol, according to a poll released by the coalition, and some public health associations endorsed the plan. But major progressive organizations such as New Mexico Voices for Children, the Center for Civic Policy, and the New Mexico Center on Law and Poverty didn’t lend their muscle to the effort. Nor were people in recovery or the state’s hard-hit tribal communities a visible presence among its members.
The coalition hammered home the message about the social costs of alcohol borne by taxpayers. It was “the only argument that held sway” in the Legislature, DeBenedittis felt.
In the House, they recruited freshman Democratic Rep. Joanne Ferrary of Las Cruces to carry the legislation. Ferrary had long worked in DWI prevention but was new to the Roundhouse. “I wish I knew then what I know now about having to lobby the different committee members and things like that,” she said.
The sponsor in the Senate, outspokenly progressive Cisco McSorely, a Democrat from Albuquerque, anticipated opposition from the state’s popular craft breweries. So he exempted from the proposed tax increase brewers who produce fewer than 15,000 barrels a year — nearly every brewery in New Mexico. Larger, out-of-state brewers, which produce over 90% of the beer consumed in the state, would be subject to the proposed tax hike.
The businesses that profit by selling alcohol are numerous and diverse. Observers disagree about how much influence they wield in the state Legislature but the advocates certainly felt overmatched.
Mann-Lev recalled Roundhouse meeting rooms crowded with opponents.
“I’m literally talking about 20 men in suits, very expensively dressed, there all the time,” she said.
Lawmakers felt the pressure too, said Sen. Gerald Ortiz y Pino, D-Albuquerque. Most communities around the state have businesses that sell alcohol.
“It’s not like we’re dealing with something that only benefits one county,” Ortiz y Pino said.
And those who lobby on alcohol stick together, said Rep. Antonio Maestas, a Democrat on Albuquerque’s west side, “So they’re very successful at killing bills.”
Others said the alcohol industry is more organized than omnipotent, lacking the sway of oil and gas, attorneys, or hospitals. “They don’t have an overbearing influence,” said Charlie Marquez, a longtime lobbyist who for decades has represented the state’s green chile growers among other clients.
One of the most knowledgeable opponents of the tax increase was Maurice Bonal. His grandmother had opened a bar and restaurant in Santa Fe and he’d grown up around the alcohol industry, later becoming the state’s leading broker of liquor licenses. He estimated he’d owned nine businesses with alcohol licenses at one point, and has worked with more than two-thirds of the other licensees around the state.
He also commanded a deep understanding of state government and was intimately familiar with the Legislature, where relationships matter.
“Since 1973, I have attended every session,” he said. “I’ve known all the leadership throughout the years, and then of course all the members.”
Bonal contracted a lobbyist to fight the tax increase, saying license holders utterly opposed it. A quarter-per-drink increase wouldn’t reduce excessive consumption, he said. “You could double (the price) and all that would happen is the black market would kick in.”
Another opponent of the tax increase, Ruben Baca, had gotten familiar with the legislature through his wife Patricia Baca, a state representative from Albuquerque between 1985 and 1994. He’d lobbied for a racetrack and a for-profit college but his main clientele was gas stations, which he represented as the executive director of the Petroleum Marketers’ Association.
Baca called the proposed tax increase a “boondoggle” and recalled showing lawmakers maps of New Mexico’s neighboring states that taxed alcohol even less.
“I talk to the people who vote,” he said, adding the advocates weren’t as focused on that strategy. “The nonprofits and these other people that are just activists, they don’t mean anything.”
The founder of La Cumbre Brewing Company, Jeff Erway also lobbied against the bill. He said a tax increase might curb drinking and prevent some chronic illness but making alcohol more expensive would never help the most desperate alcoholics. “You are going to take food out of the mouths of children,” he said. “You are not going to tax their parents into making a better life choice.”
Working against the advocates, too, was alcohol’s often-hidden role in lawmaking. During each legislative session, lobbyists wine and dine New Mexico’s unpaid lawmakers at renowned watering holes such as Santa Fe’s Bull Ring and Rio Chama steakhouses.
The pervasiveness of alcohol in lawmaking makes reform difficult, Maestas said.
“Every restaurant we go to, there’s the liquor license guy,” he said. “You’re choosing good public policy over people you know, and that’s a tough vote.”
A forgone conclusion
By the time the 2017 legislative session began, opponents of the tax increase were fired up. The first hint came Feb. 5, Super Bowl Sunday, when McSorely held a town hall for constituents in Nob Hill’s Immanuel Presbyterian Church.
Erway was among the crowd of 300, many wearing New Mexico Brewers Guild shirts, according to a blog post by attendee Chris Jackson, who published under the byline “Stoutmeister.” The mood was contentious. When McSorely tried to correct the misconception that the bill would impose a tax on small breweries, which it in fact exempted, Erway shouted “Liar!” and was nearly ejected.
On Feb. 20, the bill was heard by the Senate Corporations and Transportation Committee at the end of a hearing that started in the afternoon and stretched into the evening. As McSorely prepared to present the bill to his colleagues, one joked, “I’d hoped he’d gone to bed,” to laughter.
“Did you bring beer before it’s taxed?” another asked.
McSorely made opening remarks and introduced DeBenedittis, whose testimony brimmed with facts and figures about how hiking the tax on alcohol would raise revenue and reduce public expenditures but wearied some.
Committee chairman Clemente Sanchez, a Democrat, interrupted, “You’re not gonna go through every one of these slides, are you?”
DeBenedittis concluded by thanking the committee “for hearing how this bill creates jobs and grows New Mexico’s economy.”
Then opponents spoke. Jeff Lewis, executive director of the New Mexico Brewers’ Guild, acknowledged the bill would exempt craft brewers but signaled unity with the rest of the industry. “We’re part of an ecosystem that includes restaurateurs, hoteliers, our partners in the distribution business, the grocers,” he said, “and for that reason we can’t support it.”
Asked if the industry would be open to negotiating a smaller increase, Jimmy Bates, the head of Premier Distributing, rejected compromise. “Any tax increase, Mr. Chairman, we’d be opposed.”
And Nancy King, a lobbyist for Anheuser-Busch, noted that raising the tax by a quarter per drink would amount to “a 589% increase,” although the jump seemed dramatic only because the existing rate was so low. Later that fall as legislators approached re-election, Anheuser-Busch would shower them with $30,000 in political contributions.
Democratic senator Michael Padilla, whose Albuquerque district includes another major distributor, Admiral Beverage Corporation, said he saw the tax as both too high and too low. “Even though it’s excessive, I just don’t think it’s going to really change behavior.”
By a vote of 5 to 4, the committee tabled the measure and retired for the night. That proved to be the high watermark of the campaign.
“All the doors I had opened in the senate closed shut,” DeBenedittis said. He went on to pursue a quixotic run for governor, dropping out in the spring of 2018 when Michelle Lujan Grisham was effectively coronated the Democratic candidate. (Premier Distributing, Admiral Beverage Corporation, and another distributor Southern Wine & Spirits of New Mexico each contributed the maximum $5,500 to her campaign committee). DeBenedittis is now offering Channeled Spiritual Coaching Sessions under the brand Becoming Awesome.
Mann-Lev stepped down from the Santa Fe Prevention Alliance and her successor took the organization in a different direction. Without leadership, the other volunteers lost steam. “It just seemed like we were screaming into the wind,” Mata said.
Ferrary wished the campaign had held together. “It takes many years of effort to educate legislators,” she said. “We should have kept trying.”
What it would take
Any effort to raise New Mexico’s alcohol taxes today would encounter different challenges.
A wave of state senators who took office in 2018 shifted the balance of power in that chamber leftward. And Lujan Grisham made her early career heading the state health department and has taken aggressive measures against another public health threat, COVID-19.
But on alcohol, she has not followed the advice of her scientific advisors, according to former health department staff. Michael Landen, New Mexico’s state epidemiologist from 2012 to 2020, said when he sought permission from her staff to talk with legislators about reducing alcohol-related deaths by increasing alcohol taxes, they rebuffed him.
“We’d have to get a go-ahead to do something like that,” he said. “We did not get a go-ahead.”
Asked to comment, the governor’s office wrote in a statement that she “fully recognizes the scourge of alcohol and substance abuse in New Mexico and will continue to take every evidence-based action to combat this epidemic.”
Those concerned about the state’s over-reliance on oil and gas revenue repeatedly call for diversifying the tax base, and earlier this month the senate’s interim Revenue Stabilization and Tax committee held public hearings about alternative sources of revenue.
The committee’s chairman, Sen. Benny Shendo, D-Jemez Pueblo, said raising alcohol taxes is among the options under consideration.
“I think everything should be fair game.”
On the other hand, oil and gas production has pushed the state budget into surplus, relieving the urgency for finding revenue that animated the 2017 session. And in an election year, no one sees political advantage in supporting a tax hike.
But not acting allows inflation to eat away at the value of the tax. The present historically high inflation rate will effectively grant alcohol the biggest tax cut in 40 years.
Meanwhile, alcohol’s harms are growing and with them the need for remedies: Since 2017 alcohol has killed at least 8,000 New Mexicans.
Ferrary argued that public health should trump political considerations.
“If we can’t be elected on the things that need to be done to help our citizens, it basically isn’t worth it,” she said.
Outgoing Speaker Egolf sees the issue differently than he did in 2009, when as a freshman he blamed the demise of his dime-a-drink tax increase on special interests. He no longer thinks the alcohol industry has an undue influence. Instead, he attributed the failure to pass a tax increase to the absence of a truly sustained, strategic effort by supporters.
“Quite often there are advocates — and pick the area, it really makes no difference — who have an idea. They have a study or they have data that shows that their ideas are going to make a positive impact,” he said. “They find a member to file a bill on their behalf, and are outraged or devastated or something in between when it doesn’t pass. And the reality is: passing a bill on any topic that generates any controversy or disagreement is hard.”
Raising alcohol taxes “could absolutely be done,” Egolf said. “It’s just a question of who is going to step in and put forward the effort to turn an idea into a law.”
This reporting was made possible by support from the USC Annenberg Center for Health Journalism, the McCune Charitable Foundation, the Con Alma Health Foundation, and a fellowship from the Association of Health Care Journalists supported by The Commonwealth Fund.
Ted Alcorn is a writer raised in New Mexico whose work has appeared in The New York Times, The Atlantic, and The Washington Post Magazine, among other publications. Follow him at @tedalcorn.