New Mexico: Another round for state booze tax?

Lawmaker says time is right for raising rates on alcoholic beverages

Source: The New Mexican

By Steve Terrell

11/3/2009

When lawmakers return to Santa Fe in January to consider ways to cover the state’s budget deficit, one likely target is raising taxes on alcoholic beverages.

During the recent special session, two lawmakers – Rep. Brian Egolf, D-Santa Fe, and Sen. Bernadette Sanchez, D-Albquerque – introduced bills that would have raised the state’s excise tax on beer, wine and distilled spirits. Neither bill received serious debate because of Gov. Bill Richardson’s proclamation precluding tax-increase legislation during the short special session.

But with all financial bills fair game in the regular 30-day session – and the budget crisis continuing – Egolf said Tuesday that he’ll introduce his “dime-a-drink” tax hike again next year, along with legislation to raise cigarette taxes and motor-vehicle registration fees.

The last time legislators seriously considered raising taxes on alcohol, during a special session in 2003, the liquor industry fought hard – and won. At the end of that session, Richardson, who had supported a liquor tax hike, declared, “If the liquor industry thinks they’ve beaten Bill Richardson, they’re wrong.” But Richardson never raised the issue again.

Egolf believes the idea’s time has come. He points to a poll – commissioned last month by the New Mexico Education Partners, which includes teachers unions and other professional educator organizations – that shows 70 percent of the 400 registered voters surveyed supported increasing taxes on tobacco and alcohol products to increase revenues for public schools. In that poll, which has a margin of error of 4.9 percent, only 27 percent opposed the idea of increasing what are sometimes referred to as “sin taxes.”

Egolf said his bill would raise the rates on the various types of alcoholic beverages by an amount that would boost the price of a single serving by about 10 cents. This, he said, would generate between $43 million and $50 million in new revenue for the state.

But the liquor industry argues that such an increase would hurt business.

“In a recession, it’s a bad idea to raise any tax,” longtime liquor lobbyist Ed Mahr told a reporter Tuesday. “Things are tough out there for businesses. The excise taxes here are too big already.”

Mahr pointed out that New Mexico has some of the highest excise taxes in the country.

Both the excise tax on beer (41 cents per gallon) and wine ($1.70 per gallon for most wines) are among the top 10 highest such state taxes, according to a study published this year by The Tax Foundation, a Washington, D.C.-based nonpartisan tax-research group. The state excise tax on distilled spirits ($6.06 per gallon) is the 17th highest such levy in the nation.

In 2003, when the Legislature was considering a tax increase on alcohol, a national liquor industry group called the Distilled Spirits Council of the United States launched a campaign of radio ads saying the proposed tax increase would seriously hurt New Mexico hotels and restaurants and the people who work there. The group still maintains this would be the case.

Council spokesman Ben Jenkins, in a phone interview Tuesday, called the alcoholic beverage excise tax “the hospitality tax.”

“Any increase is going to have an effect on your hospitality industry and your tourism industry,” Jenkins said. He pointed out that the industry has suffered in the state. According to the latest report from the state Department of Workforce Solutions, the hospitality and leisure industry lost 1,300 jobs between September 2008 and September 2009.

But Egolf disputed the contention that his tax increase would hurt the hospitality industry. “That’s crazy,” he said. “If you are going out with your friends to have three or four beers – with a designated driver, of course – you’re not going to stay home just because it’s going to cost you an extra 40 cents.”

Jenkins said he didn’t know whether his organization would run radio ads in New Mexico next year to fight a tax increase.

But one thing bound to continue is the liquor industry giving campaign contributions to legislators and other state officials.

Last year, according to the National Institute on Money in State Government, the alcoholic beverage industry dropped $109,926 on state politicians. Of that, more than $39,000 went to state Senate candidates, while more than $42,000 went to House candidates.

In the last gubernatorial race in 2006, liquor manufacturers and distributors contributed $57,425 to Richardson and $14,378 to Lt. Gov. Diane Denish. J.R. Damron, a Republican gubernatorial candidate, received $500.

Richardson’s rhetoric against the liquor industry might have cost him though. In 2002, when he first ran for governor, he had received more than $152,000 from liquor interests.