Fiscal impact reports (FIRs) are prepared by the Legislative Finance Committee (LFC) for standing finance
committees of the Legislature. LFC does not assume responsibility for the accuracy of these reports if they
are used for other purposes.
F I S C A L I M P A C T R E P O R T
SPONSOR Block, J.
LAST UPDATED
ORIGINAL DATE 2/27/2025
SHORT TITLE Repeal Liquor Taxes
BILL
NUMBER House Bill 460
ANALYST Gray
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Liquor
Excise
Tax
$0 ($24,730.0) ($25,010.0) ($25,260.0) ($25,520.0) Recurring General Fund
Liquor
Excise
Tax
$0 ($22,480.0) ($22,730.0) ($22,950.0) ($23,190.0) Recurring
Local DWI
Grant Fund
Liquor
Excise
Tax
$0
($2,497.0) ($2,525.0) ($2,550.0) ($2,577.0)
Recurring Drug Courts
Liquor
Excise
Tax
$0 ($249.0) ($249.0) ($249.0) ( $249.0) Recurring Class A Muni
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
Conflicts House Bill 417 and Senate Bills 378 and 431
Sources of Information
LFC Files
Agency Analysis Received From
Administrative Office of the Courts (AOC) Health Care Authority (HCA) Department of Health (DOH) Agency Analysis was Solicited but Not Received From
Taxation and Revenue Department (TRD)
SUMMARY
Synopsis of House Bill 460
House Bill 460 (HB460) repeals the liquor excise tax and eliminates its distributions. Section 7-
1-6.40 NMSA 1978, which would be eliminated by HB460, provides a series of distributions to
the liquor excise tax. The impact of that repeal is reflected in the table below.
House Bill 460 – Page 2
HB460 Liquor Excise Tax Distribution Changes
Current FY26 Estimated
Distributions
New HB460 FY26
Distributions
Fund Rate
Amount (in
thousands) Rate
Amount (in
thousands)
Local DWI Grant Fund 45% $22,700
repealed
$0
Municipality – Class A County (Farmington) N/A $249 $0
Drug Court Fund 5% $2,529 $0
General Fund 49.5% $25,041 $0
The effective date of this bill is July 1, 2025.
FISCAL IMPLICATIONS
This bill will reduce general fund revenue by $24.7 million in FY26. This analysis used the
December 2024 Consensus Revenue Estimating Group liquor excise tax forecast.
Analysis from the Administrative Office of the Courts (AOC) notes that the liquor excise tax
provides the primary funding source for the drug court fund, which supports statewide treatment
court programs. The Legislature could choose to maintain funding for these programs with
general fund revenue, but that is not provided in HB460 or in the House Appropriations and
Finance Committee Substitute for House Bill 2. Similarly, HB460 eliminates the funding
mechanism for the Local DWI Grant Program, which could receive general fund revenue but that
revenue swap is not provided by the bill nor the current version of HB2.
SIGNIFICANT ISSUES
Economic theory typically supports imposing excise taxes on alcohol consumption to better
reflect the costs of an individual’s consumption of alcohol to society. A major rationale for
alcohol excise taxes is to discourage alcohol consumption and its negative spillover effects (such
as accidents, domestic violence, and health effects). Health effects can spill over to others if the
costs are paid by third parties, for example, health insurers. Economists often refer to these
spillover effects as externalities. Taxes will be a more effective deterrent if they are passed on to
consumers and consumers respond by reducing consumption in some meaningful way. In
general, the literature has concluded that excise taxes are passed on to consumers and that
consumers respond by reducing their consumption.
The costs associated with alcohol consumption have been studied by researchers in a variety of
fields, including economics, health, and public safety and crime. Examples of the costs most
often featured in studies include the effects of alcohol consumption on motor vehicle crashes,
public health, domestic violence, and other crimes. In addition, many researchers have studied
these effects among youth, as some of these effects are disproportionately concentrated among
younger consumers of alcohol (e.g., involvement in motor vehicle crashes and violent crime).
The liquor excise tax also generates revenue, which can be used to help mitigate the harms of
alcohol consumption. Analysis from the Department of Health (DOH) notes that reducing
revenues from the liquor excise tax would “negatively impact the infrastructure for addressing
alcohol misuse in New Mexico.”
House Bill 460 – Page 3
New Mexico has one of the higher liquor excise tax rates in the region. All states impose an
excise tax on alcohol products. Under HB460, New Mexico would likely have the lowest liquor
tax rate in the country.
State Rankin
gs by State Level Liquor Excise Taxes
3
Liquor
Category
New
Mexico
Current
Rates
Surrounding States
Arizona Utah Colorado Oklahoma Texas
Beer
1
14 36 13 46 15 31
Spirits
1
24 43 6 47 27 46
Wine
2
5 26 * 40 29 44
Note:
1
As of January 1, 2024;
2
as of January 1, 2021.
3
Comparable state ratings based on
dollars/gallon, include local rates, state-controls, differing rates by alcohol content. Utah has state-
controlled sales of wine.
Source: Tax Foundation, TRD Analysis
The federal government levies an excise tax on manufacturers and importers of alcoholic
beverages (e.g., distilled spirits, wine, and beer) based on the per-unit production of alcohol for
sale in the U.S. market. The rate per unit is based on the form that the alcoholic beverage takes
and the size of the producer. Accordingly, eliminating the state’s liquor excise tax will only
impact one component of the total tax paid on alcoholic beverages.
Eliminating the liquor excise tax would increase the profitability of liquor wholesalers. This
benefit may or may not be passed on elsewhere along the supply chain via higher profits for
manufacturers and retailers, or lower prices for consumers. The magnitude of these secondary
effects on profits and prices will be dependent on market concentration and competitiveness.
Excise taxes are generally considered regressive, meaning lower-income individuals pay a higher
proportion of their income in taxes. Eliminating the tax would reduce overall regressivity in the
tax code, although the effect would be minor for most taxpayers.
Treatment Courts. Treatment courts are specialized court dockets that serve individuals who
have been arrested or convicted of a crime, those at risk of losing custody of their children, and
those who are struggling with substance use or behavioral health disorders. AOC analysis notes
that, by offering treatment as an alternative to incarceration, these programs “integrate public
health and public safety approaches, connecting justice-involved individuals with personalized,
evidence-based treatment and recovery services to address the root causes of criminal behavior.”
AOC asserts:
Eliminating the liquor excise act would eliminate the primary funding source for the drug
court fund which provides vital support for staffing, training, treatment provider funding,
ancillary service contracts, and other resources across the state. It would also impact the
ability to implement new treatment court programs, negatively impact community safety
and health, and potentially increase recidivism.
Alcohol Use Disorder in New Mexico. According to a 2023 LFC progress report, alcohol is
New Mexico’s predominant substance-use problem. In 2021, 2,274 New Mexicans died from
alcohol-related causes, roughly six people each day. The state has had the highest alcohol-related
death rate in the country for over a decade, and the state’s alcohol related death rate grew by 32.4
percent between 2019 and 2021.
House Bill 460 – Page 4
The LFC progress report noted the effects of the pandemic
exacerbated existing problems. According to the National Institute
of Alcohol Abuse and Alcoholism, the traumas of the pandemic,
including Covid-19 infection, job losses, housing dislocation, and
social isolation, caused alcohol consumption to increase 10 percent
nationally and alcohol-related deaths to spike in all states.
Nationally, Kaiser Family Foundation finds two-thirds of the public
report they or someone in their family has been addicted to drugs or
alcohol.
According to a 2023 LFC progress report, McKinley, Cibola, Rio
Arriba, San Juan, and Socorro Counties are hotspots of alcohol-
related deaths. McKinley, Cibola, Rio Arriba, San Juan, and Socorro
counties had the highest alcohol-related death rates in 2021, the
most recent year for which the Department of Health (DOH) has
reported county-level data (Attachment 1). These five counties all
had death rates that exceed 150 per 100 thousand people.
Meanwhile, deaths in Bernalillo, McKinley, San Juan, Santa Fe, and
Sandoval counties made-up 62 percent of all 2021 alcohol-related
deaths in the state in 2021.
A 2020 DOH gap analysis suggests that, of the 100 thousand people who live with an alcohol use
disorder, about 70 thousand do not receive treatment. DOH estimated that about 10 percent of
those who need treatment and do not receive it will never receive it.
According to the Centers for Disease Control’s Behavioral Risk Factor Surveillance System
(BRFSS), 48 percent of New Mexicans, about 700 thousand people, reported drinking at least
once in the last 30 days in 2022. BRFSS reports that 15 percent of New Mexicans, over 225
thousand people, reported binge drinking in 2022.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
This bill conflicts with House Bill 417 and Senate Bill 431, which imposes a liquor excise surtax
and changes the distribution of the revenue.
This bill conflicts with Senate Bill 378, which increases the liquor excise tax.
This bill conflicts with Senate Bill 199, which makes changes to the Local DWI Grant Program
that are irreconcilable with those contemplated by HB460.
Attachments
1. Sample of August 2023 LFC progress report Addressing Substance Use Disorders
recommendations.
2. Alcohol-Related Deaths by County, 2021
BG/rl/SL2
House Bill 460 – Page 5
Attachment 1
Sample of August 2023 LFC progress report Addressing Substance
Use Disorders recommendations.
The 2023 LFC progress report recommended several actions related to alcohol use disorders.
The Department of Health should consider reporting to the Legislature about its plans,
scope of responsibility, and timeline for the creation of the Office of Alcohol Prevention.
The Human Services Department should consider:
Reporting to the Legislature and public annually about the number of patients
receiving substance use treatment, the forms of evidence-based treatment they
receive, and expenditures for these programs;
Moving forward with its proposed plan to create additional billing codes and
differentials for evidence-based forms of psychotherapy;
Studying pilots contained within New Mexico’s and other state’s 1115 Medicaid
waivers that address social determinants of health to determine the most effective
models and services;
Ensuring that the MCO contracts for Turquoise Care require the MCOs to
maintain an adequate Behavioral Health network and ensure that access to those
providers is readily available;
Ensuring that the Medicaid incentive programs reward and sanction, as
appropriate, the MCOs who perform well in delivery of SUD services;
Reporting back to the Legislature about the outcomes associated with Medicaid
provider rate increases, including impact to the state’s number of behavioral
health providers and access to patient care;
Reporting to the Legislature about the plans, scope of responsibility, and timeline
for the BHSD coordinator role focused on alcohol use disorders;
Reporting to the Legislature about the plans, timeline, and outcomes of the
statewide substance use treatment plan.
The medical licensing boards should consider expanding existing continuing medical
education requirements related to opioid use disorders to include treatment of alcohol use
disorders for all providers. House Bill 460 – Page 6
Attachment 2
Alcohol-Related Deaths by County, 2021
Decedent's County of Residence
Deaths per
100,000
Population,
Age-adjusted
Number
of Deaths
Population
Estimate
(years
combined)
McKinley 335.7 226 71,780
Cibola 179.4 51 27,184
Rio Arriba 176.6 75 40,179
San Juan 169.3 199 121,237
Socorro 156.2 25 16,346
Mora 144.3 6 4,196
Taos 118.6 41 34,623
Sierra 115.1 18 11,523
Colfax 108.8 14 12,369
San Miguel 106.4 32 27,150
Quay 102.7 9 8,709
Luna 101.9 27 25,429
Union 98.4 4 4,036
Valencia 98 78 77,190
Bernalillo 96.8 709 676,626
Otero 94 68 68,549
Torrance 91.8 16 15,041
Guadalupe 91.2 5 4,439
Chaves 87.8 60 64,454
Sandoval 87.3 137 151,369
Lincoln 84.5 20 20,557
Grant 81.8 29 27,889
Santa Fe 81.5 143 155,201
Eddy 74.8 48 61,939
Curry 66.4 31 49,230
Lea 63.8 43 72,637
Dona Ana 57.2 126 221,508
Roosevelt 52.7 10 19,232
Los Alamos 35.2 9 19,391
NM Resident, County Unknown . 6 .
Catron ** ** 3,731
De Baca ** ** 1,685
Harding ** ** 659
Hidalgo ** ** 4,102
Overall 102.7 2,274 2,120,188
Source: DOH IBIS