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 Sharer/O’Malley
LAST UPDATED
ORIGINAL DATE 2/21/2025
SHORT TITLE Liquor Tax Rates
BILL
NUMBER Senate Bill 378
ANALYST Gray
REVENUE*
(dollars in thousands)
Type FY25 FY26 FY27 FY28 FY29
Recurring or
Nonrecurring
Fund
Affected
Liquor
Excise
Tax
$0 $3,840.0 $3,680.0 $3,550.0 $3,420.0 Recurring
Local DWI
Grant Fund
Liquor
Excise
Tax
$0 $430.0 $410.0 $390.0 $380.0 Recurring
Drug Court
Fund
Liquor
Excise
Tax
$0 $4,560.0 $4,370. 0 $4,220.0 $4,070.0 Recurring General Fund
Parentheses ( ) indicate revenue decreases.
*Amounts reflect most recent analysis of this legislation.
Relates to House Bills 417 and 460 and Senate Bills 431 and 199
Sources of Information
LFC Files
Agency Analysis Received From
Taxation and Revenue Department (TRD) Department of Health (DOH)
SUMMARY
Synopsis of Senate Bill 378
Senate Bill 378 (SB378) raises the liquor excise tax by 20 percent pursuant to the following:
T
ype Current New
Percent
Increase
Beer $0.41 per gallon $0.49 per gallon 20 percent
Wine $0.45 per liter $0. 54 per liter 20 percent
Spirits $1.6 per liter $1. 92 per liter 20 percent
Cider $0.41 per gallon $0.49 per gallon 20 percent
Fortified wine $1.5 per liter $1.80 per liter 20 percent
Other Various Various No chan ge Senate Bill 378 – Page 2
The effective date of this bill is July 1, 2025.
FISCAL IMPLICATIONS
This bill is estimated to increase general fund revenue by $4.6 million in FY26. The estimate was
provided by the Taxation and Revenue Department (TRD). The agency used the liquor excise tax
forecast from the Consensus Revenue Estimating Group in December 2024 to estimate the
revenue impact of the proposed tax increases. The agency writes:
TRD applied different demand elasticities to the products. Based on a meta-analysis
study of the impact of price and tax levels on drinking and income elasticities by
Wagenaar, Salois and Komro
1
, TRD assumes a price elasticity of -0.11 for beer, -0.19 for
wine and for -0.20 for distilled spirits. TRD also assumes that wholesalers pass the tax on
to retailers and consumers at a rate of 1.5 times the tax, based on the Wagenaar, Salois
and Komro study. After the initial consumption change from the rate increases, TRD
assumes an average annual growth by liquor product from the last 10-years, removing the
growth rates from FY21 and FY22 due to changes in consumption attributable to the
COVID-19 pandemic.
TRD analysis notes that because the tax increases per product are modest, the drop in liquor
consumption resulting from higher prices could be lower than what is modeled, offering a
positive risk to the estimate. Alternatively, the agency notes, if consumption shifts to neighboring
states or online, “then the assumed drop in liquor purchases in state could be higher still or the
growth lower in the out years.”
Increasing the price of a good generally decreases the demand for that good. The assumed price
elasticities of demand were taken from Wagenaar et. al. 2009, a systemic review of studies
examining relationships between measures of beverage alcohol tax or price levels and alcohol
sales or self-reported drinking. A total of 112 studies of alcohol tax or price effects were found,
containing 1,003 estimates of the tax/price–consumption relationship. The upper confidence
interval was used for revenue estimates.
Researchers in that meta-analysis concluded:
The meta-analyses reported here demonstrate the statistically overwhelming evidence of
effects of alcohol prices on drinking. Price affects drinking of all types of beverages, and
across the population of drinkers from light drinkers to heavy drinkers. We know of no
other preventive intervention to reduce drinking that has the numbers of studies and
consistency of effects seen in the literature on alcohol taxes and prices
This analysis only considers price when estimating the elasticity of alcohol demand. Other
factors like income, whether a person is a heavy or moderate drinker, the price of alcohol
consumed, and the availability of lower priced alcohol in neighboring states or tribal lands likely
have significant impacts on total statewide alcohol consumption and public health.
1
Wagenaar Alexander C., Salois, Matthew J., Komro, Kelli A. (2009). Effects of beverage alcohol price and tax
levels on drinking: a meta-analysis of 1003 estimates from 112 studies. Journal, Addiction, 104, 179-190;
doi:10.1111/j 1 360- 0443.2008.02438.x Senate Bill 378 – Page 3
Researchers of the meta-analysis used in this report note that all studies of tax and price effects
“also reflect particular meanings and uses of alcoholic beverages across diverse social and
cultural environments, and tax and price policies probably interact with a whole web of
individual, community and societal influences on drinking behavior.” Policymakers may wish to
consider these interactions.
While the effects of a price increase will not be the same for all New Mexicans, research has
repeatedly agreed with the assumptions presented in this analysis. For example, the Guide to
Community Preventive Services concludes there is strong evidence that raising alcohol excise
taxes is an effective strategy for reducing excessive alcohol consumption and related harms.
SIGNIFICANT ISSUES
State Tax Rankings
TRD analysis notes that New Mexico has one of the higher liquor excise tax rates in the region
and that the SB378 proposal would increase New Mexico’s ranking.
State Rankin
gs by State Level Liquor Excise Taxes
3
Liquor
Category
New
Mexico
Proposed
Rates
New
Mexico
Current
Rates
Surrounding States
Arizona Utah Colorado Oklahoma Texas
Beer
1
9 14 36 13 46 15 31
Spirits
1
22 24 43 6 47 27 46
Wine
2
4 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
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.
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 Senate Bill 378 – Page 4
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 (Appendix 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 1 million people, reported drinking at least once in
the last 30 days in 2022. BRFSS reports that 15 percent of New Mexicans, over 300 thousand
people, reporting binge drinking in 2022.
Despite the growing number of people living with an alcohol use disorder, the state recently
loosened some market-based policy interventions that limit access to alcohol. In 2019, legislation
(Senate Bill 413) amended the definitions of microbrewers and winegrowers, extending the
definitions of producers and quantities that fit into the small producer tax rate categories. In
2021, legislation (House Bill 255) made significant changes to New Mexico’s liquor laws. The
statute shifted the start time for Sunday alcohol sales from 11 a.m. to 7 a.m., permitted the home
delivery of alcohol, and created a new category of restaurant liquor license that reduced the cost
of providing spirits, not just beer and wine. However, the bill also restricted the sale of liquor
other than beer for some licenses that sell gasoline, prohibited the sale of small alcohol
containers, and required DOH to study the effect of home alcohol delivery.
Prevention Efforts
The 2023 LFC progress report noted that, while the state has invested significantly in treatment,
New Mexico has not dedicated the same resources toward prevention. An increase to liquor
excise taxes will likely increase the price of alcohol and decrease consumption, but it is just one
of a constellation of policies that could be considered. As the federal Substance Abuse and
Mental Health Services Administration (SAMHSA) notes other prevention strategies involve
limiting alcohol’s physical availability, social availability, and psychological availability.
Further, SAMHSA reports that no single policy should be considered in isolation to reduce the
influence of alcohol on communities because such policies are most effective when they are
coordinated statewide, complement existing policies, and leverage different policy frameworks.
2
Social Determinants of Health. Social determinants of health are upstream conditions, such as
housing, food, education, employment, and transportation, that affect quality of life and
population health outcomes. As reported by the policy think-tank the Center for Budget and
Policy Priorities, people of color are more likely to experience barriers to treatment and have
worse outcomes due to differentials in quality of treatment.
New Mexico has very high rates of adverse childhood experiences and other risk factors and
must address social determinants of health. According to United Health Foundation’s America’s
2
Implementing Community-Level Policies to Prevent Alcohol Misuse. Senate Bill 378 – Page 5
Health Rankings, New Mexico’s children and youth experience the highest rates in the country
of adverse childhood experiences, potentially traumatic events such as experiencing abuse and
neglect, growing up in a household with substance use or behavioral health problems, and food
or housing insecurity. According to DOH, 67 percent of adults have at least one adverse
childhood experience, and nearly one in four adults have four or more adverse childhood
experiences. The National Institutes of Health suggests interventions in early childhood can help
prevent future substance use disorders.
Reporting and Data Collection. According to the 2023 LFC progress report, the Legislature
lacks timely information about the public-health impacts of substance use disorders, including
alcohol use disorders. The state is measuring and tracking alcohol-related and overdose death
data. However, changes to these outcomes and reporting about these indicators lag considerably
behind policy efforts. Moving forward, DOH could help identify and report about timely leading
indicators to measure state progress to address substance use disorders.
As noted in the progress report, providing the Legislature with recurring and consistent
information about how many New Mexicans need and are receiving alcohol use disorder
treatment, the types of services they are receiving, and the spending on these services could
allow the state to track progress toward meeting treatment gaps and ensuring public investments
are made in evidence-based approaches. These approaches could help ensure the substantial new
resources available toward treatment and prevention are best utilized.
CONFLICT, DUPLICATION, COMPANIONSHIP, RELATIONSHIP
This bill relates to Senate Bill 199 (SB199), which makes changes to the Local DWI Grant
Program. The bill also relates to House Bill 417 and Senate Bill 431, which imposes a liquor
excise surtax and changes the distribution of the revenue.
BG/hj/Sl2