New Mexico Democrats Are Once Again Trying to Increase Alcohol Taxes

Yet again, New Mexico Democrats are trying to kill your buzz and raise taxes on alcohol.

SB 217 would impose a new 3 percent liquor excise surtax on alcoholic beverages sold by retailers in New Mexico, beginning July 1, 2027. Rather than adjusting the existing per-drink or per-gallon excise structure, as Democrats have tried before, the bill layers an additional percentage-based tax on the retail price of alcohol, meaning the amount owed would rise automatically as prices increase. In practical terms, this functions as a new sales-style tax applied specifically to alcohol transactions, increasing the overall tax burden on beer, wine, and spirits purchased by consumers across the state. 

Despite Democrat lawmakers’ efforts to paint the tax hike as miniscule, the effects will be serious amongst both businesses and consumers. Local bars and restaurants are a vital pillar of New Mexico’s economy. In 2025 alone, the industry directly contributed $14.12 billion in economic output across the state, supporting approximately 111,189 jobs. It generated $1.93 billion in total tax revenue, with roughly $813 million flowing directly to state and local governments. Increasing taxes on alcohol, or raising input costs anywhere along the supply chain, risks undermining that economic engine.

Another casualty of this proposed tax hike would be New Mexico’s craft breweries and distilleries. Ranked 10th in the nation for quality, New Mexico’s craft producers are not only a source of state pride, but also local job creators that frequently source ingredients and services from within the state. Unlike large, national brands with broad distribution networks and deeper margins, small and mid-sized producers operate on tighter budgets and face greater sensitivity to price changes. A new surtax would hit them harder, forcing difficult choices about raising prices, cutting costs, or scaling back operations. In practice, that means the burden of this policy would fall disproportionately on local businesses, while national brands are better positioned to absorb the impact and maintain market share.

Supporters argue that raising alcohol taxes will reduce alcohol-related deaths. That may sound compelling, but the evidence on whether tax hikes produce lasting behavioral change tells a different story. Research suggests that while price increases can lead to a short-term dip in alcohol consumption, those effects often fade over time. A 2017 study from the Tax Policy Center found that although higher prices temporarily reduced consumption, purchasing patterns tended to rebound in the long run. In other words, consumers adjusted, and the initial decline did not translate into sustained, structural change. If the supposed goal is long-term reductions in harmful behavior, relying primarily on tax increases will prove far less effective than advertised, while still imposing higher costs on responsible consumers and local businesses.

From a fiscal standpoint, this tax hike is completely unjustified. New Mexico is projected to run a $485 million budget surplus, and the state has accumulated more than $3 billion in general fund reserves. That is not a government in financial distress — it is a government flush with cash. If lawmakers truly want to fund prevention or treatment programs, they already have more than enough money to do so without raising taxes by a single cent.

Pushing an alcohol tax increase in the middle of a surplus exposes what this proposal really is: a revenue grab in search of a justification. There is no budget emergency. There is no funding shortfall. There is simply a decision to make government larger at the expense of small businesses, restaurants, breweries, and responsible adults who choose to purchase a legal product. 

With a budget surplus and billions in reserves, there is no justification for targeting a legal industry, local businesses, and responsible consumers with higher costs. New Mexico lawmakers should once again reject this misguided proposal and stand up for jobs, small businesses, and taxpayers across the state.