Richard Auxier, senior policy associate at the Tax Policy Center of the Urban Institute and Brookings Institution reported to the Revenue Stabilization and Tax Policy Committee on Oct. 7 that New Mexico’s excise tax on wine is the fourth highest among states that tax alcohol. New Mexico’s excise taxes on spirits and beer are also near the top, at the fifth-highest for liquor and ninth-highest for beer.
Excise taxes on alcohol are levied on the wholesale transaction, but it is assumed that most of the tax is passed on to the consumer in the purchase price at the retail level. Alcohol taxes are typically per gallon. The federal government also taxes alcohol.
Auxier’s testimony provided an overview of alcohol, cigarette, and cannabis taxes across the United States and suggested that goals be incorporated into any tax policy because different taxes have different results. For example, he recommended that funding of helpful programs (such as alcohol abuse counseling) use general fund dollars to ensure the programs are not solely reliant on consumption which could decrease as taxes go up, resulting in a program becoming defunded.
Higher alcohol excise taxes can lower consumption, he said, but another study on the Tax Policy Center website indicates that motor vehicle deaths did not decrease when alcohol taxes in Illinois caused consumption to go down.
Listen to a webcast of the Oct. 7, 2022 meeting of the Revenue Stabilization and Tax Policy Committee. Mr. Auxier’s testimony starts just three minutes into the recording. Find Auxier’s PowerPoint presentation here.
Note: Mr. Auxier’s research and testimony did not look at the interaction or substitution effects from other markets. For example, an increase in alcohol prices may put a high burden on lower-income individuals, and consumers may substitute alcohol for more dangerous chemicals such as opioids or inhalants.