Many New Mexicans enjoy a good drink. Whether full-bodied, flavored, or light, the abundance of options available to suite your tastes have expanded dramatically thanks to a boom in industries such as craft beer and wineries. But state legislators are now considering legislation (HB 398) that would substantially increase taxes on beer, wine, and spirits. That will translate directly into higher prices for your favorite case, bottle, or glass.
According to an analysis from the state Legislative Finance Committee, beginning this year, the excise tax on alcoholic beverages would rise by between 140 and 650 percent. For example, a brewery selling 4,000 barrels would see its taxes skyrocket from about $9,900 to over $340,000. Assuming the increase doesn’t force the brewery out of business, many of those costs will get passed onto consumers who would end up shelling out an estimated 32 percent more in taxes for a bottle of beer.
The proposed beer and wine tax increases would make New Mexico a leader – but not in a good way. The beer excise tax would be more than 2.5 times higher than the second-highest rate in the country, and the tax rate on spirits is also significantly higher than rates in surrounding states.
The new taxes would also restrict the ability for breweries to grow. New Mexico is home to over 150,000 small businesses, which employ 55 percent of the private workforce according to the Small Business Administration. Nearly 5,000 of the state’s small businesses are in Accommodation and Food Services, but this industry is the number two employer of small businesses. Hoisting new taxes on individuals chasing their dreams by starting their own craft breweries or wineries will have an economic impact on the New Mexican labor force. We already have one of the highest unemployment rates in the country at 6.7 percent – why would we want to make it worse?
Millennials will particularly bear the brunt of this alcohol tax increase. This is a generation that can’t afford tax increases on their limited budgets. Despite a decline in the overall unemployment rate, youth unemployment at 8 percent is more than double the national average. Wages have been stagnant for nearly a decade – only recently starting to rise. In households headed by individuals under 30, the average net worth has fallen 48 percent since the financial crisis to $44,354. Student loan debt is also consuming more discretionary spending for young adults. Nearly 70 percent of the class of 2014 graduated with an average debt of $30,000 per borrower.
The risk tolerance of young people today to strike out on their own and start their own businesses is lower than for past generations, despite their appetite for entrepreneurship remaining strong. As a result, the share of entrepreneurs and business owners under age 30 has fallen to a 24-year low.
Starting a business is hard enough without added taxes and regulations making it even more difficult for individuals to start and grow their businesses. Tax increases and red tape in the alcohol industry present harmful hurdles that usually serve established companies over new startups and entrepreneurs.
Legislators think this proposal will generate $150 million to $160 million a year in new revenue, which they hope can help solve the state’s budget shortfall. Raising taxes on citizens should not be chosen over tightening the state’s belt in other areas. Ordinary Americans have learned to live within their budgets, we expect our lawmakers to do the same.
Stopping new tax increases and eliminating any burdensome regulations should be on tap in Albuquerque. Any proposals that slow growth for entrepreneurs or put entrepreneurs out of business is a drink no one wants to swallow.