New Mexico’s Tobacco Tax Hike Targets Harm Reduction, Not Smoking

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Key Points:·      

• Legislative Overview: Senate Bill 121 would significantly raise New Mexico’s tobacco taxes while expanding the definition of taxable products to include nearly all nicotine-containing alternatives, including vapor products and synthetic nicotine.

• Core Expansion: The bill broadens the definition of “tobacco product” to include any product containing tobacco or nicotine – natural or synthetic – intended for smoking, heating, chewing, dissolving, absorbing, or inhalation.

• Major Tax Increase: SB 121 raises the excise tax on most tobacco products from 25 percent to 40 percent of wholesale price. Vapor products currently taxed at 12.5 percent (open systems) or $0.50 per cartridge (closed systems) would be subject to the new 40 percent wholesale tax.

• Harm Reduction Impact: By applying cigarette-style wholesale taxes to reduced-risk vapor products, the bill sharply increases costs for alternatives many adults use to quit smoking.

• Adult Smoking Trends: In 2024, 12 percent of New Mexico adults were current smokers – representing a 27.7 percent decline since 2016 and 63,306 fewer adults smoking.

• Adult Vaping Growth: In 2024, 137,953 adults were current vapers. Since 2016, vaping has increased 67.3 percent, representing nearly 60,000 additional adult users as smoking declined.

• Equity Concerns – Income: Lower-income adults are disproportionately affected. Adults earning under $25,000 annually were 3.6 times more likely to smoke than those earning $50,000 or more.

• Equity Concerns – Education: Adults without a high school diploma were 3.9 times more likely to smoke and 2.5 times more likely to vape than college graduates.

• Youth Trends Ignored – Smoking: In 2023, just 3.2 percent of high school students were current smokers (3,293 students), compared to 202,889 adult smokers – more than 61 adults smoking for every one high school student.

• Youth Trends Ignored – Vaping: In 2023, 18.3 percent of high school students were current vapers (18,831 students), compared to 138,031 adults – more than seven adults vaping for every one high school student.

• Misplaced Focus: SB 121 creates a fund targeting “nicotine use” rather than combustible tobacco use, despite longstanding scientific consensus that smoke from combustion – not nicotine – is the primary cause of tobacco-related disease.

• Continuum of Risk Overlooked: Federal regulators, including the FDA, acknowledge that tobacco products exist on a continuum of risk, with combustible cigarettes posing the greatest harm. SB 121 collapses this distinction.

• Revenue vs. Prevention: In 2024, New Mexico collected $135 million in tobacco tax revenue but allocated only $4.4 million (3.3 percent) to tobacco prevention and cessation – about three cents per dollar collected.

• Bottom Line: SB 121 increases taxes on reduced-risk products, disproportionately burdens lower-income adults, and shifts focus from smoking to nicotine itself. Rather than advancing harm reduction, the bill risks making safer alternatives less accessible and less affordable for the adults who need them most.

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Legislation introduced in the Land of Enchantment would significantly increase the tax rate on tobacco and vapor products while creating new “nicotine use” prevention programs. The proposal is inherently regressive, as lower-income and less-educated New Mexicans disproportionately use tobacco and vapor products. It also risks further demonizing nicotine itself – despite overwhelming evidence that it is smoke from combustion, not nicotine, that causes the vast majority of tobacco-related disease.

Senate Bill 121 would increase the tobacco products excise tax rate and broaden the scope of products subject to taxation. Under the proposal, the definition of “tobacco product” would expand to include any product containing tobacco and/or nicotine, whether natural or synthetic. This includes products intended for smoking, heating, chewing, absorbing, dissolving, or inhalation. E-cigarettes, e-liquids, closed-system cartridges, and products containing synthetic nicotine would all fall under the expanded definition.

SB 121 would raise the excise tax rate on most tobacco products from 25 percent of wholesale price to 40 percent. The rate on cigars would remain at 25 percent, capped at $0.50 per cigar. Currently, e-cigarettes are taxed under a bifurcated structure: open systems and e-liquids are taxed at 12.5 percent, while closed-system cartridges are taxed at $0.50 per cartridge. Under SB 121, these products would instead be subject to the 40 percent wholesale tax – a substantial increase for many reduced-risk alternatives.

It is well established that many adults who vape are either current smokers or former smokers who used e-cigarettes to quit. Data from New Mexico suggest that increases in vaping have coincided with steep declines in combustible cigarette use.

In 2024, an estimated 137,953 New Mexico adults aged 18 and older were currently vaping. While this represents a slight 1.2 percent decrease from 2023, it reflects a 67.3 percent increase since 2016, when 4.9 percent of adults reported vaping. There were 59,675 more adults vaping in 2024 than in 2016. By comparison, 12 percent of adults were currently smoking in 2024 – a 1.6 percent decrease from 2023. Between 2016 and 2024, adult smoking rates declined by 27.7 percent, representing 63,306 fewer adults smoking.

Tobacco and vapor taxes are often regressive because lower-income and less-educated adults use these products at higher rates. In 2024, adults earning less than $25,000 annually were 3.6 times more likely to smoke than those earning $50,000 or more. Educational disparities are also pronounced. Adults without a high school diploma or GED were 2.5 times more likely to vape and 3.9 times more likely to smoke than college-educated adults in New Mexico.

The legislation also overlooks record lows in youth cigarette use and continued declines in youth vaping. In 2023, 15.4 percent of New Mexico high school students reported ever trying cigarettes, and only 3.2 percent reported current smoking. That translates to approximately 3,293 high school students currently smoking, compared to an estimated 202,889 adults. For every one high school student smoking in 2023, more than 61 adults were smoking.

Youth vaping has also declined significantly. In 2023, 36.1 percent of high school students reported ever using an e-cigarette and 18.3 percent reported current use. Between 2019 and 2023, ever-use declined by 35.9 percent and current use declined by 46.2 percent. Approximately 18,831 high school students were vaping in 2023, compared to 138,031 adults. For every one high school student vaping, more than seven adults were using e-cigarettes.

Despite these trends, SB 121 creates a fund specifically targeting “nicotine use,” rather than focusing on the use of combusted tobacco – the most harmful form of nicotine delivery. This framing ignores decades of scientific and regulatory consensus.

Since the 1970s, researchers have recognized that smoke – not nicotine – drives tobacco-related disease. Combustible cigarettes contain nearly 600 ingredients and produce more than 7,000 chemicals when burned, including at least 69 known carcinogens. Eliminating combustion through oral nicotine, heated tobacco, or vapor products dramatically reduces exposure to these harmful chemicals.

Federal regulators acknowledge this continuum of risk. In 2017, the FDA announced a comprehensive regulatory plan emphasizing that nicotine is most harmful when delivered through combustible smoke. In 2023, the Director of the FDA’s Center for Tobacco Products reiterated that tobacco products exist on a continuum of risk, with smoked products posing the greatest danger. As recently as 2024, the FDA confirmed it is researching how to better communicate that combustible cigarettes present the highest risk.

SB 121 disregards this framework and risks confusing adults seeking less harmful alternatives.

If lawmakers are truly concerned about youth nicotine use, they should first evaluate how existing funds are being spent. In 2024, New Mexico collected approximately $135 million in tobacco tax revenue yet allocated only $4.4 million – just 3.3 percent – to tobacco control programs. That amounts to roughly three cents of every tax dollar being directed toward prevention and cessation.

Rather than imposing steep new taxes on reduced-risk products and broadly stigmatizing nicotine, policymakers should adopt a proportional, evidence-based approach. Public health policy should reflect the well-established continuum of risk and encourage adults who smoke to move away from combustible cigarettes – not make safer alternatives less accessible or less affordable.

Nothing in this analysis is intended to influence the passage of legislation, and it does not necessarily represent the views of Tobacco Harm Reduction 101.