By Matthew Holloway |
Arizona renters and landlords alike will get to breathe a sigh of relief this month when the Transaction Privilege Tax (TPT), applied by cities to rental payments every single month, is eliminated. While the cities that will no longer enjoy this source of tax revenue and lobbying groups like the League of Arizona Cities and Towns cry foul, local Republicans who pushed for the reform and the renters who pay it are celebrating.
Seventy-five cities across the state charge TPT on rentals ranging from 1.5% to 4%. Depending on rental rates, this could mean monthly savings of about $20-$50 per month based on estimates.
In a statement posted to X in November, Arizona Senate President Warren Petersen touted the tax elimination writing, “Its happening. Renters are about to get relief from the rental tax repeal passed by the Republican led legislature. The rental tax repeal was an important part of our majority plan to deliver inflation relief. To get the governors signature we had to delay the effective date to Jan 1 2025. Many people said the Dems would take the majority and put the tax back in place. Fortunately for renters we held the Senate and the House. Here is an email from a property manager letting the tenants know their rent will be going down.”
Jake Beeson of Beehive Property Management told AZFamily, “It’s going to mean quite a bit for some tenants. We work with the Community Housing Partnership as one of our clients, which has low-income housing, and those rents are between $900 and 1,000 a month. So for a low-income family to have a 2% discount every month doesn’t sound like a lot, but if you’re paying $900 in rent every month, that’s $18. $18 is a whole month of discounted lunches at your kid’s school.”
The outlet noted that the rates in the valley can range from 2% in Mesa to 2.3% in Phoenix or 3% in Cave Creek. Some cities charge as much as 4%.
But not everyone sees the rental tax relief as a positive. Lee Grafstrom, a tax policy expert with the League of Arizona Cities and Towns told Fox10, “You’re not cutting any of the services that citizens are requesting and requiring, so, we still have to do all the same amount of work. We just have this much less money to do it.”
He stressed that cities could find themselves in budget shortfalls, expecting a combined loss of $230 million in tax revenue annually.
“We have to find a way to either cut services or make up that shortfall,” Grafstrom told Fox10. “This is a minor piece of a solution to a much larger problem, in terms of housing affordability.”
The League said in a statement, “Cities and towns across the state are facing a loss of over $230 million in their budgets, which support essential services like police, fire, parks, and more. Without state funding to make up for these losses, local governments will be forced to make tough decisions to balance their budgets, such as cutting jobs and services or raising local taxes—both unpopular choices. Local leaders are working to address these challenges before the repeal takes effect in January.”
The additional savings could see renters parlay the funds into more goods and services to offset inflation, which still tolls heavily on Arizona residents.
Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.
