by Matthew Holloway | Mar 31, 2025 | Economy, News
By Matthew Holloway |
Arizona’s Republican lawmakers are looking to take on the cost of groceries by sending a referendum to the voters that would cap the transaction privilege taxes in municipalities on the sale of food items for home consumption at 2 percent.
The effort has been led by Republican State Representative Leo Biasiucci. It initially began as an outright ban, which proved to be a non-starter with State House Democrats and Governor Katie Hobbs. A bill to accomplish this was already dead on the table with the prospect of a veto from Hobbs, but this has been sidestepped through a compromise, HCR 2021.
“These are things that families need to survive,” Biasiucci told AZ Capitol Times. “This is the right thing to do. The fact that we are taxing people on eggs and milk and bread is insane.”
In a post to X Biasiucci wrote, “My bill to remove taxes from all essential food items like milk, eggs, butter, vegetables, fruit, baby food, beef and chicken passed committee 4-2. My bill also removes taxes from diapers. Taxing our food is regressive and it needs to end.”
A previous version of the measure passed both chambers of the legislature in 2023 only to suffer a prompt veto from Hobbs after the leaders of several municipalities claimed city services, including police and fire departments, would need to be reduced without tax revenue from food sales. In her veto letter, Hobbs claimed, “It’s clear that this bill doesn’t actually eliminate costs for our residents. It simply moves those costs around.”
Rep. Neal Carter, a Republican from San Tan Valley told the Times that there have been significant increases in municipal sales tax revenue from online sales after the SCOTUS ruling in South Dakota v. Wayfair. The outlet reported that from 2019-2024, cities and towns have enjoyed a 60% increase in sales tax revenue, but city expenses have also increased in that time period as well, leaving the local governments reticent to cut spending.
“This is a terribly regressive tax. This is the most regressive tax I could possibly dream up,” Carter told the outlet. “If I was going to dream up a regressive tax, I would tax the one thing that you literally have to have to live. You don’t even, in a sense, have to have a home to live, but you have to have food.”
“I don’t know a single person in Arizona, a voter or a constituent, who’s going to say, ‘Yes, continue to tax me on these things that I have to put on the table for my family,’” Biasiucci told his colleagues. “At a time when inflation is through the roof, these taxes are going higher. You’re paying more.”
Under the compromise passed in the House, a city or town with a tax rate below 2% could elect to increase it up to the limit with voter approval. However, with approximately 70 of the 91 municipalities charging taxes on groceries ranging from 1.5% to 4%, some municipalities would be required to reduce their taxes and either reduce spending or increase taxes in other areas such as property tax.
After passing the House with limited Democrat votes and near total Republican support, the resolution was read in the Senate on March 10th and 11th and is pending review by both caucuses and a final vote.
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.
by Matthew Holloway | Mar 12, 2025 | News
By Matthew Holloway |
The City of Phoenix has drawn the attention of the Goldwater Institute, earning a stern response from the conservative think tank to “Stop violating taxpayers’ rights.” The rebuke comes over a proposed tax increase on businesses that provide services that are precluded by the Arizona Constitution. A final city council vote on this proposal is set for March 18, 2025.
If the hike on Transaction Privilege (“TPT”) and Use Tax rates is approved, the rates go into effect July 1, 2025.
According to Goldwater, “The city of Phoenix has proposed a tax increase on businesses that provide services, claiming it needs the money because of a revenue shortfall. But the burden of the new tax increase will ultimately fall hardest on Phoenix businesses and consumers, raising the prices of services like construction contracting and lodging.” As Goldwater observes, the Arizona Constitution (Art. IX § 25) outright forbids “any county, city, town, municipal corporation, or other political subdivision of the state, or any district created by law” from creating any new or increasing any existing transaction-based taxes on the “privilege to engage in, or the gross receipts of sales or gross income derived from, any service performed in this state.”
Notably though, the prohibition on Section 25 “does not repeal or nullify any tax, fee, stamp requirement, or other assessment in effect on December 31, 2017,” and therefore allowed the pre-2017 taxes already in place. However, as Goldwater Attorney Stacy Skankey explains, the new rates would constitute a new tax under the law.
Skankey wrote succinctly, “New or increased taxation on services violates the Arizona Constitution.”
“The Arizona Constitution has a broad understanding of the term ‘service,’ and it includes a range of covered enterprises on anything that does not produce ‘goods.'”
“Service generally includes activities involving human effort like labor, skill, or advice. The term also covers businesses in the hospitality industry such as hotels, restaurants, and bars. Many of the business classifications subject to the proposed TPT tax increase are services as that term is used in the Constitution.
“The proposal by the Phoenix City Council is a tax increase on services, and therefore, is unconstitutional. Consequently, we urge the City to disapprove of the proposed TPT tax increase and any future proposed tax that may violate the Arizona Constitution.”
As reported by AZ Free News in January, the Goldwater Institute has already launched a lawsuit against the Town of Gilbert after municipal leaders unleashed a similar service tax on Town businesses including homebuilding and short-term rental properties.
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.
by Matthew Holloway | Jan 4, 2025 | Economy, News
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.
by Staff Reporter | Sep 10, 2024 | News
By Staff Reporter |
The Tucson City Council is looking to implement a new transaction privilege tax to pay for a number of social projects.
The transaction privilege tax would be temporary (10 years) and amount to one-half cent (.5 percent). The city projected the tax would generate $80 million annually, or $800 million total.
With the council’s approval during their upcoming regular meeting on Wednesday, the transaction privilege tax under the “Safe and Vibrant Tucson” ballot measure would come before voters in a special election next March. The election wouldn’t be in person, but rather a vote-by-mail election.
The city projected the cost of conducting this special, mail-only election wouldn’t exceed $1.1 million.
The ballot measure was intended to take place last month; however, the city’s intent had the potential of breaking state law requiring local sales tax proposal elections to appear only on November ballots in even-numbered years. Following a request to review the issue by Democratic Senator Rosanna Gabaldon, Attorney General Kris Mayes issued a legal opinion in March defending the city’s desire to hold a tax-related ballot measure on their own terms rather than those permitted by law.
Even with Mayes’ blessing, city leadership opted to forfeit the July date for their special election, instead pushing it back to March of 2025.
Disbursements of the tax revenue would first prioritize capital investment for first responders (30 percent), enhanced emergency response (22 percent), affordable housing and shelter (17 percent), neighborhood and community resilience (16 percent), and then technology investments (12 percent).
Capital investments for first responders (30 percent) would include funding for: more police and fire personal protective equipment; specialized fire apparatus such as fire trucks, fire engines, fire pumpers, ambulances, and support trucks; unmarked police vehicles and speciality units used by SWAT teams; and upgrades and modernization for fire stations, police substations, and major equipment.
Enhanced emergency response (22 percent) would include funding for increased staffing for police, fire departments, 911, and 311. Police staffing funds would specifically include employment of more commissioned officers, community service officers (CSOs), and professional staff investigators (PSIs).
Affordable housing and shelter (17 percent) would include funding for: Tucson’s Housing First program; increased access to emergency shelters and transitional housing; down payment assistance to qualifying residents; a new Mobile Court function and investments in other specialty courts; progressive addiction treatments like harm reduction; physical investments in public, rental, and private houses such as long-term maintenance, weatherization, and climate resilience; large-scale housing projects; development impact fees for qualifying affordable housing projects; and moving current rental properties into the market for local home ownership.
Neighborhood and community resilience (16 percent) would include funding for: Pima Early Education Program Scholarships; youth workforce development programs; expanding the Community Safety, Health, and Wellness programs to teens; opening up VIVA locations; deploying Community Service Officer resources; beautification programs such as Team Up to Clean Up and Somos Uno Master Plan; cleaning up public transit; and expanding workforce training programs.
Technology investments (12 percent) would include funding for: improving 911 and 311 call systems; modernizing air support functions within Community Safety Awareness and Response Center by adding a fixed-wing aircraft, replacing the aging helicopter fleet, and advancing the use of unmanned aircraft; and accessing and managing all video and data collected by police body-worn cameras.
The proposed ballot measure’s primary focus on funding police and public safety was a reflection of results from over 800 respondents to a community budget survey the city issued earlier this year.
In its agenda materials, the city did note that the ballot measure excluded funding for road infrastructure.
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