GOP food, rental tax plan troubles Tempe mayor, senator

Posted 2/6/23

The mayor of Tempe and a senator who represents the city said a move by state lawmakers to strip municipalities of some of their taxing ability could cost the community millions of …

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GOP food, rental tax plan troubles Tempe mayor, senator


The mayor of Tempe and a state senator who represents the city said a move by state lawmakers to strip municipalities of some of their taxing ability could cost the community millions of dollars.

The votes last week by the Senate Commerce Committee to remove the ability of cities and towns to tax residential rentals and grocery store food came despite objections from mayors and lobbyists for many communities that have the levies.

They told senators that their budgets are dependent on the revenues.

Those claims drew derision from Sen. Anthony Kern, R-Glendale, who said most cities and towns have a surplus. And he rejected the claims that these are appropriate, even if the state itself has a "rainy day'' fund, money set aside to protect against future economic downturns.

And Sen. Steve Kaiser, R-Phoenix, the sponsor of the measure to phase out the tax on rentals, said it is crafted in a way to ensure that tenants get the benefit of the mandated reduction.

But that drew a skeptical response from Sen. Mitzi Epstein, D-Tempe.

"Whatever the market price is, that's what the rent will be,'' she said. All SB 1184 will do, she said, is allow landlords to pocket what they no longer must forward to cities in taxes.

Mayor Corey Woods said following the committee vote that Tempe opposes the bills, noting the budget impact on the city could force reductions in critical services.

“Losing $26 million in revenue would force cuts to essential services in public safety, affordable housing, homeless services, park maintenance and renovation and more,” Woods said.

“It is vital that cities have reliable streams of revenue with which to assist their communities. Local control of tax dollars allows cities to plan the futures of their communities with their residents’ best interests in mind.”

Nick Ponder, lobbyist for the League of Arizona Cities and Towns, told lawmakers that SB 1063, the companion measure to eliminate local taxes on food purchased for home preparation and consumption, won't reduce overall taxes.

He pointed out that state lawmakers, facing an initiative, voted in 1980 to exempt the state sales tax on food.

But three years later, facing a deficit, Ponder noted the Legislature raised the overall state sales tax on all remaining items from 4 percent to 5 percent, an increase that never was repealed. He suggested that cities, facing a similar loss of one source of revenues, may have to follow suit.

And he said that cities where the decision was made to eliminate these taxes have a higher overall sales tax rate than others where the levies remain. He cited in particular Tucson where shoppers pay 3.5% on everything else they buy.

Ponder said the decision on what to tax is best left to local elected officials and their voters.

Not all communities levy rent or food taxes.

But they can be a big part of what communities collect. And the impact is particularly great on the smallest towns.

In Nogales, for example, the tax on food is nearly 14% of total sales tax collections. It's close to 16% in Cottonwood, 17.6% in Douglas, 18.5% in Safford, 19.9% in San Luis and 35.2% in Taylor.

Overall, the levy amounts to more than $161 million a year statewide.

Rental taxes are a smaller percentage of sales taxes in most communities, though they total nearly $180 million statewide for affected communities.

The food tax repeal is being proposed by Sen. Sonny Borrelli, R-Lake Havasu City.

"To be taxing food, essential items that are consumed at home, not only is it unreasonable, it's outrageous,'' he said.

Woods said Tempe’s daytime population nearly doubles with workers, students and visitors.

“The food tax, which is based on many sources, allows the city to provide the proportional services needed for the influx of people,” the mayor said.

“Removing the food and residential rent taxes would reduce revenues that we can use to create sustained affordable housing for Tempe residents and provide other services.”

And Globe Mayor Al Ganeros told lawmakers that the levy, which is paid not only by residents but people from outside the city who drive into town, helps his community cover its costs. And he said there are costs, citing, for example, the $1.5 million to $2 million it will take to replace a 35-year-old ladder truck at the fire department.

Casa Grande Mayor Craig McFarland said revenues from the food tax amount to 7% of the total city budget.

"I struggle to understand why the Legislature feels the cities are the one who are robbing from our citizens,'' he testified.

"We are where the rubber meets the road,'' McFarland continued. "We are where citizens rely on the services that we provide.''

Not every local official who testified was opposed.

"We have a regressive tax on a fundamental human need,'' Allen Skillcorn, a member of the Fountain Hills City Council, said speaking specifically about the rental tax. "That's just mean.''

The party-line 4-3 votes by the Republican-controlled committee sends both measures to the full Senate.

We’d like to invite our readers to submit their civil comments, pro or con, on this issue. Email