PHOENIX (AP) — Soaring rents in metro Phoenix and across the state have prompted a new proposal in the Legislature that would ban cities and towns from levying a tax on home and apartment rentals.
Republican Rep. Shawnna Bolick of Phoenix said her bill, added as a last minute “scratch all” amendment on the House Ways and Means Committee, which she chairs, would give a little relief to tenants who have seen Metro Phoenix rents soar 15% to 30% — depending on size and location — over the last year. They are expected to increase by another 20% this year.
But city officials say eliminating the $152 million in rent tax revenue collected by 71 of Arizona’s 91 cities would do little to help people who have seen their rental payments soar. And they argued that the reduction in revenue would result in cities raising other taxes or cutting services.
“If this bill were to pass, there would only be two scenarios that a mayor and council would have to enact,” Tom Savage, a lobbyist for the League of Arizona Cities and Towns, told the committee. “There really is no other option.”
“Both of these options impact the same tenants that this bill purports to help,” Savage said in an interview.
Bolick’s proposal passed his committee on Wednesday in a party-line vote with opposition Democrats.
Tax rates among cities that charge the tax vary from 1% to 4% of the total rent.
Savage noted that in Phoenix, which levies a 2.3% rental tax, someone paying $1,000 in rent would see a savings of just $23. And the bill as written does not require that money to go to the tenant, although Bolick has pledged to add a provision requiring it if necessary.
But Bolick and other Republican supporters of the legislation said cities are swimming in money, in part because of a 2018 state law that required sales taxes to be collected on goods purchased online and because of federal coronavirus relief funds. She said cities should “learn to live within their means”.
The $152 million in municipal tax revenue is collected by individual cities, ranging from about $60 million in Phoenix last year to $1,900 collected by the small town of Taylor, Navajo County.
Prescott sits right in the middle, with the town of about 45,000 people 100 miles (140 kilometers) north of Phoenix, collecting $2.6 million in rental taxes.
Barry Aarons, a Prescott lobbyist, said losing that tax money would be a big hit. With the police and fire department taking up the majority of the city’s budget and the cuts there being nasty, that means all other services would have to be cut by more than 25%.
“It’s hard to do for a small community that has limited ability to raise additional or new resources, especially the imposition of new taxes,” Aarons told the committee.
Democrats on the panel pushed back on Bolick’s claim that cutting municipal taxes will help keep people in their homes when they see monthly rent increases of hundreds of dollars.
Rep. Andres Cano of Tucson said a constituent told him he saw his rent go up by $330 a month.
“There are bigger issues around a person’s budget and their decision to buy food or pay rent,” Cano said. “And I respectfully think that 2% of that $330 that we’re talking about, overnight in the snap of a finger, the relief that we’re talking about is tiny.”
But Bolick said cutting municipal taxes is better than nothing.
“If we’re trying to look at affordable housing, I think that’s a small thing we can do right now,” she said. “Obviously it’s not huge, but I think it’s a starting point.”
If the legislation is enacted, cities would no longer be allowed to collect rental taxes starting in January.