Senate President-Elect Warren Petersen, R-Gilbert, unveiled a new plan to mitigate inflation on Tuesday, like the one gubernatorial candidate Kari Lake presented, but the measure will likely face heavy opposition.
Petersen’s plan would be to eliminate rental and food taxes, reduce (or eliminate) occupational license fees and increase housing supply.
“Government has done extremely well over the last few years by adding a record amount of revenue. Unfortunately, hardworking taxpayers are reeling during this period of runaway inflation and are having a tough time paying for the most basic necessities,” Petersen said in a written statement. “There are at least four actions we can make as a Legislature to counter the effects of rising costs and help our citizens who are living paycheck to paycheck.”
Elements of his plan strongly resemble the economic plan published by Republican gubernatorial candidate Kari Lake, which also called for cutting food and rental tax.
“Arizonans can’t afford to wait for a change of leadership in Washington – they need relief now. That’s why I’ve pledged to eliminate all taxes on groceries and rent in the State of Arizona, putting almost half a billion dollars back into the pockets of Arizona families,” Lake stated in her plan earlier this year.
Governor-elect Hobbs opposed Lake’s plan at the time and said it would essentially defund law enforcement by taking away revenue that cities and towns use to fund public safety.
Petersen’ plans won’t become law without Hobbs’ support.
“Lake’s ‘plan’ would do nothing to actually put money back in the pockets of working Arizonans. Instead, Lake’s plan would get rid of the tax revenue that funds law enforcement in Arizona’s cities and towns, defunding local police,” Hobbs said in a statement at the time, citing an opinion piece by Arizona Republic writer Laurie Roberts to that effect.
The opinion piece cites Republican Glendale Mayor Jerry Weiers as opposed to Lake’s idea. City and town officials have historically opposed similar measures.
Arizona cities and towns get hundreds of millions of dollars in tax revenue each year. A large portion of that goes to police and firefighters. Not all cities tax rent or groceries, but most of Arizona’s 91 cities and towns do.
A proposal to eliminate rental tax was introduced in the legislature last session by Rep. Shawnna Bolick, R-Phoenix, but died on the Senate floor when Sen. Paul Boyer, R-Glendale, and the Democrats voted it down.
The bill was opposed by the League of Arizona Cities and Towns.
Boyer said on Tuesday that the measure – Senate Bill 1116 – was a “$202M ongoing hit to cities. Essentially, defunding the police given how much cities spend on public safety.”
“Nothing justifies poor tax policy but the good news is cities are enjoying surpluses from wayfarer and expanding state shared revenue to 18%. However we can look at delayed implementation for a soft landing,” Petersen said in response.
Petersen argued in his statement that homeowners don’t have to pay taxes on their mortgage payments and tenants shouldn’t have to pay a rental tax.
Bolick introduced a bill to cut food taxes in 2019, but the bill was held in House rules and never made it to a floor vote. It was co-sponsored by Reps. Leo Biasucci, R-Lake Havasu City, Walt Blackman, R-Snowflake, John Fillmore, R-Apache Junction, Kevin Payne, R-Peoria, Ben Toma, R-Peoria, and Frank Carroll, R-Sun City West. The bill was opposed by the East Valley Chamber of Commerce, the Professional Fire Fighters of Arizona and the Arizona State American Federation of Labor and Congress of Industrial Organizations.
Bolick’s bill would only have eliminated food tax on groceries, not meals in restaurants. Petersen doesn’t specify his plans but writes that food is “not a luxury” and that the tax hurts “the poorest of the poor.”
In Arizona’s largest cities, there is no food tax, and statewide, families who use federal food subsidies do not pay food taxes.
In a proposal that could enjoy some bipartisan support, Petersen writes that he wants to “increase the housing supply,” something that Democrats and Republicans have been saying loudly for at least the past year. The question is, how Petersen wants to go about it.
A Housing Supply Study Committee has been meeting for the past few months and will discuss possible legislation to create more affordable housing in an executive session at their next meeting on Tuesday, according to the committee’s chair Rep. Steve Kaiser, R-Phoenix. Republicans on the committee, including Kaiser, want to “deregulate zoning” on housing projects to make it easier to build more homes, however nothing concrete is on the table.
Petersen writes that he wants to shorten the window of time it takes to get approval for land development and housing projects. “One way to accomplish this is through administrative approvals for all projects that meet all existing laws and requirements,” he said.
Kaiser will chair the commerce committee next session and said that he and Petersen have spoken and that he is on board but didn’t get into specifics.
When asked whether he will sponsor the bills to make these economic changes himself, Petersen said that he will defer to committee chairs first.
Petersen’s last proposal is to “reduce or eliminate occupational license fees,” which many professionals must pay to stay in business. Petersen has battled occupational licenses in the past. He sponsored two bills that Gov. Doug Ducey signed into law, one allowing professionals moving to Arizona from other states to keep their existing licenses and not acquire new ones, and one requiring state agencies to post about the occupational licensing requirements, notifying professionals of their right to petition to repeal or modify the existing regulation.
“To create new opportunities for Arizonans, we have to make sure our economy is one of the most competitive in the country to launch or relocate a business. To get there, I plan to identify and roll back any cumbersome and unnecessary regulations that get in the way of Arizona’s appeal to attract new businesses and jobs,” Lake said in her economic plan.
Petersen noted that the state has full coffers, pointing to over taxation. Arizona has a surplus of more than $2 billion dollars this year.
Finance Chair J.D. Mesnard, R-Chandler, said in a text that he’s “generally supportive” of the concepts Petersen put forward but hasn’t gotten into the details.
Hobbs has not yet commented on Petersen’s plan. Her support will be hard to win on the removal of food and rental taxes. City and town lobbyists also likely make their opinions known.