A Republican proposal to cut sales tax imposed on groceries by some cities passed its final hurdle in the Arizona Legislature, but it may meet a veto stamp on the ninth floor.
The House of Representatives passed the measure to cut the food tax, Senate Bill 1063, on party lines 31-29 Wednesday afternoon. The bill is one of the major policy goals legislative Republicans are seeking this year in addition to cutting taxes imposed on rental leases.
“Families are struggling every day to put food on the table. There is nothing that can provide them relief like this bill,” Republican Majority Leader Leo Biasiucci, R-Lake Havasu City, said on the House floor Wednesday. “To a lot of those families, (this bill) is the difference between putting gas in their car; the difference between taking their child to soccer; the difference in a lot of things that make our families work,” he continued.
Biasiucci is sponsoring a mirror bill in the House and Senate Bill 1063 was substituted for his bill. The bill passed in the Senate and now moves to Gov. Katie Hobbs.
Hobbs, a Democrat, vetoed the rental tax cut proposal on Feb. 23 and she’s indicated she has concerns over eliminating the food tax for cities that rely on it. Axios reported Hobbs earlier told reporters recently that are other options the Legislature can take to provide Arizonans financial relief such as eliminating sales tax on diapers and feminine hygiene products, which was one of her main policy goals when her office released the executive proposal for the state budget.
That measure is sponsored by Rep. Alma Hernandez, D-Tucson, and has bipartisan support. Sen. T.J. Shope, R-Coolidge, sponsored a mirror bill in the Senate that got a committee hearing, but Hernandez told the Arizona Capitol Times her bill has the 31 votes it needs in the House, but it’s being used as a bargaining chip for the budget, which is causing its holdup for a floor vote in the House.
“I’m just waiting and it is the hill I’m going to die on this year,” Hernandez said.
House Democrats echoed Hobbs in their opposition to the bill and said it would cut just shy of $160 million to cities that impose a food tax. This figure comes from Department of Revenue data, which indicates that 65 of Arizona’s 91 incorporated cities and towns that taxed food for home consumption in fiscal year 2022 collected $158.3 million.
A fiscal note of the bill estimates that municipal sales tax collections will grow to just under $200 million by fiscal year 2026. Democrats said some city officials that use the food tax have expressed they will have to either increase property taxes to make up for lost revenue or cut services like police and fire response.
“The city of Globe, led by a Republican mayor by the way, has let us know that this bill would be the fire truck that’s about to be purchased and the cuts from that jurisdiction as a result of 1063 would be a trickle-down effect of this,” said Minority Leader Andres Cano, D-Tucson. “We need to stop passing soundbite legislation like 1063 and we need to continue to recognize the fiscal impact.”
Nick Ponder, a lobbyist for the League of Arizona Cities and Towns, told a House panel in January that some municipalities depend heavily on the food tax. The Town of Taylor gets 35% of its sales tax revenue from the food tax, the city of Cottonwood gets 16% and the city of El Mirage gets 12%, according to Ponder. Taylor’s 35% of food tax revenue equates to about $40 million.
Republicans say that city revenues have increased from the sales tax imposed to online purchases and cities should be more responsible with spending.
“Maybe rather than having legislators here carry water for them, the cities should explain to their voters why police and fire are always first on the chopping block whenever there’s a question about revenue,” said Rep. Justin Heap, R-Mesa.
An amendment to the bill delays the effective date of prohibiting a food tax to July 1, 2025, which Democrats said doesn’t provide immediate relief to families. Reps. Lupe Contreras, D-Avondale, and Leezah Sun, D-Phoenix, said the impact the bill has to families is minimal and would save “pennies on the dollar” with grocery purchases or “a couple hundred dollars” a year.
Republicans and other Democrats took issue with those comments and said any relief is helpful for Arizonans. Rep. Myron Tsosie, D-Chinle, spoke out against those comments and said they bothered him. He still voted against the bill and said it was on behalf of his constituents but also that “every penny counts” for his people.