Hobbs plans to veto legislation to block cities, towns from taxing groceries

Gov. Katie Hobbs is going to veto legislation to block cities and towns from taxing groceries.

Press aide Murphy Hebert confirmed late Friday that her boss finds the legislation sent to her last week unacceptable. And that means that, at least for the time being, the communities that do impose the levy — and that’s a majority of them — need not fear the loss of revenues.

But it also means the local taxes, which collectively raise more than $161 million a year from shoppers, will remain in place, at least for the time being.

Hobbs said Friday that the leaders of the cities and towns that do impose the levy — not all of them do — are “very concerned about the impact on their resources, particularly for public safety, particularly in rural communities.”

She also noted that not a single Democrat in the House or Senate voted for the measure, though several did express concern that the tax is hurting their constituents.

“I think we’re really looking for bipartisan solutions and one that comprehensively addresses the issues,” the governor said.

Hobbs also said she does not want to deal with issues of taxes on a piece-meal basis.

“Arizonans need comprehensive solutions for affordability,” she said.

And there’s something else.

The governor noted that, even if she were to sign the legislation on her desk, it would not take effect until July 1, 2025.

“These are people who need relief now,” she said.

At the heart of the issue is a levy that a majority of Arizona communities have continued to impose even after the state repealed its own sales tax in 1980. Rates range from 1.5% in places like South Tucson and Gilbert to 4% in San Luis, Mammoth and Guadalupe.

The amount collected can be significant, $17.8 million in Glendale, $14.8 million in Gilbert and more than $11 million in Scottsdale and more than $10 million in Tempe.

They also can be a big part of a community’s budget.

Globe, for example, reports that more than 15% of its sales tax dollars are from groceries. And in tiny Taylor, its $1 million in grocery tax revenues equals more than 35% of all sales taxes collected.
Proponents of the legislation have said what families are having to pay can have a big impact on their budgets.

They also pointed out that the levy doesn’t affect the poorest of the poor: Anyone in the Supplemental Nutrition Assistance Program, better known as food stamps, is exempt from paying the tax. That, they said, puts the burden on those who earn too much for such aid but may still be struggling to pay their bills.

Sen. John Kavanagh, R-Fountain Hills, called it regressive “because it deals with a commodity that people can’t not use, people can’t avoid, people can’t escape, which is why it disproportionately burdens working poor people and working class people,” he said.

House Majority Leader Leo Biasiucci, R-Lake Havasu City, had his own take when the measure was sent to Hobbs.

“To a lot of struggling families, that is the difference between putting gas in the car, the difference between taking their child to soccer, the difference in a lot of things that make our families work,” he said.

And despite the fact that not a single Democrat agreed to support the measure, several made it clear they agree.

“I have an issue with us saying that a few hundred dollars in someone’s pocket is not enough and wouldn’t help,” said Rep. Alma Hernandez, D-Tucson. “Even if we save someone $10 a month, that can make a huge impact.”
Rep. Myron Tsosie, D-Chinle, while voting against the tax relief, expressed a similar sentiment.

“I have constituents in my district who live paycheck to paycheck,” he said.

“Every penny that they can save counts,” Tsosie continued. “It doesn’t matter whether it’s one penny, two penny, one dollar, two dollars, that benefits my constituents.”

The move will bring Hobbs to 17 vetoes since the session started in January. And Republicans lack the two-thirds vote that would be necessary to override her.

Hobbs vetoed similar legislation last month that would have ended the ability of cities and towns to tax residential rentals. And, like now, the governor pointed to the opposition of communities.

“It will force local government to weigh increasing other taxes or reducing services, putting the vitality of our burgeoning region at risk,” Hobbs wrote in that veto message.

The governor also cited another factor: her belief that landlords, alleviated of the need to collect local sales taxes, would not pass along the savings to renters despite a provision in the legislation that required them, by the end of the year, to reduce rent due by an amount equal to what they would no longer be paying to cities.

The governor also has her own priorities for tax cuts.

She is pushing a measure to eliminate state sales taxes on diapers and feminine hygiene products. Her budget staffers said that would save customers about $40 million a year.