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Arizona cities and towns brace for effects of rental tax ban, which went into effect in August
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Arizona cities and towns brace for effects of rental tax ban, which went into effect in August

Cities and towns across the state are planning for expected revenue shortfalls after a residential rental tax ban was enacted last fall.

In August, Gov. Katie Hobbs signed a bill that would prevent cities and towns from collecting rental taxes on residential rental properties.

And that could hit some cities hard. Lee Grafstrom is a tax policy analyst for the Arizona League of Cities and Towns. He says the city of Tempe is expected to lose between $20 million and $25 million.

“When you take away a small amount of taxes paid by an individual, you know, $20 a month or whatever, the impact, the negative impact on the city or town is much greater because of the cumulative effect of all those taxpayers who do not paying $20 each. 20 dollars to me is not a big deal. “$20 million for the city of Tempe is a big deal,” she said.

The law will come into force in January 2025.

While the ban is supposed to help mitigate rising rental costs, it is also projected to take $240 million to $250 million off of cities and towns’ revenues.

“We wish there was some kind of replacement for that instead of just forcing cities to raise their own taxes and address all of those issues,” he said.

As KJZZ News reported in February, Phoenix City Council members have been told not to add services or programs due to estimated revenue shortfalls.

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