House panel advances bill to ban grocery taxes
A House committee gave preliminary approval on Wednesday to a new effort to ban taxes on groceries that appears to specifically target Phoenix.
House Bill 2638 — sponsored by Rep. Shawnna Bolick, a Phoenix Republican — would bar cities with a population of 625,000 or more from levying a tax on food intended for home consumption.
The House Ways and Means Committee approved the bill in a 6-4 partyline vote, with several members questioning whether the state Legislature should trump cities’ rights to make decisions about its own budget.
HB 2638 is a pared-down version of another bill Bolick introduced earlier this session that would have prohibited any municipality from taxing food intended for home consumption. All but about 20 Arizona cities and towns tax food, collecting a total of $115.2 million annually, according to the Arizona Department of Revenue.
Supporters argue food is a necessity and should not be taxed, but critics have said the ban would shoot holes in city budgets.
The original bill stalled in the House after staunch opposition from the League of Arizona Cities and Towns, which represents 90 of the 91 incorporated municipalities in the state. Bolick told committee members Wednesday that she introduced the second bill in hopes it could appease some concerns and garner more support.
The bill appears to take a jab at Phoenix, which is currently the only Arizona city with a population higher than the threshold.
Phoenix does not tax groceries but did at one time to help cover a record $277 million budget shortfall. The city is not considering a food tax, said Councilman Sal DiCiccio, who spoke in favor of the bill during the committee hearing.
If the bill passes, Phoenix would be barred from implementing a food tax in the future, even in times of financial crisis as it did in 2010.
Phoenix opposes bill
Phoenix was one of several cities and organizations that registered in opposition of the bill. Frank McCune, the city’s government relations director, declined to comment on the bill until it’s heard on the House floor.
But while the city opposes the bill, DiCiccio said he supports eliminating food taxes statewide.
Phoenix’s controversial food tax, which helped cover a record shortfall and avoid drastic service cuts, expired in 2015 after a 5-year life span. More than half of the money went to the general fund, which pays for day-to-day expenses, such as personnel costs for police and fire.
DiCiccio, however, argued the bulk of the money didn’t go to bridging revenue gaps for services but to additional bonuses and raises for employees.
He said a food tax is “one of the worst” taxes that a city can impose on its residents.
“The impact is on those individuals who cannot afford it,” he said. “I am 100 percent supportive of this bill.”
Lawmakers question if Legislature is abusing its power
Bolick said the idea of banning food taxes was brought to her by a constituent, Ray Sweeney. She said the original bill received backlash from cities and towns who felt a blanket ban was unfair.
Bolick, who said she grew up in a small town in Pennsylvania where neither food or clothes were taxed, said food taxes are regressive and place an unfair burden on people who are on fixed incomes.
“Food is a necessity and fundamental for life and should not be taxed,” she said during the hearing.
Sweeney, a Phoenix resident, said Arizona already has one of the highest sales taxes and is one of only 16 states that allows groceries to be taxed. He urged committee members to pass the bill.
“If not passed, this committee will conduct an assault on the pantries and spending powers of residents who are taxed,” he said.
Nick Ponder, legislative director for the League, said the organization is concerned the bill will be expanded to all cities and towns. While the bill doesn’t affect any of the cities that the organization represents, he said, cities could eclipse the population threshold or the threshold could be amended in the future.