Governor Hobbs Vetoes Tax Cut Bill for Landlords That Would Eliminate Taxes For Rent Payments

Last year, the state of Arizona saw a historical rent increase like never before. Many residents were looking to government officials to step in and help alleviate their sudden increase in financial burden. Arizona Legislators attempted to step in and assist in any way initiated a bill that many hoped would help.

On Thursday, Governor Hobbs vetoed SB1184, that would have eliminated taxes for rent payments, citing a pair of reasons for her decision.

Hobbs, said in a letter to Republican Senate President Warren Peterson that she was unsure SB 1184 would actually provide relief for renters.

“I appreciate the legislature’s interest in addressing rising housing costs, particularly for renters,” the Governor said in a letter.  “Lowering costs for Arizona families is a priority of my administration. Unfortunately, this bill suffers from two important defects at this time.

First, this bill lacks any enforceable mechanism to ensure relief will be provided to renters. As noted by the legislature’s own attorney, provisions in the bill that purport to require that tax savings be passed on to renters face challenges under both the state and federal constitutions. If we are going to promise relief to renters, it’s important that we are able to ensure they actually receive it. For working families faced with ever-increasing rental prices, this proposal just doesn’t fit the bill.”

Details on SB 1184

A fact sheet published by the Arizona State Legislature details that the bill would, starting on Jan. 1, 2024, ban a city, town or other taxing jurisdiction in the state from levying a tax or fee on the business of residential rentals.

The bill, as passed, required a property owner in a city or town that levies a rental tax to reduce their rent amount by an amount equal to the difference caused by the elimination. In addition, the state government, under the bill, was required to distribute about $14.9 million each month from the General Fund to cities and towns affected by the tax ban from Jan. 1, 2024 to June 30, 2025. The distribution was set to be made in proportion to average revenue.

Gov. Hobbs’ alleges that a number of cities and towns have come out against the bill.

Under the Arizona State Constitution, the State Legislature can actually overturn veto with a two-thirds vote of members elected in each house.

At this time, it is unknown if there is enough support to overturn Gov Hobbs’ veto.