Arizona Tax Group Pushing For 'Right Sized' Business Property Tax In 2020

Published: Thursday, January 16, 2020 - 12:53pm
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Many advocacy groups will be competing for Arizona lawmakers’ time and a slice of the state budget this year.

Arizona Tax Research Association is included in that list. The Show sat down with the Sean McCarthy, senior research analyst there.

Interview Highlights

What ideally would you most like to see come out of this legislative session?

The most important part of any legislative session is the state budget and passing a state budget that is prudent and takes into account the available revenues without going above and beyond what you'd expect, naturally. But, more importantly, not committing to too much ongoing spending, but trying to be prudent with the revenue growth that is there with a strong economy, and not over committing the state with with too much ongoing spending. 

Are you particularly nervous about that this year, given the fact that there's several hundred million dollars in excess money at the statehouse? 

Sure. Taxpayers should always be nervous under those circumstances, because you can get into this cycle where you come to expect that you're always going to have that amount of growth. And then you can overcommit yourself in those years. And then if you don't have this strong growth — just a 1% difference in revenue growth can be several hundred million dollars — and now you've made these promises to state and local governments that they can spend into these dollars. And now you're talking about, you know, real, real paychecks to real people. And that can be very difficult, very challenging to unring those bells. 

There has been some conversation about maybe implementing a tax on short-term rentals. Is that something that you think would be beneficial to the state? Is that something you think is a bad idea? 

Certainly where we've been engaged in those conversations, we'd like to be helpful to the extent that we have some expertise there. Those short-term rentals are paying the sales taxes, to the best we understand it, that are owed in that environment as relates to what, you know, hotels might pay. But the big question I think is property taxes. In Arizona, we tax property based on use. So if you're using a building in one way, you're going to pay different rates than another type of property under use. And so that's a really good public policy question as to, you know — OK, so you're using this property differently. Should you should you fall into a different classification? Should be you be paying the bed and breakfast use? Should you be paying a class-one hotel? And so, frankly, those are decisions that policymakers are going to have to make. And I don't think that we've concluded that we know exactly where those lines exist. I think there's pretty substantial policy difference between somebody who might rent out their home for once a year during the Phenix Open or a Super Bowl versus somebody who is doing it all the time with their, you know, three or four for houses that they own. And so I think lawmakers can have to decide how they classify those properties. And we'll be there to maybe help sort it out and try to provide guidance. But that's something that's the Legislaure should tackle this year. 

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