PHOENIX — A business-backed Republican bill to permanently repeal a suspended state property tax has squeaked through the Arizona House with one vote to spare.


The House approved the repeal bill Tuesday on a 32-28 vote largely along party lines. It takes a minimum of 31 votes for the 60-member House to pass a bill.


The bill now goes to the Senate. The chief sponsor of that chamber’s version has acknowledged a Senate vote also would be a cliffhanger.

Dramatic fluctuations in the real-estate market in recent years have caused considerable unrest among property taxpayers across Arizona.


Beginning in 2005, the Arizona real-estate market skyrocketed, particularly in the residential-housing market. As they are constitutionally required, county assessors responded to the market by increasing property valuations for property-tax purposes. In Maricopa County, residential properties increased 60 percent in most cases.

SONOITA — As chief of the Sonoita-Elgin Fire District in Santa Cruz County, Joseph De Wolf oversees the response to everything from large wildfires to rollover accidents involving speeding trucks full of illegal migrants.


He does it all on a budget of only $890,000 – not enough to meet the challenges he confronts every day, he says.


“We’re under a huge amount of financial pressure right now,” De Wolf says. “I don’t have what I need to cover my area.”

With support from business groups and tax-reduction advocates, an Arizona House panel Monday approved a bill that would permanently repeal a statewide property tax.


The move is projected to provide $250 million in annual tax relief.


The biggest winners in eliminating the school-equalization tax are businesses, whose tax assessment is more than twice the rate of homeowners. A business with property valued at $1 million would receive about $775 in savings, and the amount would increase based on higher values.

The deep slide in East Valley home values is showing up in property tax assessments being mailed out to homeowners, but don't expect that to translate into a drop in your tax bill anytime soon, if ever.

A coalition of 21 Arizona business groups has penned a letter to legislators, asking for a permanent repeal of a state property tax.


The equalization tax has been the focus of much Capitol discussion in recent months. It is nearing the end of a three-year suspension, so the tax, and its more than $250 million a year in state revenue, is slated to come back on the books in fiscal 2010. The business groups hope to keep that from happening and argue that the tax would "create further harm to struggling homeowners and businesses during this difficult economic time."

The economic crisis facing Arizona is extraordinary. Arizona's unemployment is up to 7 percent, and 155,000 Arizonans lost their jobs in the past year. This economic collapse has led to a record state budget deficit.


The question policymakers face now is how to close the deficit. The governor has put tax increases on the table. If we accept that premise, it is vitally important to recognize that all tax increases are not created equal and that each has different impacts on the private economy.

A late addition to budget bills rushed through the Legislature last week would ease the tax burden on businesses by shifting it on to homeowners.


The proposal drew no discussion during committees or floor debates and some lawmakers are just now realizing the full impact of the measure.


Under the provision, secondary property tax rates for businesses would be cut by more than half for any bonds or overrides passed after June 30.

Homeowners could be on the hook for a larger portion of taxes to pay for city, county and school district bonds and overrides if the governor goes along with a provision in the budget just approved by the Legislature.


For any election after June 30, the bill essentially cuts the ratio at which businesses are assessed to pay off those voter-approved obligations, from 22 percent to 10 percent — the same ratio at which homes are now evaluated.

A move to cap secondary property taxes is underway at the Arizona Capitol.


Under S1421, the existing limitations on annual increases in primary property taxes would apply to special taxing districts throughout the state.


The Senate Finance Committee approved the bill by a vote of 5-1 on June 10. Its next stop is the Senate floor for a debate and a vote.