SB1745 would place a new cap on municipal transaction privilege taxes and excise taxes in Arizona cities and towns with populations of 550,000 or more, which in practice would primarily affect the state’s largest municipalities. Under the bill, those local governments could not levy or assess a transaction privilege tax or excise tax above 2.5% on any tax classification, and the cap would apply separately to each classification regardless of how the tax is structured across multiple ordinances or components.
The bill also restricts cities and towns from adopting new taxes, raising existing rates, broadening the tax base, or adding surcharges if doing so would push any classification above the 2.5% limit, unless voters approve the increase. Any proposed increase in a transaction privilege tax or excise tax would have to be submitted to the qualified electors, and voter-approved increases adopted on a consolidated even-year election date would not be subject to the cap. The bill expressly preserves already voter-approved taxes under Title 42, chapter 6, and excludes ad valorem property taxes from its scope.
Impact
SB1745 would amend Title 9 by adding a new municipal tax limitation statute, directly constraining local taxing authority for large cities and towns. It would also create an enforcement mechanism tied to state oversight: if a city or town violates the section, the attorney general may proceed under existing enforcement law and the state treasurer would withhold state-shared revenues in proportion to the unauthorized tax increase until the violation is resolved. The bill defines key terms such as "excise tax" and "transaction privilege tax classification," and it would not invalidate existing voter-approved taxes, but it would materially limit future municipal revenue options for affected jurisdictions.
Sentiment
The bill appears to have had mixed but ultimately insufficient support. It received a 4-3 do-pass-as-amended recommendation in the Senate Government Committee, but later failed to advance, including a 15-15 tie on Senate Third Reading. The committee and floor results suggest the proposal was seriously considered and had some support, but not enough to clear the chamber.
Contention
The main point of contention is the bill’s restriction on local fiscal autonomy, especially for the state’s largest cities and towns. Supporters likely viewed the measure as a way to cap local tax burdens and require voter approval for increases, while opponents likely objected to the state imposing a rigid ceiling on municipal transaction privilege and excise taxes and to the threat of withholding state-shared revenues. The voter-approval exception and the carve-out for already approved taxes may have been intended to soften the bill, but the core issue remained whether the Legislature should limit how large municipalities raise revenue.