AZFEC: Arizona Cities Stand Firm Against Tax Cuts Amid Ongoing State Windfalls

By the Arizona Free Enterprise Club |

The Republican-led legislature faces a persistent challenge when considering tax cuts: opposition from taxpayer-funded lobbyists representing municipalities. Each session, these advocates claim that budget reductions threaten essential services, particularly in law enforcement and emergency response. In contrast, less critical expenses, such as diversity programs and various local projects, rarely face scrutiny.

This narrative, however, does not align with the financial realities of local governments. Contrary to claims of funding shortages, cities and towns have seen remarkable financial boosts, accumulating hundreds of millions in new revenue over the past six years. This surge mainly stems from two legislative actions: the taxation of online sales and increased state shared revenue.

In 2019, Arizona’s legislature reacted to the U.S. Supreme Court’s Wayfair decision, which enabled the taxation of online sales from out-of-state vendors. Initially portrayed as a modest $85 million annual increase, the reality has evolved significantly. Five years post-implementation, annual collections for both state and local governments now exceed one billion dollars.

This increase underscores a shift in funding dynamics, indicating that local governments have not only maintained but significantly enhanced their financial positions. As the debate over tax policy continues, the emphasis on public safety funding risks overshadowing the substantial revenue inflows that could reshape the conversation about how municipalities allocate their budgets.