To compensate for a precipitous drop in sales tax revenue, City Manager Mike Letcher has proposed $17.4 million in new or increased taxes and millions more in new or increased fees.
The largest chunk, estimated at $10 million in Letcher’s recommended budget, would come from a 2 percent tax on residential rental property.
The tax, which needs City Council approval, would apply to residential property owners with more than three such rental units in Arizona, at least one in Tucson, says a fact sheet from the Finance Department. Properties rented as public housing would be included.
The new levy would mean that renters who pay $600 a month would likely have to pay another $144 a year, the budget states.
Landlords would be responsible for getting a business license and collecting the taxes, and they would be audited as the city audits any business, officials said.
The tax has been criticized as regressive, a burden to the poorest made all the heavier by an economic recession.
U.S. Census Bureau statistics for 2005-2007 show that about 42 percent of the more than 94,000 Tucson households that rent pay $500 to $749 a month.
More than 41 percent of Tucson renters pay more than 35 percent of their monthly income on rent, compared to about 19 percent of city mortgage holders, according to the bureau.
City officials note that property tax rates for rental and owner-occupied homes have changed since the 1970s, when the city last imposed a rental tax.
Under the new system, both types of properties are taxed at equal levels.
The cost of the property tax, however, is likely still passed to renters.
The city already imposes a 2 percent tax on commercial rentals.
Tucson tried to add a rental tax in 2004 but backed away after 1,000 people rallied by the Arizona Multihousing Association protested.
The association again opposes the tax, leaving pamphlets at apartment doors and setting up a site – www.norenttax.com – that urges Tucsonans to show up at the council’s public hearing Tuesday at the Tucson Convention Center. The meeting begins at 5:30 p.m.
Courtney LeVinus, president of Capitol Consulting, which handles lobbying and governmental affairs for the trade group, said last week, “The AMA has always seen this as an unfair and regressive tax and we don’t support it under any circumstances.”