Phoenix to cut food tax in half at start of ’14
Phoenix shoppers will pay a little less in taxes at the checkout line when they buy a gallon of milk, vegetables, uncooked meats and other basic groceries starting early next year.
City leaders voted 8-1 Wednesday to repeal half of the controversial tax on food earlier than scheduled, with the reduction taking effect Jan. 1. The move means the city’s 1.4 million residents and other shoppers will save an estimated $33.4 million on their grocery bills.
Outgoing City Manager David
Cavazos said the councilapproved plan removes half of the 2 percent tax without requiring cuts to police, fire and other community services. The remaining 1 percent tax would stay in effect through March 2015, when it automatically sunsets.
The vote occurred with little fanfare, marking a quiet end to the polarizing debate over the food tax, a saga that began when the city enacted the tax in 2010 with little more than 24 hours’ public notice. At the time, city leaders said Phoenix needed the funds to help cover a record $277 million budget shortfall.
“I think it is a big relief for the city taxpayers,” said Councilwoman Thelda Williams, who helped strike a compromise for the partial repeal. “It helps end the controversy.”
Critics have said the “regressive” tax places an unfair burden on poor and working-class families struggling to afford their grocery bills. According to the U.S. Department of Agriculture, a typical family of four on a lowcost budget spends about $191 a week on basic groceries. For such a family, the 2 percent tax adds up to $3.82 per week, or nearly $200 per year.
But supporters of the tax say it helps pay for city services that aid the most vulnerable, such as after-school programs for children, longer library hours and more police officers and firefighters to respond to emergencies.
Shoppers pay the tax on food purchased for home consumption. They already pay an 8.3 percent sales tax — from the city, state and Maricopa County — on pre-prepared meals and non-food items bought at the grocery store, such as paper towels, soap and toothpaste.
The partial repeal will cut city revenue by an estimated $12.1 million this budget year and $21.3 million the following. City officials will make up for the loss through the refinancing of city transit bonds, staff reorganizations and streamlining, selling off of excess city land and other financial maneuvers.
The single biggest source of savings is the refinancing of city bonds, estimated to provide $19.3 million. Officials said Phoenix can refinance because of its perfect AAA credit rating.
Council members’ support of the plan is a sharp shift from earlier this year, when the push for a full repeal fizzled.
In March, Cavazos warned that repealing the tax this year would create a $55 million shortfall requiring sweeping cuts, including the layoffs of 99 police officers and about 300 other employees, closures of some senior centers and reduction of library hours.
A majority of the council had supported leaving the tax in place until 2015. Mayor Greg Stanton was criticized for backing off his campaign pledge to repeal the tax by April 2013.
But the council’s seemingly gridlocked opposition cracked in April, when Williams and Councilmen Michael Nowakowski and Sal DiCiccio announced they had reached a compromise to phase the tax out.
A sticking point for the council members was that the partial repeal not come at the expense of city services to residents. Concerns over potential cuts scuttled the earlier push to repeal the levy in its entirety.
Councilman Michael Johnson cast the lone vote Wednesday against reducing the tax. He has said the city should not reduce the tax until it fully restores hundreds of police-officer jobs lost to attrition and services shuttered during the recession, such as senior centers, recreation programs and library hours.
“Not only will there be a loss of funding — we should be doing things to try to make sure we’re enhancing our programs,” Johnson said. “All the programs that we cut will never get back to the level that we were.”
DiCiccio, an outspoken budget hawk who led the push to repeal, said while he would have liked to remove the tax in its entirety, the vote is a move in the right direction. He said the outcome shows the earlier projections of dire cuts were misleading.
However, other council members have said the options Cavazos outlined are largely one-time savings and don’t provide enough leeway to repeal the entire tax early.