The Rise of Residential Property Tax in Arizona

If you own property in Arizona, be aware that your property tax is about to increase. Legislatures, in large part influenced by lobbyists of large companies, are shifting the tax burden from large commercial properties to residential properties. Before going into detail, it is important to have at least a general understanding of the Arizona property tax system.

Properties are classified into two major classes; commercial and residential property. Commercial consists of income producing properties and residential property is just that, residential, or property that does not produce income. The larger commercial properties are valued by the Arizona Department of Revenue (DOR) and the smaller ones, like mom and pop stores, are valued by the county assessor. All residential properties are valued by the county assessor. The DOR and county assessor place two values on each property; the full cash and limited value. The limited value, which is the value of concern, is factored by an assessment ratio set by the legislature to determine the taxable value.

Since 1973, the assessment ratio has been set at 10{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2}. The ratio for most DOR valued commercial properties was 50{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2} in 1979, 25{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2} in 1999, 20{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2} in 2012, and will drop to 18{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2} next year, equating to a 64 percent drop. Commercial property assessed by the county assessor will also drop to 18{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2}, a 28{8438d4ed2bb89d58da5fb188fb5e3a54d93a11ec32721f0f7e4cdf3979ff74e2} decrease since 2005. Reducing the limited value of DOR valued commercial properties 64 percent and the county assessor valued properties 28 percent has resulted in an approximate 20-30 percent increase.

Thanks to the special interest tax breaks, people who own residential property will see a substantial increase in property tax. The increase in residential property tax will also be locked in for years to come due to legislators successfully getting Proposition 117 on the 2012 ballot. The campaign was supported and paid for by members of the Arizona Tax and Research Association, an organization that primarily consists of lobbyists for owners of high valued commercial property. Even though ATRA’s campaign material stated that it would lower property taxes, it will neither raise nor lower property taxes but it will lock in the tax burden shift on the residential property owners at least for the near future. Not knowing the potential consequences of passing Proposition 117, 55 percent of the voters voted to pass it.

If you would like to voice your opinion on this matter you should contact the legislator for your district (contact information included below). Voicing your opinion to anyone other than your legislator will unlikely result in change. If you have any questions about property tax or how the burden shift will affect your property, feel free to contact my office.

• To find your district/legislator go to www.azleg.gov and click on, “How do I find my legislators”
• If you do not have access to the internet you can call 602-926-3559
• To send a letter to your legislator send it to (Legislator’s Name) Arizona State Senate (or Arizona House of Representatives), 1700 W. Washington, Phoenix, AZ 85007.