Should Oro Valley Consider A Tax On Rental Receipts?

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Is it time for Oro Valley ro consider a "renters tax"?

A renters tax is added to the rent paid.  Generally it ranges from 1 to 3%.  A rental taxes generally applied to properties which have apartments that are more than two. The tax is collected and remitted by the property owner. For practical application, however, the tax is generally added to the cost of the rent. As a result, the renter does not directly see or pay the tax.

A renters tax is common in Maricopa County.  Many municipalities there have such a tax.  For example, Scottsdale's charges a "privilege and use" tax.  It is collected monthly.  It is 1.65%.  All payments made by the renter are taxable.  This includes  monies received for property taxes, repairs, improvements, telecommunications, utilities, pet fees, non-refundable deposits, forfeited deposits, and common area maintenance charges.  In Scottsdale, the tax is actually subdivided for budgeting fund purposes. For example, 10% of the tax is used to fund public safety.  Scottsdale's rental tax rate is exactly the same as its sales tax rate. Other towns in charge rate includes Tempe (2%), Gilbert (1.5%) and Mesa (1.75%).

None of these towns are Oro Valley. Still, we are growing in that direction.  We are adding rental properties.  Look at the giant bladed area that will result in rental properties on Oracle Road.  This development is going to house over 250 rental units and could add up to 1000 residents to our town. 

Cities and towns in Pima County do not charge a rental tax.  So, if Oro Valley Were to move in that direction, it would be "breaking tradition."  Why not do so?  Oro Valley Is nothing like other communities in Pima County.

The argument in favor of a rental tax is that it is simply a sales tax.  It is justified on the basis that rental properties disproportionally add to the burden of operating the town. For example, the density of rental properties creates greater public safety needs. More police attention is needed. There is greater propensity for crime, not because the people who move into apartments are criminals; rather because the density of housing and the gathering of wealth in one place creates the opportunity for more crime.

In addition, renters do not use the same level of taxing sources that those who own homes do. For example, Oro Valley's utility tax will be less on renters than on property owners simply because renters use list of items such as water. Yet, the need for town services is exactly the same.    Remember, the utility tax is a source of general fund revenues.

The argument against a rental tax is that it will unfairly burden those that rent property and, that it is therefore discriminatory to them.  In addition, there are those who argue that taxing a necessity like a home in which you live is wrong.  Finally, some would argue that any rental tax even as minor is a 1 or 2% tax would discourage economic growth or put Oro Valley at a disadvantage because it would be the only community in Pima County to charge such a tax.

Oro Valley Is no longer a little community. Oro Valley will have 50,000 people within just a few short years. This will require the town to look for sources of continuing revenue. Yes. Some of this revenue will come from the sales tax. Some of this revenue will come from the utility tax.  A rental tax will add to this stream of revenue. Other sources are likely to either remain the same or possibly decrease over time. This would include revenues from construction or revenues received from the State.

The "knee-jerk" reaction for adding a continuing, sustainable revenue stream is a property tax. This is something that we are hoping that Oro Valley will avoid.  Consequently, identifying creative ways to generate future revenues will be critical as Oro Valley grows.

So, we ask again: "Is it time for Oro Valley to consider a renter's tax?"
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