Q: I heard that there’s a bill to eliminate property taxes in Arizona. If passed, how would the change affect homeowners?
A: Last month, Arizona state Rep. Rachel Jones from Tucson introduced a bill that would eliminate property taxes for those homeowners who own their property outright. The bill would apply only to primary residences. The property tax exemption would not extend to homeowners who are still paying their mortgage, have a reverse mortgage or have any other encumbrance on their property.
In a recent interview, Ms. Jones, a Republican, said the bill was created primarily to relieve the tax burden for seniors, many of whom are on a fixed income and may be in danger of losing their homes to back taxes.
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“It’s an interesting but radical proposal, one that’s too radical to succeed in its current incarnation,” said Jordan Ayan, partner and listing agent at The Lifestyle Collection at Launch Real Estate in Scottsdale. He argues that the bill, which is still open to amendments by other legislators, raises more questions than it answers.
For example, the impact of the bill on those with reverse mortgages is up in the air. Currently, homeowners with reverse mortgages do not pay property taxes, but under the bill they would be back in the position of footing a tax bill. “It’s a Gordian knot. You start looking at individual cases and there are a lot of outliers. There are so few cases that would fit neatly within the definition of the bill,” said Mr. Ayan.
Further, Mr. Ayan points out that Arizona already has one of the lower property tax rates in the nation. With a 0.66% effective real-estate tax rate, a homeowner with a property valued at $225,500, the median home value in the state, will pay less than $1,500 in annual property taxes. This is close to one- third of the property tax rate of Texas, for example, and one- quarter that of New Jersey.
Property tax revenue is also crucial for civil and social services in the state, said Mr. Ayan, such as funding for public schools and local fire departments. The bill doesn’t answer how these funds would be replaced.
“But, Arizona is known for introducing novel things and doing things our own way,” said Mr. Ayan. “They still call it the Wild West out here for a reason.”
