Arizona Gov. Katie Hobbs Vetoes GOP Bill Eliminating Food Tax Amid Skyrocketing Inflation

On March 28, Arizona Governor Katie Hobbs vetoed Senate Bill 1063, a Republican-sponsored bill that aimed to stop municipalities from placing a tax on groceries. Arizonans are currently battling with rising inflation, and eliminating the food tax would have helped ease their financial burden.

Sonny Borrelli sponsored the bill, which had passed through the Republican-controlled Legislature. It was a pledge made by Kari Lake, a Republican candidate for governor who had campaigned for eliminating not just the food tax but also rent taxes.

Republicans stated that the bill would help people save money amid perpetually increasing inflation, which is forcing residents to spend 15% to 45% more on food than before. As per data cited by them, a family of four that relies on a low-cost grocery budget nowadays spends approximately $1,000 per month on food alone.

Essentially, the GOP’s proposals would have gotten rid of the municipal Transaction Privilege Tax (TPT), meaning that towns and cities could no longer impose a tax on food and beverage items meant for home consumption. The bill’s effects would have started in July 2025.

As per Republicans, 65 of Arizona’s 91 cities and towns currently impose a sales tax of up to 4% on food meant for home consumption. The League of Arizona Cities and Towns disclosed that none of the state’s three major cities (Tucson, Phoenix, and Mesa) tax groceries.

Hobbs’ Veto

The bill was opposed by Democrats and numerous cities throughout the state, who argued that it would be detrimental to city budgets. If revenue drops because food and beverage items are no longer being taxed, cities would have to cut spending on other services or raise taxes elsewhere to make up for the lost revenue.

A legislative analysis of the bill suggested that it would cost municipalities, up to $195.6 million until FY 2026, $189.3 million in FY 2025, and $182.9 million in the fiscal year 2024.

On Tuesday, Hobbs sided with town and city representatives who warned about the impacts that the legislation would have on municipalities, and vetoed the bill. She tweeted, “From potential cuts to service–including public safety–to increased property taxes, it”s clear that this bill doesn’t actually eliminate costs for our residents. It simply moves those costs around.”

Hobbs added that the bill, originally presented to mitigate inflation, wouldn’t be effective until over two years later. Also, people that utilize SNAP and WIC benefits (over 800,000 Arizonans) are already exempt from the food tax, and therefore the bill wouldn’t be of assistance to these groups.

Disappointed GOP

Senate Republicans expressed “extreme disappointment” after the governor vetoed the measure. In a statement, Borrelli said, “This veto is a disgraceful windfall for cities and an absolute gouge for families… Food is not a luxury; it is a necessity. A tax on our groceries is regressive and hurts everyone.”

Cities and towns should reportedly receive an average of $2.3 billion per year in state-shared revenues over the next four fiscal years, representing an $844 million increase compared with the four prior fiscal years. Republicans claim that Hobbs’ veto will leave less money in the wallets of hard-working taxpayers.

Previously, Governor Hobbs vetoed a GOP-led measure that aimed to eliminate rental taxes when housing costs were rapidly increasing. She said that she did so because it does nothing to guarantee that relief will benefit renters and would instead cause city governments to place an increased tax burden on citizens to offset losses.