Phoenix food tax expired at midnight

Phoenix shoppers' grocery bills got a bit lighter overnight.

Five years after its inception, the city's emergency tax on food expired at midnight, meaning residents will spend about $1 less for every $100 of basic groceries.

The tax has been controversial since City Council members created it in early 2010 with little more than 24 hours' public notice. At the time, they said Phoenix needed a temporary tax to help cover a record $277 million budget shortfall and avoid drastic service cuts.

The city estimates the tax collected $222.3 million over its lifetime. Residents paid the full 2-cent-per-dollar tax until Jan. 1, 2014, when the council reduced it to 1 cent.

But even though the tax has disappeared, city leaders remain sharply divided over its impact and legacy as a political lighting rod in the nation's sixth-largest city.

Supporters say it saved Phoenix from having to cut services to vulnerable residents. More than half of the money went to the general fund, which pays for day-to-day expenses, such as personnel costs for police and fire.

Vice Mayor Daniel Valenzuela, who came into office after the tax was approved, said he supports the decision because it prevented the city from closing libraries, senior centers and after-school programs or laying off hundreds of public-safety workers.

"I believe it has served its purpose," Valenzuela said. "That temporary tax is a lesser evil."

But critics said the "regressive" tax placed an unfair burden on poor and working-class families struggling to afford their grocery bills.

The tax applied to foods for home consumption, such as fruits, vegetables, dairy, milk, bread, uncooked meats and other unprepared foods. Hot and prepared foods are levied at the normal 8.3 percent sales-tax rate, which includes state and county taxes.

Councilman Bill Gates, who opposed the food tax from the outset, said he remembers being dumbfounded when it was placed on the council's agenda with roughly a day's notice. He said an uproar over the process has helped changed the culture at City Hall, putting a brighter spotlight on tax decisions.

"It was an illegitimate tax from the beginning," Gates said. "I believe that tax increases in the future of that size would be referred to the voters."

Other critics of the tax, including Councilman Sal DiCiccio, point out that Phoenix has spent millions on pay raises since it created the food tax. The city's bill for pay increases and "longevity" bonuses topped $28.1 million this year.

Now that the tax has disappeared, Phoenix is one of the few Valley cities with no tax on basic groceries. However, officials in Tempe and Scottsdale have discussed options to remove their food taxes.