Committee clears uncapped capital-gains subtraction for primary residence despite fiscal objections

The Senate Government Committee advanced SB 16-33, a bill that would allow taxpayers to subtract net capital gains from the sale of a primary residence beginning in tax year 2027. The sponsor described the measure as an update to long-standing exemptions that no longer reflect current housing prices and said a five-year residency requirement would apply.

Opponents said the bill would be an expensive, untargeted tax cut for higher-value homeowners. Joseph Palomino of the Arizona Center for Economic Progress testified the measure could cost between $20 million and $60 million annually depending on methodology and data assumptions, and that the largest benefits would accrue to wealthier households in high-priced markets. Blake Lister of Opportunity Arizona said the policy would provide a disproportionate benefit to wealthy homeowners and could exacerbate budget pressures on the general fund.

Supporters and the sponsor argued the deduction would reduce disincentives for homeowners to move and help ease housing turnover; committee discussion included questions about adjusting the deduction amount or adding a cap to limit fiscal exposure.

During the roll call, Senator Epstein offered an extended explanation opposing the bill as written, calling it a ‘‘bill for billionaires’’ and urging limits or adjustments; nevertheless the committee moved SB 16-33 forward with the recorded committee action reported.