GILBERT, AZ — The Town of Gilbert may be sued over a surprising reason: splash pads and pickleball courts.
The town has hiked taxes on services, like hotels, short-term rentals, restaurants, and bars, after the Council approved increases on what some are calling “pickleball taxes.”
Gilbert town leaders say tax increases that took effect on January 1st will lead to vital improvements, but now those changes are the subject of a lawsuit.
Goldwater Institute has filed a complaint, calling the new tax code unconstitutional.
“About 550 square feet, one bedroom, little kitchenette, and we rent this out,” Jonathan Barth said, showing his rental property in Gilbert.
Barth says the income from the short-term rental lets his family lead the life they want.
“I'm a teacher. We have five children. My wife is a homemaker, and so this allows us to do that,” he said.
That’s why he’s worried that as of this year, the rental is subject to two tax rate increases.
One is the general transaction tax, which increased from 1.5 to 2 percent for goods and services, like lodging, contracting, and restaurants. The other is the bed rate tax, applied to short-term lodging, that went up from 2.8 to 5 percent.
“It increases the burden on families who are trying to make ends meet,” Barth said. “It also makes Gilbert a little less competitive.”
The town defends the changes, saying the revenue will fund necessary improvements to police, fire, and parks and recreation.
That last point draws criticism.
“It's for pickleball courts and splash pads,” Barth said. “Gilbert doesn't need that, especially when it's going to harm real people.”
It is why some call this the “pickleball tax.”
However, it is not the main reason Barth is joining a lawsuit against the Town of Gilbert and the Arizona Department of Revenue.
“This is an illegal action,” he said.
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Goldwater Institute filed a complaint on behalf of Barth, as well as the Home Builders Association of Central Arizona.
“That taxes services,” Stacy Skankey, Goldwater Institute Staff Attorney, said. “Now the issue with that is that it's actually unconstitutional in Arizona. You cannot add a new tax or increase pre-existing taxes on services.”
The complaint cites Article IX, Section 25 of the Arizona Constitution.
“This went to the voters to decide this, and again, they voted for this,” Skankey said. “Even if you love pickleball, the tax is unconstitutional.”
Town officials tell ABC15, the taxes are in full compliance with Arizona law and the Constitution.
“Our legal team has thoroughly reviewed the relevant statutes and precedents to ensure that any tax increase and associated processes strictly adhere to the requirements of state law,” Gilbert Town officials say in part in a statement.
They add the changes are designed to reduce the impact on locals.
“By increasing the use tax for online vendors and increasing the bed tax for visitors, we aim to reduce the impact on local residents and businesses,” the statement reads. “This approach ensures that those who benefit from Gilbert’s infrastructure and services contribute fairly to their maintenance and long-term sustainability.”
The Arizona Department of Revenue, also a defendant in the case, tells ABC15 it cannot comment on pending litigation.
