Arizona’s Historic Income Tax Cut Will Take Effect Early

Arizonans will soon be able to keep more of their hard-earned money. Thanks to a historic tax relief package that was delivered by Governor Doug Ducey and Republican legislators, Arizona’s graduated income tax, which had a top rate of 4.5 percent under the state’s previous tax law, will be streamlined to a flat income tax rate of 2.5 percent in 2023. This is a huge victory for all residents of the Grand Canyon State.

This tax relief package – sponsored by House Majority Leader Ben Toma and Senator J.D. Mesnard – used a series of triggers to deliver the largest income tax cut in Arizona history. It was anticipated that this package would take three years to be fully implemented, but thanks to the pro-growth policies of Gov. Ducey and Republican leadership, Arizona’s economy has remained strong and the triggers have already been met.

“Gov. Ducey, Leader Toma, Senator Mesnard, and many others delivered a huge win for Arizona taxpayers,” said Grover Norquist. “It will allow Arizonans to keep more of their own money, attract new jobs and opportunities, and make Arizona a model for other states to copy.”

“Back in 2021, the Republican State Legislature provided Arizona taxpayers relief by setting the course to a flat income tax,” said Leader Toma. “In that process, three higher taxes rates were eliminated leaving behind a single lower rate. These reductions were timed to occur based on a certain state revenue threshold being met to ensure and protect funding for necessary government function. I am happy to report that revenue thresholds have been exceeded one full year in advance, enabling the implementation of a single flat rate of 2.5% a year earlier, providing Arizonans with significant economic relief when they need it most.”

The tax relief package and 2.5 percent flat rate – which is lower than the bottom income tax rate of 2.59 percent under Arizona’s previous tax law – will provide an income tax cut and a rate cut for every single income taxpayer. Individual taxpayers, families, and small businesses, which pay their taxes on the personal side of the code, will be able to keep more of their own money in their wallets and their business operations.

In addition, this historic tax relief package will also allow Arizona to remain competitive in the economy of tomorrow. Over the last decade, millions of people and jobs have moved out of high tax states and into states that impose low- and no-income taxes. In order to compete for that investment, a growing movement of states are working to reduce and phase out their income taxes.

This year alone, three states – Iowa, Mississippi, and Georgia – delivered legislation that will move their income taxes to flat rates as step one on the path to eliminating them completely. Kentucky delivered legislation that will phase out its 5 percent – soon to be 4.5 percent – flat income tax over roughly the next decade. Utah, Missouri, and several other states delivered legislation that will reduce their income tax burdens in some capacity.

Rather than sitting back and allowing Arizona to fall behind, Gov. Ducey, Leader Toma, Senator Mesnard, Senate President Karen Fann, Senate President Pro Tempore Vince Leach, House Speaker Rusty Bowers, and many other Republicans in the House and Senate, worked tirelessly to keep Arizona at the forefront of this movement.

“This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity,” wrote Gov. Ducey.

Under the 2.5 percent flat income tax – the lowest flat income tax rate in the nation – Arizona will be better positioned to compete with the nine states that do not tax wage income as well as remain an attractive place for businesses looking to expand, investors looking for growing economies, and families looking for better opportunities. This growth will bring new jobs and higher wages to all residents the Grand Canyon State.

Making this great news even better, the 2.5 percent flat tax is only step one. Many leaders in the house and senate are committed to making Arizona the tenth state without an income tax. Stay tuned.