Arizona voters have approved Proposition 132, which requires a 60% threshold for any future ballot measures that raise taxes. This is a huge win for taxpayers and a huge blow to out-of-state big government forces bent on ruining Arizona’s tax competitiveness.
Passage of the measure bolsters protections for Arizona taxpayers against tax hikes typically pushed by out-of-state progressive activists.
“Arizona is a model for other states. Many states including Arizona require a two-thirds vote of the legislature to raise taxes but leave the door open to massive tax increases via ballot measures pushed by out of state progressive interests. With this win, Arizonans have acted to protect themselves from Californians who push tax increases on Arizonans in order to avoid tax competition,” said Grover Norquist, president of Americans for Tax Reform.
And thanks to a historic tax relief package that was delivered by Gov. 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 effective Jan. 1, 2023.
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.
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.