Arizona Gov. Doug Ducey Announces Lowest Tax Rate in the Nation Going into Effect Next Year

Gov. Doug Ducey (R) announced Thursday that Arizona’s surging economy had paved the way for a historic flat income tax rate to come a year in advance.

“It’s no secret Arizona’s economy is booming. Over the last eight years, we’ve made responsible decisions to live within our means, reduce burdensome government regulations, lower taxes every year and ensure our state remains a great place to live,” Ducey said in a letter to the Arizona Department of Revenue (ADR). “It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money.”

Beginning on January 1st, the flat income tax rate will be 2.5 percent, the lowest in the nation. This rate was scheduled to phase in over three years but was advanced due to Arizona’s economic strength. The flat tax plan was part of the 2021 state budget. According to the governor’s office, this new rate will reduce the income tax of the average taxpayer by 13 percent, saving families roughly $350 a year.

Arizona needed a general fund revenue of $12.8 billion to trigger the rate early, which is what happened according to the Joint Legislative Budget Committee and the governor’s Office of Strategic Planning and Budgeting. A joint memo from the groups revealed that in Fiscal Year 2022, Arizona’s general fund revenue was $16.7 billion, well exceeding the threshold.

Other examples of Arizona’s economic prowess include creating 400,000 jobs since 2015 and raising the Rainy Day Fund to $1.4 billion, the highest in the state’s history. Economists also forecast that Arizona will have a $4 billion budget surplus through 2024.

“In Arizona, we believe you deserve to keep the money you earn. This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity,” tweeted Ducey.

Moreover, the newest Rich States, Poor States report from the American Legislative Exchange Council (ALEC) painted a promising picture for Arizona. ALEC ranked every state based on economic performance between 2010 and 2020, of which Arizona took first place. This ranking was based on state gross domestic product, absolute domestic migration, and non-farm payroll employment. This is a jump from Arizona’s seventh place in 2021. Arizona also placed third in the ALEC’s economic outlook, an increase of 10 slots compared to 2021.

Furthermore, the Arizona State House also celebrated this achievement. Majority Leader Ben Toma (R-Maricopa) marked the journey to the achievement.

“Back in 2021, the Republican State Legislature provided Arizona taxpayers relief by setting the course to a flat income tax,” Toma said in a statement shared with the Arizona Sun Times. “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 exceed 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.”

Nine states have a flat income tax rate, but none is lower than three percent.

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Neil Jones is a reporter for The Arizona Sun Times and The Star News Network. Follow Neil on Twitter. Email tips to [email protected].
Photo “Doug Ducey” by Governor Doug Ducey.


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