Arizona’s income tax will switch to a flat rate of 2.5% on January 1, which will be the lowest in the nation once it takes effect.
Although it was initially expected to be implemented in 2024, Republican Gov. Doug Ducey announced in September that it would be bumped to the 2023 tax year.
“It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money,” Gov. Ducey wrote in a letter to Department of Revenue Director Robert Woods at the time.
Currently, the state has two income tax rates of 2.55% and 2.98% for 2022, and it used to be upwards of 4.5% in previous years.
This comes amid the state’s rapid economic and population growth, as well as high inflation nationwide. Many new residents and businesses have moved from other states, such as neighboring California.
The American Legislative Exchange Council’s “Rich States Poor States” report for 2022 ranked Arizona third for the economic outlook and first in performance.
“It’s no secret that Arizona’s economy is booming,” the governor said in the letter.
Meanwhile, the Phoenix Metropolitan Area currently has the highest inflation in the county at 12.1% as of October, according to the United States Bureau of Labor Statistics.
Republished with the permission of The Center Square.
