By Grover Norquist
Arizona’s income tax – with a top rate of 8% – is not competitive. Reducing and eventually eliminating the state income tax would be a huge win for all Arizonans.
Individual taxpayers and families would be able to keep more of their hard-earned paychecks. Small businesses would be able to invest more in their employees. And Arizona would be much more attractive to businesses and investment, bringing new jobs and opportunities to the state.
Over the last decade, millions of people and jobs have been fleeing from high-tax states to states that do not impose income taxes. The ability to work remotely will only amplify this trend.
Unfortunately, Arizona’s current income tax puts it on the wrong side of this equation.
Arizona is a high tax state and slipping further
Under the status quo, Arizona’s income tax – with a top rate of 8% – is not competitive. Eight states – including Arizona’s neighbor Nevada and nearby Texas – do not impose individual income taxes of any kind. Thirty-two more states – count Arizona’s neighbors Colorado, New Mexico and Utah, among them – have top rates that are lower than Arizona’s.
Even worse for Arizona, the list of states that do not impose income taxes will continue to grow. Mississippi Gov. Tate Reeves, New Hampshire Gov. Chris Sununu, West Virginia Gov. Jim Justice, and Arkansas Lt. Gov. Tim Griffin are among several key lawmakers that are working to eliminate income taxes in their states.
Unless Arizona begins reducing and phasing out its income tax, it will continue to fall behind.
The good news is Arizona’s leaders refuse to sit back and allow it to fail. Gov. Doug Ducey, Sen. J.D. Mesnard, President Pro Tem Vince Leach, Majority Leader Ben Toma and many others are eager to provide pro-growth income tax relief.
A flat tax is a much better way to go
They are working on a tax plan that would streamline Arizona’s current four-bracket system (five brackets when accounting for the Proposition 208 “surcharge” of 3.5% that will be imposed on certain income, resulting in top rate of 8%) down to a flat tax of 2.5%.
That would be lower than its current bottom rate of 2.59% (with adjustments being made to ensure that even with the Proposition 208 “surcharge,” which would effectively create two brackets, the top rate would not be higher than 4.5%).
Flat taxes protect all taxpayers from tax increases. Under a progressive income tax, taxpayers are divided into small groups, allowing politicians to rob them one by one. Raising a flat tax, on the other hand, is much more difficult because politicians are forced to answer to every single income tax filer.
Making this news even better, there is a serious effort to include a full phase-out of the income tax (excluding the Proposition 208 “surcharge”) over time through the use of revenue triggers, a responsible way for states to cut taxes without getting ahead of their ski tips.
It could bring new jobs, higher wages
If such a provision were included, Arizona would be a model for other states to copy.
In addition to reducing income tax rates, the Republican tax plan would provide even more income tax relief by quadrupling the child tax credit and by coupling the standard deduction to inflation.
The Republican tax plan would be a huge victory for every single Arizonan. Reducing and, ideally, eliminating the income tax would attract businesses looking to expand, investors looking for growing economies with hospitable tax climates and families looking for greater prosperity.
This would bring new jobs and opportunities to current Arizona residents.
Income tax relief would also allow small businesses, which overwhelmingly pay their income taxes on the personal side of the code, to invest in higher wages, and would allow the hardworking people of Arizona to keep more of their paychecks.
Arizona’s future will be brighter if it begins reducing and eliminating the state income tax.
Grover Norquist is president of Americans for Tax Reform, a nonprofit taxpayer advocacy organization that was founded at the request of President Ronald Reagan. Reach him at firstname.lastname@example.org.