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Common Sense Institute’s Free Enterprise Report Highlights School Choice, Tax Reforms In Arizona

January 16, 2025

By Matthew Holloway |

The 2025 Free Enterprise Report from the Common Sense Institute Arizona (CSI) was released Monday and ranked the state of Arizona amongst the states in education as well as the new indexes of economic performance and economic momentum.

According to Katie Ratlief, Executive Director of CSI Arizona, “Arizona continues to lead the way in key areas like tax policy, state budgeting, and educational choice, proving the impact of data-driven, common-sense policies.”

“However,” she added, “challenges in housing, public safety, and homelessness are beginning to slow our momentum. While Arizona remains a top destination for growth, addressing critical issues like crime and the housing crisis will be essential to sustaining our competitiveness. Fortunately, the policies that fueled much of Arizona’s success are still in place, and with a renewed focus on data-driven solutions to address issues like crime and housing, Arizona can solidify its position as one of the most competitive states in the nation for years to come.”

The report details Arizona’s positioning in the emerging recovery of 2025, particularly highlighting the success of the state and its persistent momentum. In an overall measure, the state ranked 27th in “free enterprise competitiveness,” with CSI emphasizing advances in taxes, state budgeting, energy and education, but noting the heavy limitations imposed by housing shortages and rising costs.

In education, Arizona ranked second in the nation in share of students enrolled in school choice options, seemingly ratifying the state’s first-in-the-nation universal Empowerment Savings Account (ESA) program which now provides financial support to over 83,000 families.

The report noted, “Arizona today has the most open K-12 educational market in the country, and hosts a diverse network of District, Charter, and private school options. Since the pandemic, its home- and microschool space has expanded rapidly. Today, about a third of Arizona’s K-12 students are not enrolled in the traditional District school system.”

The report also highlighted Arizona’s Energy situation, noting in a post to X, “Arizona remains a top 20 state for energy competitiveness, boasting one of the most reliable electricity grids in the nation.”

CSI explains, “Thanks to maintaining the nation’s largest nuclear power plant and the moderate and deliberate pace of adoption of wind and solar energy sources (supplemented by robust investment in natural gas), the state’s electrical grid remains reliable and affordable.”

Finally, Arizona’s advantageous tax system was highlighted with the 2.5% flat income tax and property tax instant depreciation of business investments cited in particular for contributing to an extremely competitive tax and regulatory system. Arizona ranked 7th in the nation on the Taxes & Fees Competitiveness Index.

The report observed, “Arizona has significantly reduced its tax burden in recent years, most notably by adopting a 2.5% flat personal income tax rate. This reform cut the top marginal tax rate from 4.5% to 2.5%, simplifying the tax code and making Arizona one of the most competitive states for income taxation.”

Looking to the future, CSI pointed to the steps Arizona legislators have taken to insulate the state against capricious tax hikes, explaining “this tax structure is well protected. Rules requiring supermajorities for statewide tax increases by the State Legislature were extended in 2022 to initiatives and referendums that would have voters approve the tax increases.” The report continues, “Arizona’s competitive ranking for its tax structure is not only unlikely to get worse but may improve (even if further reform is more incremental) due simply to the relative erosion of the position of other states that lack these structural protections.”

Matthew Holloway is a senior reporter for AZ Free News. Follow him on X for his latest stories, or email tips to Matthew@azfreenews.com.

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