By Matthew Holloway |
A new economic analysis estimates that measures proposed during Arizona’s 2026 legislative session could have imposed at least $31.5 billion in annual costs and reduced employment by more than 424,000 jobs if they had taken effect together.
The 2026 Arizona “Job Killers” report, produced by Common Sense Institute Arizona (CSI) and the Arizona Chamber Foundation, identified 119 legislative measures that the organizations classified as potential tax increases, labor-cost increases, regulatory burdens, or new operating restrictions on Arizona businesses.
A review of the measures’ introduced sponsorship records found that 92 had Democratic lead sponsors and 27 had Republican lead sponsors. One Democratic-led measure also listed Republican sponsors. All 23 measures classified in the report’s labor category had Democratic lead sponsors.
CSI used Regional Economic Models Inc. (REMI) simulation software to produce the statewide estimates. Most individual estimates represent direct, first-order costs, while researchers applied a broader REMI TaxPI+ analysis to selected proposals.
The projections describe hypothetical effects, not recorded losses. The report assumes sudden and simultaneous enactment of the modeled proposals and cautions that actual costs could vary with implementation. None of the 119 measures became law.
The authors wrote, “An initial econometric analysis using CSI’s REMI simulation software suggests enactment of 88 of the 119 bills identified and tracked by the Arizona Chamber would have imposed at least $31 billion in new annual costs on Arizona.”
The report’s methodology footnote gives a different count, stating that CSI limited its quantitative analysis to 31 proposals whose costs could be estimated from tax and fee provisions or existing academic research. It says the remaining proposals could impose additional costs that were not readily estimable for the report.
CSI reported that its economic simulation estimated that simultaneous implementation of the modeled proposals could have reduced statewide employment by 424,400 jobs, or 9 percent; lowered real disposable personal income per resident by as much as $4,100 annually, or 7 percent; and reduced Arizona’s real gross domestic product by $48 billion, or 8 percent, once the effects were fully realized.
The largest estimated cost category consisted of labor measures, with 23 proposals carrying an estimated combined cost exceeding $17.5 billion.
These included proposals to repeal Arizona’s constitutional and statutory right-to-work protections. SCR 1035 and HCR 2022 proposed placing the repeal of Article XXV of the Arizona Constitution before voters. If voters approved the constitutional change, the related HB 2464 would have repealed Arizona’s statutory right-to-work provision.
Article XXV prohibits denying a person employment because of nonmembership in a labor organization and prohibits agreements that exclude people from employment on that basis.
CSI’s modeling assumed repeal would lower Arizona’s projected average annual GDP growth over five years from 3.86 percent to 3.05 percent, a reduction of approximately 21 percent from the baseline growth rate. The model projected between 30,000 and 40,000 fewer jobs.
Other labor proposals included mandatory paid-leave programs, minimum-wage increases, workplace heat regulations, and changes to scheduling, meal breaks, and overtime requirements. The report estimated $1.8 billion in costs from proposed paid-leave programs and up to $1.9 billion from minimum-wage increases.
- HB 2466 would have required overtime compensation for work exceeding eight hours in a workday, double pay for hours beyond 12 in a workday, and additional meal and rest breaks. CSI placed the measure’s estimated annual cost at $2.5 billion.
The report estimated that tax proposals would have imposed a combined cost of nearly $3.8 billion.
- HB 4095 proposed an additional 3.5 percent tax on federal adjusted gross income exceeding $250,000 for single filers and married people filing separately, or $500,000 for married couples filing jointly and heads of household. Revenue would have been divided equally between the Classroom Site Fund and the Emergency Deficiencies Correction Fund.
CSI estimated the measure would have generated approximately $1.5 billion in additional annual tax liability.
- HB 2636 would have retained the state’s 2.5 percent rate on taxable income through $1 million and applied an 8 percent rate to income above that threshold. The report’s narrative incorrectly identifies that proposal as HB 2629; its appendix identifies it correctly.
- Separately, HB 2629 would have increased the minimum annual corporate income tax from $50 to $1,000 for otherwise taxable corporations with at least 50 employees. CSI estimated approximately $3.9 million in additional annual costs.
- SB 1575 would have changed Arizona’s formula for allocating the income of multistate corporations by ending the option to calculate business income using only the sales factor. CSI estimated approximately $292.9 million in annual costs.
- HB 2461 proposed a workforce-development surcharge on businesses with at least 50 employees. The bill set the surcharge at 1 percent of payroll taxes paid during the taxable year. CSI estimated an annual cost of $32.6 million.
Energy and environmental proposals accounted for an estimated $7.1 billion in annual costs, according to the report.
- HB 2551 would have required Arizona electric distribution utilities to generate at least 50 percent of their electricity from renewable sources by January 1, 2035. It also proposed establishing an Office of Resiliency within the governor’s office.
- SB 1385 proposed a similar renewable energy requirement taking effect by January 1, 2036.
CSI estimated that the renewable-generation requirements could have increased electricity costs by approximately $3 billion after accounting for generation and backup-capacity expenses.
The study also examined HB 2467, which would have removed transaction privilege and use-tax exemptions for qualifying data-center equipment. The bill would have required data centers to use renewable electricity with battery storage beginning in 2027 while imposing limits on water-consuming cooling systems.
The report identified 66 measures involving legal or administrative requirements, with an estimated combined cost of $3.3 billion. Those proposals addressed rent regulation, mandatory acceptance of cash, pharmacy benefit managers, consumer refunds, and price restrictions during emergencies.
“No single policy determines the entire direction of an economy, but policy choices compound over time,” CSI Arizona Executive Director Katie Ratlief said. “That’s exactly why we do this analysis every year. A tax here, a new mandate there, another regulatory requirement somewhere else may not seem significant on its own. But put them all together, and the economic picture can change dramatically. Our job is to connect those dots and give Arizonans a clear view of what these policy choices could mean for jobs, investment and the future of our economy.”
The analysis also compared Arizona’s economic performance with Colorado’s. CSI reported that Arizona’s inflation-adjusted GDP has grown at an average rate approximately 20 percent faster than Colorado’s since 2016. Arizona’s average annual population-adjusted net interstate migration increased 18.5 percent since 2020 compared with its average during the previous decade, while Colorado’s comparable measure declined by more than 90 percent, according to CSI.
CSI estimated that Arizona would have approximately 154,405 fewer workers and $26.4 billion less in real GDP if the state had followed Colorado’s economic growth trajectory since 2019. That comparison is also a modeled counterfactual rather than a measurement of losses Arizona experienced.
“Arizona’s economic success is not an accident,” Arizona Chamber President and CEO Danny Seiden said. “It reflects years of policy choices that have kept taxes competitive, preserved a flexible labor environment, cut red tape, and given businesses the confidence to invest and hire here.”
“We’re fortunate none of these bills became law. If they had, Arizona’s competitive advantages could have been dramatically undermined. Arizona’s competitive position is strong, but we can’t take it for granted,” he added.
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.
