AZ Governor Doug Ducey announced that the state’s surging economy had unlocked its historic flat tax package – to be fully enacted in 2023 – a whole year ahead of schedule.
Key Highlights:
- Massive Arizona income tax cut going into full effect a year before the original date.
- A 1987 tax cut stands in contrast to Arizona’s flat tax package
- The US inflation rate keeps soaring to all-time highs.
- Governor Ducey maintains his annual moves in cutting/reducing tax rates.
The announcement was included in the Governor’s letter to Robert Woods, Arizona Department of Revenue Director. According to details of the letter, Governor Ducey directs the department to implement the next phase of Arizona’s 2.5 percent flat tax for the tax year 2023 instead of 2024 as originally anticipated.
According to Governor Ducey, “It’s time to deliver lasting tax relief to Arizona families and small businesses so they can keep more of their hard-earned money. This tax relief keeps Arizona competitive and preserves our reputation as a jobs magnet and generator of opportunity.”
What Does This Mean For People Living and Working In Arizona?
Firstly, Governor Ducey signed the flat tax package last year, aimed at reducing and streamlining taxes for Arizonans while not affecting small businesses even in the wake of a 77% tax increase. The flat rate of 2.5 percent was initially scheduled to run across three years.
With this news, more people and businesses are most likely to move to Arizona to benefit from the new economic law about to swing into action. The pitch from the Governor was quite enticing – shrinking Arizona’s tax code from five rates to two and cutting taxes for virtually everyone while also making it possible for an Arizona tax return to fit on one page.
Arizona will have the lowest flat tax nationwide when the flat rate becomes active on January 1, 2023. This also means that the average taxpayer will receive about a 13% income tax reduction, which could save them up to $350 a year.
It appears everyone is comfortable with the new move from Gov. Doug Ducey, but a similar scenario – although contrast to the current law – happened about 35 years ago – in 1987. The AZ tax rate correction bill in 1987 had great impacts on the state’s economy.
What Was The Original Plan?
The original plan as of when the flat tax rate was signed in 2021 was to span the process across three years. In 2021, the tax rate on small business taxable income was a flat 3.5%, and the marginal individual rate was at 4.5%. The rate was reduced to 3 percent in 2022 and was scheduled to reduce further to 2.8 percent for tax years 2023-2024 before hitting 2.5 percent in the tax year 2025. But right now, everything is taking a new turn, and a majority of people are in support of the new swing.
