The Tax Foundation

Tax Data

Arizona

The Facts on Arizona’s Tax Climate

Here are some basic facts on Arizona’s tax system and how it compares to other states:

Tax Freedom Day Arrives on April 20 in Arizona
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2008, Arizona taxpayers had to work until April 20 (ranked 20th nationally) to pay their total tax bill, three days earlier than national Tax Freedom Day (April 23). The Tax Freedom Days of neighboring states were: California, April 30 (ranked 4th nationally); Nevada, April 26 (ranked 11th nationally); Utah, April 21 (ranked 17th nationally); Colorado, April 23 (ranked 15th nationally); and New Mexico, April 12 (ranked 42nd nationally).

Tax Freedom Day has been projected using the most up-to-date economic and budget projections from official government agencies. However, Tax Foundation estimates of average state and local tax rates for 2008 will not be released until later this spring as we await more up-to-date data from various government agencies.
Full study of Tax Freedom Day, nationwide and in each state

Arizona's State/Local Tax Burden Below National Average in 2007
In 1990, Arizona had one of the nation’s highest tax burdens with taxes as a percentage of state income registering at 11.7%--5th highest nationally. Since then, the tax burden has significantly fallen due to tax cuts and the fact that individual incomes have risen faster than state-local tax collections. Recently the decline has leveled off. Estimated now at 10.3% of income and ranked 31st highest, Arizona’s state-local tax burden percentage is below the national average of 11.0%. Arizona taxpayers pay $3,603 per capita in state and local taxes, and per capita state income is $34,836.

Arizona's State-Local Tax Burden, 1970-present

Arizona’s 2008 Business Tax Climate Ranks 25th
Arizona ranks 25th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states were as follows: California (47th), Nevada (3rd), Utah (17th), Colorado (13th) and New Mexico (23rd).
50-State Comparison of Business Tax Climates (data only)
2008 State Business Tax Climate Index, Fifth Edition (full study)

Arizona Individual Income Tax System
Arizona's personal income tax system consists of five brackets and a top rate of 4.54% kicking in at an income level of $150,000. That top rate ranks 39th highest among states levying an individual income tax. In 2005, Arizona's individual income tax collections were $478 per person, which ranked 39th highest nationally.
50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Arizona’s Corporate Income Tax System
Arizona's corporate tax structure consists of a flat rate of 6.968% on all corporate income. That rate ranks 26th highest among states levying corporate income taxes. In 2006 state-level corporate tax collections (excluding local taxes) were $144.33 per capita, which ranked 25th highest nationally.
50-State Table of Corporate Income Tax Rates, 2000-2008
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household, 2005
50-State Table of State Corporate Income Tax Collections Per Capita, 2006

Arizona Levies Sales Tax Slightly above National Median; Cigarette Tax is Comparatively High
Arizona levies a 5.6% general sales or use tax on consumers, which is slightly above the national median of 5.4%. In 2005, general sales tax collections for state and local governments in Arizona were $1,470 per person, which ranked 11th highest nationally. Arizona's gasoline tax stands at 19.0 cents per gallon (ranked 41st highest nationally), while its cigarette tax stands at $2.00 per pack of twenty (4th highest nationally). The sales tax was adopted in 1933, the gasoline tax in 1921 and the cigarette tax in 1935.
50-State Table of Sales and Excise Tax Rates
50-State Table of State and Local General Sales and Gross Receipts Tax Collections Per Household and Per Capita, Fiscal Year 2005

Arizona Property Taxes: Comparatively Modest
Arizona is one of the 37 states that collect property taxes at both the state and local levels. As in most states, local governments collect far more. Arizona's localities collected $4,521,563,000 in property taxes in fiscal year 2004, the latest year for which the Census Bureau has published state-by-state data. At the state level, Arizona collected $346,427,000 in property taxes during FY 2004, making its combined state/local property tax collections $4,867,990,000. That brings its per capita collection to $848 (ranked 35th nationally).
State property tax collections per capita by state

Federal Tax Burdens and Expenditures: Arizona is a Beneficiary State
Arizona taxpayers receive more federal funding per dollar of federal taxes paid than the average state. Per dollar of Federal tax collected in 2005, Arizona citizens received approximately $1.19 in the way of federal spending. This ranks the state 21st highest among all states, the same ranking as in 1995 when Arizona received $1.13 per dollar of taxes in federal spending. Neighboring states and the amount of federal spending they received per dollar of federal taxes paid were: California ($0.78), Nevada ($0.65), Utah ($1.07), Colorado ($0.81), and New Mexico ($2.03).
Comparing the amount of federal taxes sent to Washington with the amount of federal spending coming back to the state

Tax Data from The Tax Foundation