Arizona is one of the top states in the country when it comes to tax friendliness, according to a recent report from Kiplinger.
Tax-friendliness, in this case, considers the impact of state and local taxes on the individual resident. Arizona placed ninth in the survey.
“Arizona's top income tax rate of 4.5% doesn't kick in until taxable income exceeds $159,000 for single filers or $318,000 for married couples filing jointly," Kiplinger says in its report. "That's not a very high top rate to begin with, and having a fairly high threshold for that rate means that relatively few people will be taxed at the state's highest rate.”
Kiplinger is a Washington, D.C.-based publisher of business forecasts and personal finance advice.
Gov. Doug Ducey touted the state's tax friendliness in a news release.
“In Arizona, we believe in keeping taxes simple and fair – while allowing hardworking taxpayers to keep more of the dollars they earn,” Ducey said.
Arizona taxpayers can expect to keep even more of their money in 2020, when changes are enacted to the state tax code to have it more closely align with the Tax Cuts and Jobs Act. These changes are estimated to mean a tax savings of $135 a year per wage earner.
The Kiplinger report found that sales taxes in Arizona "lean high, though, and some cities tax groceries.” Sales taxes vary based on location. With the “5.6% state levy. Localities can add as much as 5.6% to that, but the average combined levy is 8.39%.”
By comparison, North Dakota, which is ranked just ahead of Arizona, has an average state and local sales tax rate of 6.85 percent.
“With a booming economy and hundreds of new residents every day, we’ve also been able to invest significantly in the things that matter — like K-12 public education, public safety and infrastructure," Ducey said. "This is a winning game plan, and we will continue to keep our state attractive for residents and businesses alike.” Gov. Ducey added.
While residents may be enjoying lower tax rates and an overall top-ten tax structure, some question how that materially translates into sustainable growth.
“Lower taxes, which Arizona does have, also correlates with lower services – consequently low tax strategies have not led to improvement in incomes," Dave Wells, research director at the Grand Canyon Institute, said. "Arizona is well situated relative to California and has attractive weather much of the year – these are likely much greater factors than low business taxes.”