Residents from high-tax blue states are primarily moving to Phoenix, Dallas, and Las Vegas, according to recent Census data detailing domestic migration.
More than 83,000 people moved to Arizona from other states from July 1, 2017, to July 1, 2018. Its population growth “is partly due to its low state tax burden,” a recent Kiplinger analysis states, including a low state income tax.
Despite Arizona’s low state tax burden, its sales taxes, property taxes, and taxes on pensions can make relocating to the Grand Canyon State tricky, according to the report.
While Arizona’s state sales tax is 5.6 percent, additional local sales taxes can double that number, with an average combined levy of 8.33 percent, according to the Tax Foundation.
Private pensions are fully taxed at ordinary income tax rates in the state, as are government pensions from other states, Kiplinger says. Military, civil service, and state and local government pensions are taxed slightly less with only the first $2,500 in income being exempt from Arizona state taxes.
Social Security benefits are not taxed. Most other income is taxed, ranging from 2.59 percent for married filers with roughly $20,690 of taxable income to 4.54 percent for married filers with more than $310,317 of taxable income.
In a survey of the 30 largest cities and towns in Arizona, Kiplinger ranked the most expensive by tax burdens according to estimates of what a hypothetical resident would pay in common county and municipal taxes for a $250,000 home.
Sun City residents pay the lowest combined taxes of $2,815, while Marana residents pay the highest of $4,652.
Arizona’s largest city of Phoenix ranked 14th lowest, with an overall tax burden of $3,604.
Its second largest city, Tucson, fared worse, posting the second-largest tax burden of $4,625. Having the third-highest average property tax rate is the driving force behind the city's overall high local tax burden, the report notes. The 2017 average property tax rate in Tucson was $1,016 per $100,000 in home value, or $2,540 for a home worth $250,000.
They also pay the highest combined highest utility and communications taxes of 13.2 percent in the state.
Conversely, Scottsdale has the second-lowest combined tax burden and the third-lowest property tax rate among the 30 cities and towns analyzed. In 2017, the average property tax rate in the city was $540 per $100,000 in home value, or $1,350 for a home worth $250,000. Its combined general ssales tax is also below average at roughly 8 percent.
Between 2010 and mid-2018, Arizona’s population grew by 12.2 percent; 37 percent of new residents cited retirement as the reason for relocating to the state.
Domestic migration to New York City, Los Angeles, and Chicago has been negative for most of the 21st century, the Census report notes. In 2018, roughly 277 people left New York City every day, 201 people left Los Angeles every day and 161 residents left Chicago every day.