Arizona to Implement 2.5% Flat Tax in 2023


October 20, 2022

On September 29, 2022, Governor Doug Ducey announced that Arizona’s new 2.5% flat income tax rate will be implemented a full year ahead of schedule. Effective January 1, 2023, Arizona will have the lowest flat tax rate in the nation.

The flat tax, which was authorized as part of the 2022 fiscal year budget, was initially intended to be implemented gradually over three years, with a starting date of January 1, 2024. However, a joint memo prepared by the Governor’s Office of Strategic Planning and Budgeting and the Joint Legislative Budget Committee determined that Arizona’s General Fund revenues exceed the statutory levels needed to immediately implement the flat tax.

In a letter to Arizona Department of Revenue Director Robert Woods, Governor Ducey credits the accelerated adoption of the flat tax to Arizona’s “thriving economy” and “unprecedented economic growth.”

For more details, read the full news release from the Office of the Governor.