New Year, New Tax Rate: Goldwater’s Flat Tax Reform Takes Effect to Kick Off 2023

While Washington lawmakers search for ways to hike taxes on hardworking Americans so they can increase spending by trillions of dollars, Arizona is providing a blueprint for economic growth and opportunity.

Case in point: As Goldwater Institute Director of Government Affairs Jenna Bentley told 12 News KPNX in Phoenix, Arizona’s historic tax relief law, which the Goldwater Institute helped write and pass last year to establish the nation’s lowest flat tax rate, took effect on Jan. 1, 2023—not 2024 as originally expected. It’s policies like that which have led Arizona to be one of just five states to receive an “A” grade in the Cato Institute’s recent Fiscal Policy Report Card.

“This is going to be significant for Arizona families,” Bentley said. Prior to Jan. 1, “Arizona’s income tax [was] based on a tiered system. So depending on how much you make, that can put you into a higher tax bracket,” she added. “Essentially, what this is doing, is collapsing all of those and lowering them into a 2.5 percent flat tax income rate that everyone pays.”

With inflation continuing to soar and a recession looming, the last thing Americans need is the government taking more of their hard-earned money. It’s always good policy to keep taxes low and uncomplicated, but it’s all the more critical in these uncertain times. That’s why the Goldwater Institute is proud to have simplified the state’s tax laws and reduced the burden on Arizona’s taxpayers by implementing the 2.5 percent flat tax rate.

The new rate took effect at the start of 2023 rather than 2024 due to record revenue pouring into the state’s General Fund—the result of a thriving economy.

It’s no surprise that Arizona’s economy is humming—that Americans are moving to the state in droves. In too many states, it’s the same old story: high unemployment, overregulation, crippling taxation, and an overall economic climate made worse by the heavy hand of government. But it’s a different story in Arizona, which has adopted the Goldwater Institute’s vision of getting the government out of the way.

In addition to cutting taxes, the Goldwater Institute defeated the largest tax hike in Arizona history, Proposition 208, which would have killed more than 100,000 jobs. The Goldwater Institute has also helped thousands of Arizonans exercise their right to earn a living by enacting a first-in-the-nation 2019 reform that tears down barriers to employment for workers moving to Arizona from out of state. Low taxes and low regulation are a recipe for economic growth, and with the Goldwater Institute’s help, Arizona is providing a national model for how to build and maintain a strong economy.

And the best is yet to come. In fact, according to the American Legislative Exchange Council’s (ALEC) 2022 “Rich States, Poor States” report Arizona ranks third among all 50 states in economic outlook, thanks in large part to the flat tax law. And that ranking came out before the announcement that the tax relief package would take effect a year earlier than expected.

“It was a savings for hard-working Arizona taxpayers,” ALEC Chief Economist Jonathan Williams told The Center Square. “Arizona’s move to reduce taxes substantially really cements its position as a competitive state not only regionally, but nationally.”

The Goldwater Institute has worked to restore Arizona’s competitive advantage as a low-tax state so that businesses owners, employees, and entrepreneurs can thrive. The Institute is committed to keeping Arizona open for business and ensuring taxpayers can keep more of their hard-earned money—and we will never back down in the fight for economic liberty.