In Fiscal Year (FY) 2016, Arizona collected $24.4 billion in state and local taxes—or $3,536 for every man, woman, and child. While this is an impressive sum of money, it tells us little about whether or not the average Arizona taxpayer can afford this level of taxation?
To better answer this question, this analysis will calculate Arizona’s tax burden relative to the private sector. Ultimately, it is the private sector that creates new wealth and income. A high tax burden means a state is hobbling its private sector relative to other states and reducing their long-run economic growth potential.
Fortunately for taxpayers, as shown in Chart 1, Arizona’s state and local tax burden (tax collections divided by private sector personal income) was the sixteenth lowest in the nation for FY 2016 at 13.1 percent—or -8 percent below the national average of 14.3 percent.
As shown in Chart 2, Arizona’s tax burden has increased over time by a modest 9 percent to 13.1 percent in FY 2016 from 12 percent in FY 1950.
Arizona’s lower than average state and local tax burden is driven by a low individual income tax burden (2.1 percent, 11th lowest), corporate income tax burden (0.3 percent, 15th lowest), property tax burden (3.8 percent, 21st lowest) and all other taxes (1.4 percent, 6th lowest). However, Arizona does have a very high sales tax burden (5.1 percent, 8th highest) partially offsetting the other lower tax burdens.
To put Arizona’s tax burden into perspective, let’s compare it to size of major industries in the state (as a percent of private sector income). As shown in Chart 3, Arizona’s 13.1 percent tax burden is greater than these combined industries: manufacturing (8.1 percent), educational services (1.7 percent), arts, entertainment, and recreation (1.2 percent), and utilities (0.9 percent).
Of course, as shown in Chart 4, the tax burdens for local government can vary just as much as they do among the 50 states. As such, we have also calculated the local government tax burden for every county in Arizona—this includes every taxing jurisdiction within the geographic county borders whether it is a city, a special district, or county government itself.
Arizona only has 15 counties and are listed below from highest to lowest local government tax burden:
Finally, don’t forget to watch our exclusive time-lapse video of state and local tax burdens over the last 66 years! See if your state has been above or below the national average?
Scott has nearly 20 years of experience as a public policy economist. He is the author, co-author and editor of over 180 studies and books. His professional experience also includes positions at the American Conservative Union Foundation, Granite Institute, Federalism In Action, Maine Heritage Policy Center, Tax Foundation, and Heritage Foundation.