Arizona hits revenue threshold to implement 2.5% flat income tax a year early

PHOENIX – Arizona’s flat income tax rate of 2.5% will kick in for the 2023 tax year thanks to a healthy economy, the state announced Thursday.

The single-rate system was scheduled to be implemented no later than the 2024 tax year, but it will start a year earlier because the state’s general fund revenue surpassed a statutory threshold.

The phased-in flat tax plan was part of the 2021 state budget. The plan will cut income taxes by 13% for the average taxpayer, about $340 per year, according to the Governor’s Office.