Arizona moved to a flat 2.5% individual income tax rate for tax years beginning in 2023 — one of the lowest flat income tax rates in the United States. Combined with a statewide average effective property tax rate of about 0.48% (Tax Foundation, 2024 Census data), Arizona offers a low-income-tax, low-property-tax combination. States with no tax on wages (such as Texas and Florida) beat Arizona on income tax, but Texas’s average effective property tax rate (about 1.40%) is far higher than Arizona’s.
Phoenix, Arizona’s capital and the center of Maricopa County, is a popular destination for people leaving California. For a single filer earning $100,000 in wages, the state income tax saving of a California-to-Arizona move is about $2,810 per year (2026, standard deduction).
Arizona's income tax overhaul was one of the most significant state tax reductions in the US in recent years. Before 2021, Arizona had a graduated income tax topping at 4.5%. In November 2020, Arizona voters passed Proposition 208 (the Invest in Education surcharge), which would have added a 3.5% surcharge on incomes over $250,000 — taking the top rate to 8%. However, after a 2021 Arizona Supreme Court ruling sent the case back to the trial court, a Maricopa County Superior Court judge declared Prop 208 unconstitutional in March 2022.
Simultaneously, in 2022, Arizona voters approved Proposition 132, which requires a supermajority of 60% for any future ballot measure imposing a new tax — making tax increases through ballot initiative significantly harder. The Arizona legislature also passed a flat tax consolidation: all taxpayers pay a flat 2.5% rate starting January 1, 2023. For comparison: California's top rate is 13.3%, New York's is 10.9%, Colorado is 4.4%, Utah is 4.45%, and Indiana is 2.95%. Arizona's 2.5% is exceptional. At $100,000 of wages (single filer, 2026, standard deduction), Arizona income tax is about $2,098 — versus about $4,911 in California or $4,861 in New York State (state tax only).
Arizona’s property tax system caps how fast a home’s taxable Limited Property Value (LPV) can rise: no more than 5% above the prior year’s LPV, and never above Full Cash Value (Proposition 117). Residential property is then assessed at 10% of LPV to determine the taxable assessed value. This dual system (a 5% annual cap on LPV plus a 10% assessment ratio) helps keep effective rates low.
For a $500,000 Phoenix home, the Tax Foundation’s statewide average effective rate of about 0.48% implies roughly $2,400 per year — compared with about $7,000 at Texas’s 1.40% average or about $9,400 at Illinois’s 1.88% average. Actual bills vary by school district and special districts.
Arizona's consumption tax is called the Transaction Privilege Tax (TPT) rather than a sales tax — a technical distinction that matters. The TPT is legally a tax on the privilege of doing business in Arizona, imposed on the seller rather than the buyer (unlike most states' sales taxes). In practice, sellers pass the cost to buyers, making it function identically to a sales tax. Arizona's state TPT rate is 5.6% — lower than most surrounding states. Maricopa County and the City of Phoenix add their own rates, bringing the combined rate to approximately 8.6%.
Arizona exempts food for home consumption (groceries) from the state TPT, and prescription drugs are exempt. The TPT's business-level imposition means remote sellers and marketplace facilitators also collect it. Arizona's 5.6% state TPT rate is lower than California (7.25%), Illinois (6.25%), or Washington (6.5%) — another dimension of Arizona's tax competitiveness.
The California-to-Arizona migration is the dominant demographic and economic story of the Phoenix metropolitan area. The state income tax math for a single filer (wages only, 2026, standard deduction) is:
| Income Level | California Tax | Arizona Tax | Annual Saving |
|---|---|---|---|
| $75,000 | ~$2,665 | ~$1,473 | ~$1,192 |
| $100,000 | ~$4,911 | ~$2,098 | ~$2,813 |
| $150,000 | ~$9,561 | ~$3,348 | ~$6,213 |
| $250,000 | ~$18,861 | ~$5,848 | ~$13,013 |
| $500,000 | ~$43,700 | ~$12,098 | ~$31,602 |
At $150,000 of income, a California-to-Phoenix mover saves approximately $6,213 per year in state income tax alone (single filer, wages only). Housing costs, property taxes and sales taxes also differ and are not included in this table.
For a single professional earning $150,000 in wages (2026, standard deduction) and owning a $500,000 home:
| Tax Type | Phoenix, AZ | Los Angeles, CA | New York City |
|---|---|---|---|
| State income tax | ~$3,348 | ~$9,561 | ~$8,291 |
| City income tax | $0 | $0 | NYC resident income tax also applies (3.078%–3.876%) |
| Property tax ($500K home at statewide average effective rate) | ~$2,400 (0.48%) | ~$3,500 (0.70%) | ~$6,500 (1.30%, NY statewide) |
Federal income tax is the same in all three. On state income tax alone, Phoenix is about $6,213 less than California and about $4,943 less than New York State (before NYC tax). Property tax figures use Tax Foundation statewide average effective rates; new California buyers are assessed at purchase price and typically pay more than the 0.70% average, and NYC rates differ from the New York statewide average. Sales tax, which depends on spending, is not included.
CountryTaxCalc.com is reader-supported. When you use our partner links, we may earn a commission at no cost to you. This helps us provide free tax calculators and comparison tools.Learn more about our affiliate partnerships
★ 4.8verified reviews · 3,758 reviews
Multi-jurisdiction tax situations — city tax on top of state on top of federal — can be complex to file correctly. Taxhub matches you with a CPA who specialises in your specific state and city. Fixed pricing, reviewed CPAs, no surprises.
âš Not for simple single-state returns. Free filing is fine for straightforward W-2 situations.
Get Matched with a Local CPA →Interested in reaching this audience? Advertise on CountryTaxCalc →