Arizona ranks second in the nation for the highest average combined state and local retail sales taxes, according to the Washington based Tax Foundation. The five states with the highest average combined rates are Tennessee (9.44 percent), Arizona (9.16 percent), Louisiana (8.87 percent), Washington (8.86 percent), and Oklahoma (8.67 percent).
The five states with the lowest average combined rates are Alaska (1.69 percent), Hawaii (4.35 percent), Maine (5 percent), Virginia (5 percent), and Wyoming (5.34 percent).
The highest total sales tax rate in the United States is in Tuba City, Arizona, which has a combined rate of 13.725 percent. This rate is composed of a 6.6 percent state tax, a 1.125 percent Coconino county tax, and an additional 6 percent tribal tax levied by the To’Nanees’Dizi local government.
The Tax Foundation says that sales taxes are just one part of an overall tax structure and should be considered in context. For example, Washington State has high sales taxes but no income tax; Oregon has no sales tax but high income taxes. While many factors influence business location and investment decisions, sales taxes are something within policymakers’ control that can have immediate impacts.
Arizona has both an income tax and sales taxes.
Arizona’s personal income tax system consists of five brackets and a top rate of 4.54% kicking in at an income level of $150,000. That top rate ranks 41st highest among states levying an individual income tax. In 2009, Arizona’s state-level individual income tax collections were $379 per person, which ranked 41st highest nationally.
Arizona ranks 25th in the Tax Foundation’s State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states are as follows: California (48th), Nevada (3rd), Utah (10th), Colorado (18th), and New Mexico (38th).