The table below compares Arizona to its neighbor states on ten indicators of economic strength. Three of the rankings assess economic freedom, three assess the state’s business climate, three assess the state’s tax climate and one examines the cost of living.
The first thing to notice is that on average, Arizona outranks only New Mexico and California. Considering that both of these states achieve a rock-bottom ranking in at least one of the measures, it’s not much of an achievement for Arizona to beat out only those two.
Second, while Arizona achieves only one top-10 ranking, Utah and Texas achieve six and seven top-10 rankings, respectively. With regard to economic policy, Arizona has firmly established itself in mediocre territory.
Problem is, Arizona can’t afford to be mediocre. The state has just two percent of the nation’s population, we’re in a desert a very long way from ports, and even farther from the 60 percent of the nation that lives east of the Mississippi.
Arizona can improve its rankings and more importantly, its economy, by making some fundamental changes, including reducing the per-capita cost of government, which is higher in Arizona than in Texas. Arizona needs to simplify its sales and property tax systems – among the most complex in the nation. Arizona could jump ahead of Texas by reforming the sales tax and eliminating the corporate and personal income taxes. Arizona also needs to revise its regulations to make them more sensible.
The days of construction booms are over. Prosperity despite poor policy is a thing of the past. With California in an economic free fall, Arizona has a real opportunity to rise. But, if we don’t want to continue to lose out to Texas, Colorado, and Utah, we must address our economic policies now. There is no time to wait.
Goldwater Institute: Lessons from Texas on Building an Economically Healthier Arizona
Missouri Economic Research and Data Center: Cost of Living Data Series
Tax Foundation: 2013 State Business Tax Climate Index