Arizona implemented a significant tax reform in 2023, transitioning from a two-bracket graduated-rate system to a flat 2.5% rate, making it the lowest individual income tax state. The Small Business Income Tax (SBI) rate also decreased from 3.0% in 2022 to 2.5% in 2023, potentially leading to financial savings for small businesses and promoting investment in operations and growth. State budget deficit predicted due to flat income tax. House introduces AFJA, extending Trump's Tax Cuts and Jobs Act, benefiting small businesses with immediate capital expense expensing and pass-through deductions. The Inflation Reduction Act of 2022 and House Bill 1783 are implementing tax credits and incentives to support Arizona businesses and innovation. Arizona's flat tax rate changes, aimed at benefiting small businesses, have raised concerns about revenue reduction and public spending, potentially limiting essential services.