Arizona manufacturers’ directly and indirectly sold $77.6 billion worth of goods and services in 2022, up nearly 40% from 2017, according to a new report by the Common Sense Institute Arizona (CSI), a nonpartisan research institute employing precise econometric analyses to bridge the gap between economic development and public policy.
At approximately 9% of the state GDP and 6% of total employment, manufacturing in Arizona continues to grow rapidly as the state experiences unprecedented growth. In fact, while Arizona’s manufacturing boom occurred earlier in the 2010 decade, the report finds that the passage of the Tax Cut and Jobs Act in 2017 sent an already-burgeoning sector into overdrive.
“Policy is of paramount importance, especially when it comes to the manufacturing sector,” said Steve Macias, CSI Board Member and CEO of Pivot Manufacturing. “Our industry has a significant impact on the Arizona economy, with indirect and induced effects that far exceed what you might expect. It’s no secret that we punch above our weight, and that’s why we need to pay close attention to the policies that govern our operations.”
Moreover, Arizona’s manufacturing sector has undergone substantial foundational reforms since 2011 to improve its competitive position for investment and job creation.
This began with the passage of the “jobs bill,” HB 2001, which created the Arizona Commerce Authority, reduced corporate income and business property taxes, and most importantly, established a single-weight formula for calculating state income tax liability based only on sales within the state.
Subsequently, Arizona has benefited from a 2013 law that reimburses up to 80% of public infrastructure costs for large manufacturing facilities, the 2017 federal Tax Cuts & Jobs Act, the state’s 2019 conformity with the federal law, and its recent adoption of a single-rate income tax and instant depreciation of new business investments in machinery and equipment for property tax purposes.
Other key findings include:
- 6%: Average annual manufacturing job growth since 2017. For perspective, manufacturing job growth over the 6-years prior was just 1.5%, and overall Arizona annual job growth since 2017 was 2.3%.
- 633,565: Number of people directly and indirectly employed by Arizona’s manufacturing sector, or 16% of the state’s total workforce. This is particularly remarkable given the sector directly employs about 6% of the workforce.
- 4%: Share of Arizona’s economy directly and indirectly attributable to its manufacturing sector.
- $5.8 billion: Combined state and local revenue collections in 2022 that CSI estimates were attributable to the state’s manufacturing sector.
“The impact of the industry on our economy is clear, with impressive job growth and revenue collections. It is important for policymakers to continue supporting the growth of the sector by creating a business-friendly environment through tax policies and infrastructure investments,” said CSI Executive Director Katie Ratlief.
