Tale Of Two States’ Policies: Comparing Arizona and Colorado Economies

Arizona and Colorado had similar policy decisions in recent years but diverged on a number of them. A new report says the Copper State’s pro-growth moves have resulted in outsized economic growth compared to its northern neighbor.

Partnered with the Arizona Chamber, the Common Sense Institute of Arizona used research from partners in Colorado to estimate the potential impacts on Arizona’s economic prospects of enacting some of the policy ideas within the “job killer” bills, according to the CSI Arizona report.

CSI’s report analyzed 67 bills and found that if enacted, they would create an additional $25 billion in costs for businesses, resulting in a $9.5 billion decrease in Arizona’s economy.

“Bills like those studied here are being shopped at state legislatures across the country, and many of them have been introduced annually at the Arizona Legislature,” according to the report. “Though they have not moved in the past, the lesson of Colorado’s anti-business policy transformation over the past half decade shows that climates can change quickly.”

Five years ago, Arizona and Colorado were on similar growth trajectories. In 1990, Arizona had 3.7 million residents and Colorado was 10% smaller. By 2015, Arizona’s population had increased 86% and Colorado’s by a comparable 65%.

One difference in the past few years between Arizona and Colorado is the policies.

“Arizona has aggressively invested in policy initiatives post-Great Recession intended to both diversify and make more competitive its business economy (and in particular its manufacturing economy),” according to the report. “The beginnings of this can be traced to the state’s passage in 2011 of its ‘Jobs Bill,’ which established the Commerce Authority and lowered business property and income tax rates.”

But Colorado went in a different direction. 

“While the state conformed to the federal tax law changes in 2017, beginning in 2019, it has been enacting various statutory and regulatory schemes intended to promote social welfare ahead of economic growth,” according to the report.

Colorado’s manufacturing sector is now running at an average annual job growth rate of just 0.7%/year.

According to the report, if Arizona had grown more like Colorado since 2019, there would be 113,500 fewer workers, 3.5% of the state’s workforce.

“Policy matters as seen in Arizona’s success compared to Colorado’s shortcomings. In the Grand Canyon State, our leaders have trusted people over government,” Rep. Matt Gress, a Phoenix Republican who previously served as former Gov. Doug Ducey’s budget director, told The Center Square. “The report released today by the Common Sense Institute Arizona reveals that some Arizona politicians think they know better than Arizonans by proposing terrible ideas like tax hikes of all sorts, higher energy costs to cover environmental regulations, and greater compliance with an administrative state that knows no bounds.”

In Colorado and since 2019, at least 13 bills similar to “job killer” bills identified this year by the Arizona Chamber have been enacted. More are under active consideration and each year similar bills are re-introduced.

“Arizona has seen extraordinary economic growth over the last ten years,” Executive Director of CSI Arizona Katie Ratlief said in a tweet. “Our economy has diversified and matured, and we’ve been one of the fastest growing states in the country.”

CSI estimates that some of the bills introduced would have a total tax increase of more than $15 billion.

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The article was published by The Center Square and is reproduced with permission.