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Operating Costs

Cost of Living & Taxes

The Tucson region is one of the most affordable markets west of the Mississippi. With a Cost-of-Living Index that is consistently 4% – 5% below the national average, Tucson and Southern Arizona enjoy a high-quality lifestyle that is less expensive than major markets like Phoenix, Portland, Denver and Austin.

City Cost of Living Index
(Nationwide Average = 100)
El Paso, TX 88.7
San Antonio, TX 94.4
Tucson, AZ 95.8
Albuquerque, NM 96.3
Phoenix, AZ 97.1
Las Vegas, NV 97.8
Salt Lake City, UT 99.4
Colorado Springs, CO 99.6
Austin, TX 100
Portland, OR 101.7
Denver, CO 106

Source: U.S Bureau of Economic Analysis via MAP (

Arizona’s tax structure is competitive and business-friendly, and the worker’s compensation and unemployment insurance costs are among the lowest in the United States. With a low flat-rate corporate tax and a decreasing individual tax burden, the metro Tucson region and Southern Arizona gains a competitive advantage over most regions and states in the nation.

Tax Breakdown Arizona Notes
State Income 4.9%
Average Property 2.72%
Local Sales/Use 2.6 – 4.0%
Combined State & Local Sales 8.2 – 9.6%
Wages Subject to Tax $7,000
Minimum Rate 0.03%
Maximum Rate 8.9%
New Employer Rate 2.0%
Corporate Income Tax Rate 4.9% Corporations incur no county or city taxes.
Arizona is also not a unitary tax state.
Corporate Franchise Tax 0% Arizona has no corporate franchise tax
Inventory Tax 0% Arizona has no business inventory tax
Individual Income Tax Rate 2.59% > $0
2.88% > $11,047
3.36% > $27,614
4.24% > $55,226
4.54% > $165,674
Arizona has no individual county or city income tax.

Source:, Sales Tax Clearinghouse, Tax Foundation Calculations; 2019

utility costs

Southern Arizona is served by a number of organizations, both public and private, that provide basic utilities and services to local residents. Utilities are regulated by the Arizona Corporation Commission. Most of the water utilities are regulated by the Arizona Department of Water Resources and their respective elected bodies.

The commercial and industrial electric rates are consistently lower than the national average and businesses of all kinds can profit from these savings. Energy-intensive businesses, such as data centers, especially benefit from Tucson Electric Power (TEP)’s low energy costs and high reliability. Trico Electric Cooperative Inc. is a non-profit electric distribution cooperative serving more than 2,365 square miles, including portions of Pima, Pinal, and Santa Cruz counties.

The chart below shows examples of demand and usage, with corresponding rates and monthly bills. Tucson Electric Power covers, Ft. Huachuca, most of Pima County and all of Santa Cruz County.

500 kW, 180,000 kWh
$/kWh Monthly Bill
US Average $0.1089 $19,607
Tucson Electric Power $0.1117 $20,111


1,000 kW, 200,000 kWh
$/kWh Monthly Bill
US Average $0.1331 $26,618
Tucson Electric Power $0.1511 $30,214


1,000 kW, 650,000 kWh
$/kWh Monthly Bill
US Average $0.0882 $57,329
Tucson Electric Power $0.0785 $51,041


50,000 kW, 32.5 Million kWh
$/kWh Monthly Bill
US Average $0.0833 $2,707,225
Tucson Electric Power (ED Rider Applied) $0.0593 $1,928,576

Source: Edison Electric Institute Annualized Rates Report; TEP; Winter 2019

Southwest Gas

Commercial $9.10
Industrial $6.63
Dollars per Thousand Cubic Feet
Source: US Energy Information Administration, December 2017

Industrial & Commercial Rates – Tucson MSA

Charge Charge per Ccf
Usage Base Rate $2.85 (industrial) $2.88 (commercial)
Tier 1 Summer Surcharge $1.00
Tier 2 Summer Surcharge $0.27
Central Arizona Project (CAP) $0.69
Conservation Fee $0.09

Per 100 cubic feet (Ccf) (1 Ccf = 748 Gallons)

Water conservation

Tucsonans can be justifiably proud of their national leadership in effective use of water. Tucson Water has encouraged water conservation for more than three decades, and as a result Tucson has one of the lowest per capita water usage rates in the southwestern United States. Strengthening our conservation ethic is a key strategy in ensuring our future sustainability.

Wise use of all these water resources requires planning. Tucson Water has developed a Long Range Water Resources Plan which provides a comprehensive look at Tucson’s future water supply requirements. Using the plan as a guideline allows the community to implement projects and programs that will provide adequate water supplies to meet the needs of future generations. The region also has access to Colorado River water, which is imported via the Central Arizona Project. This renewable resource will, over time, largely replace groundwater as Tucson’s primary drinking water supply.

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Susan Dumon | Senior Vice President, Economic Competitiveness

Daniela Gallagher | Vice President, Economic Development

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