This year, Arizona policymakers have a chance to do something that no other state with an income tax has done: eliminate the tax on capital gains. Arizona, like most states with an income tax, treats capital gains as “ordinary” income and taxes it at the same rate as all other income. Taxation of capital gains is, among other things, a tax on entrepreneurship. Businesses – new businesses especially – need investment to flourish. States that have lowered their taxes on capital gains have seen an increase in investment which precipitated an increase in entrepreneurial activity and the job creation that accompanies it. State policymakers can set the stage to make Arizona a national hub for new investment. The best way to do this is to immediately eliminate taxation of capital gains or phase it out as quickly as possible.