Water and its cost is a problem everywhere in the West, but I’m finding it costs about one-third as much in AZ as in CA. Reason is that the main source–the Colorado River–with its water rights set over a century ago, treated AZ more generously on a per capita basis than CA.
As far as cost of living and operating a business there is a huge difference, and not just taxes and government regulations. New and used homes are 1/4 to 1/2 the price of houses within 20 miles of our coast. So workers are willing and able to work for far less than in CA and still raise a family in their SFR.