Alabama

The Facts on Alabama's Tax Climate

Here are some basic facts on Alabama's tax system and how it compares to other states:

Tax Freedom Day Arrives on April 2 in Alabama
Tax Freedom Day is the day when Americans finally have earned enough money to pay off their total tax bill for the year. In 2011, Alabama taxpayers work until April 2 (ranked 43rd highest nationally), celebrating tax freedom a ten days before national Tax Freedom Day (April 12). Tax Freedom Days of neighboring states were: Tennessee, March 27 (ranked 49th nationally); Georgia, April 3 (ranked 37th nationally); Florida, April 11 (ranked 16th nationally); and Mississippi, March 26 (ranked 50th nationally).
Full study of Tax Freedom Day, nationwide and in each state

Alabama's State and Local Tax Burden Below National Average
During the past three decades, Alabama's state and local tax burden has been consistently below average. Alabama's 2009 tax burden of 8.5% of income is below the national average of 9.8%. Alabama's tax burden has decreased overall from 9.0% (39th nationally) in 1977 to 8.5% (40th nationally) in 2009. Alabama taxpayers pay $2,967 per capita in state and local taxes.

Alabama's State-Local Tax Burden, 1977-present
Other States' State/Local Tax Burdens
Map of U.S. Showing all State's Burdens and Ranks
Historical Chart Comparing All States' State/Local Tax Burdens from 1977 to 2009

Alabama's 2012 Business Tax Climate Ranks 20th

Alabama ranks 20th in the Tax Foundation's State Business Tax Climate Index. The Index compares the states in five areas of taxation that impact business: corporate taxes; individual income taxes; sales taxes; unemployment insurance taxes; and taxes on property, including residential and commercial property. The ranks of neighboring states are as follows: Tennessee (14th), Georgia (34th), Florida (5th) and Mississippi (17th).

50-State Comparison of Business Tax Climates (data only)
2012 State Business Tax Climate Index, Ninth Edition (full study)

Alabama's Individual Income Tax SystemAlabama's personal income tax system consists of three separate brackets with a top rate of 5% kicking in at an income level of $3,000. That top rate ranks 31st highest among states levying an individual income tax. Alabama's 2009 state-level individual income tax collections were $567 per person, which ranked 37th highest nationally. 

50-State Table of Individual Income Tax Rates
50-State Table of State Individual Income Tax Collections
50-State Table of State and Local Individual Income Tax Collections Per Capita

Alabama's Corporate Income Tax System
Alabama's corporate tax structure consists of a flat rate of 6.5% on all corporate income. Among states levying corporate income taxes, Alabama's rate ranks 29th highest nationally. In FY2009, state-level corporate tax collections (excluding local taxes) were $105 per capita, which ranked 26th highest among states that tax corporate income.
50-State Table of Corporate Income Tax Rates
50-State Table of State and Local Corporate Income Tax Collections Per Capita and Per Household
50-State Table of State Corporate Income Tax Collections Per Capita

Alabama Sales and Excise Taxes
Alabama levies a 4% general sales or use tax on consumers, which is below the national median of 5.85%, but localities are permitted to levy their own high sales taxes. 2007 combined state and local general and selective sales tax collections were $1,391 per person, which ranked 23rd highest nationally. Alabama's gasoline tax stands at $0.209 per gallon (35th nationally), while its cigarette tax stands at $0.425 per pack of twenty (45th nationally). Additionally, municipalities in Alabama have the authority to levy their own "local option" taxes on gasoline. The sales tax was adopted in 1936, the gasoline tax in 1923 and the cigarette tax in 1935.
50-state table of sales, cigarette, gas, beer, wine, and spirits tax rates.
50-State Table of State and Local General and Selective Sales Tax Collections Per Capita

Alabama Property Tax Collections Lowest in Nation
Alabama collects very little in property taxes compared to most other states. Alabama's localities collected $367.47 per capita in fiscal year 2006, the latest year for which the Census Bureau has released state-by-state data. The state government collected $54.63 per capita in property taxes, meaning Alabama's combined state and local property tax collection figure was $422.10 per capita in FY 2006-the lowest property tax collections in the nation.
State property tax collections per capita by state

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