Archibald: Why Alabama's taxes are unfair (2024)

This is an opinion column.

There’s a line, in a December report by the Public Affairs Research Council of Alabama at Samford University, that I just can’t shake:

“If Alabama collected taxes at Mississippi’s rate, the state would have an additional $1.5 billion to fund education, health care, highways, public safety, and the wide spectrum of state and local services provided.”

Wow.

That’s $1.5 billion, with a B. For prisons or prevention or investment or security. That’s $1.5 billion, to move us down a highway or better prepare our kids for a changing world. All if we simply collected taxes at rates comparable to Mississippi, which is not, if you thought otherwise, a bastion of liberal tax policy.

It’s remarkable. As the report’s author, senior research associate Tom Spencer wrote, Alabama – which ranks 50th in the U.S. in per capita state and local property tax collections – would raise an extra $2 billion a year if its per capita tax collections matched other Southeastern states.

Imagine. If we raised the income a state needs to survive, we might just be able to pay for the things we need to become a competitor in the fields of commerce, education, quality of life and common decency.

Alabama gets a double whammy, as the report points out. Its tax rates are lower than most states and its base of wealth is smaller. So it gathers less cash – especially from those with wealth to actually pay tax – and fails to invest in the people and infrastructure that other states have used to -- you know -- build a base of wealth.

But as long as we’re imagining, imagine if we collected taxes fairly. Alabama wears its low-tax status as a badge of honor. But it’s a bait-and-switch. The less you earn, the bigger chunk of your income you pay. The more you have, the more you get to keep.

It ought to be Alabama’s motto: Why pay taxes when you can pass them along to somebody less fortunate?

Here is why Alabama’s taxes are unfair.

Alabama’s low property taxes are in large part a product of the state’s tough-to-change constitution. As a result of that, state and local governments can’t raise the money they need. So they turn instead to tax measures that are easier to pass.

They raise sales taxes, and sin taxes. As a result Alabama has one of the highest sales tax rates in the country. Since Alabama is one of just three states that charges sales tax on groceries, low income families pay a far bigger chunk of their income on sales taxes, just to feed their families. Alabama’s sales tax even applies to medications, but it still doesn’t make up for the low property taxes.

Alabama’s income tax system is just about as bad. It may be worse.

The state’s threshold for taxing income is the nation’s lowest, the report says, and “Alabama has the highest income tax burden on the poorest families.”

Alabama has just three tax brackets for its income tax, and the top rate – 5 percent -- kicks in at an astonishingly low level. A family of four starts to pay income taxes if it makes more than $12,600 a year, the report says. A family that makes more than $18,600 -- $7,000 below the federal poverty level – is taxed at Alabama’s top rate.

It essentially becomes a flat tax, so a part-time barista pays the same income tax rate as a corporate CEO.

It’s not enough to be a low-tax state. That means nothing. If Alabama is to prosper it needs taxation that is reasonable, and adequate, and most of all fair. It’s not that much to ask.

John Archibald, a Pulitzer Prize winner, is a columnist for Reckon by AL.com. His column appears in The Birmingham News, the Huntsville Times, the Mobile Register and AL.com. Write him at jarchibald@al.com.