For the first time since the 1990s, the revenue Alabama collects from state and local taxes is no longer the lowest per capita in the country. The state’s local and state tax revenue per resident is now the second-lowest in the country. That’s according to a new report from the Public Affairs Research Council of Alabama.
The report, based on tax collections in 2018 recently released by the U.S. Census Bureau and the Bureau of Economic Analysis shows that Tennesseans pay slightly less in overall state and local taxes due to a reduced tax rate on groceries there and the process of phasing out what remains of its small income tax.
According to the report, Alabamians pay $3,527 per capita — up $157 from $3,370 reported previously in 2017. The current figures listed in the report do not include the tax increase from the 2019 gas tax.
This increase is linked to stout revenue growth and increased income tax collection by the state, which coupled with Tennessee’s tax policy changes, places Alabama second on the list for lowest total state and local taxes collected per capita.
Alabama still ranks significantly lower than other states in the Southeast, who collectively are the lowest in state and local taxes in the U.S. PARCA suggests that these lower taxes partially explain Alabama’s struggle to provide public services on the same level as other states.
PARCA’s report compares Alabama per resident tax collections with other southern states like Louisiana, South Carolina and Mississippi.
“Mississippi, a state with less wealth and economic activity, nevertheless collects $240 more per capita than Alabama,” states the report. “If Alabama collected taxes at Mississippi’s rate, state and local governments would have an additional $1.2 billion to fund education, health care, highways, public safety, and the broad spectrum of state and local services provided.”
Alabama still maintains one of the highest tax rates in the nation for alcohol, public utilities and sales taxes.
