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Thinking About Tax Burdenscomment (0)

April 18, 2013

By Jim Williams


April is an appropriate month to pause and think about tax burdens. For Alabamians, the story has pluses and minuses. While our state and local taxes remain low, they are not always fair; and we share with other states the burden of federal taxes and deficits.

Each year a Washington think tank named the Tax Foundation estimates “tax freedom day.” This is the calendar day when taxpayers across the country have earned enough income to pay all federal, state and local taxes for the year. 

The 2013 tax freedom day for the nation is April 18. This means that 107 days or more than 29 percent of the calendar year will be spent working to pay taxes for all levels of government.

Over 70 of those days are required for federal taxes, which is two-thirds of the nation’s total tax burden. 

Federal taxes don’t cover all of the federal government’s spending, creating a deficit each year. It’s a sobering thought, but another 21 days would be required to eliminate the current year’s deficit and balance the federal budget, pushing tax freedom day well into May.

For Alabama, tax freedom comes sooner than for the nation as a whole. This year the date is April 5 or the 94th day of the calendar year. Alabamians will work less than 26 percent of 2013 to pay all our taxes, well below the national average.

A key reason for this is that Alabama has the lowest property taxes in the U.S., particularly for homeowners. The Tax Foundation compared residential taxes to household income for all counties above 65,000 population. 

The median tax rate in Alabama (0.9 percent of income) is lower than in neighboring Mississippi (1.7), Tennessee (1.8), Georgia (2.3) and Florida (3.2), as well as other states.

Alabama ranks 37th per capita among the 42 states with personal income taxes, according to the Census Bureau. 

We are one of only six states allowing a deduction for federal income taxes, which produces a tax burden that is heavy for lower-income taxpayers and light for higher-income taxpayers, when compared to other states.

Among the 45 states with sales taxes, Alabama ranks 30th in per-capita revenues. Two features detract from sales-tax fairness: Alabama and Mississippi are the only states without some kind of exemption for groceries; on the other hand, Alabama’s narrow tax base excludes most services.

EDITOR’S NOTE — Jim Williams is executive director for the nonprofit, nonpartisan Public Affairs Research Council of Alabama. Jim may be contacted at jwwillia@samford.edu.

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