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Improving Alabama’s Tax Bargaincomment (0)

April 24, 2014

By Jim Williams


In the 25 years that the Public Affairs Research Council of Alabama has had its finger on the pulse of Alabama’s taxes, they have remained very low. This year is no exception.  

Is this a bargain? Not necessarily. Taxes are used to provide services, and their value is tied to the results achieved.       

The data leaves no doubt that Alabama remains among the lowest-taxed states.  

Each year the Tax Foundation, a Washington-based think tank, calculates what it calls “Tax Freedom Day.” This is the calendar day when total personal income is sufficient to pay all taxes — federal, state and local, freeing the balance of the year for other pursuits. 

This year’s Tax Freedom Day came April 21 for the nation as a whole. In Alabama it arrived two weeks earlier, April 7, because of our low tax burden. Only four other states finished paying for their taxes sooner.

The latest figures from the U.S. Census Bureau show that Alabama’s state and local governments collected $2,904 in taxes per resident for fiscal 2011, a lower amount than in any other state. South Carolina ranked second lowest. Alabama’s taxes were $324 million lower than they would have been if collected at the same per-capita rate as in South Carolina.

However, taxes are a bargain only when taxpayers get more than their money’s worth from the services produced. This can’t happen without control over the use of revenue and budget procedures that focus on performance. The state of Alabama, which spends more than 10 billion taxpayer dollars each year, has neither.

About 88 percent of the state’s revenue is earmarked in advance for specific purposes, far higher than in any other state. Guaranteed budgets provide no incentive to efficiency. A sound Budget Management Act has been on the books for many years, but Alabama today has no systematic process for linking appropriations to performance measures.    

As every shopper knows, low prices are only half of what makes a bargain. A higher quality budget is what it will take to improve Alabama’s tax bargain.

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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