The tax system in Alabama is arguably the most troubled in the United States and relates directly to the high poverty level in the state. The income and sales taxes place a disproportionate, heavy burden on low-income citizens, which is combined with significant tax advantages for wealthy Alabamians on income and property taxes. Alabama taxes low-income families in such a way that it is very difficult for them to improve their economic status. While the income tax structure was updated in Alabama in 2006 (at that time, families of four with annual incomes of $4600 paid state income tax), the state still begins to tax families earning far less ($12,600) than the federal poverty rate ($19,600). Sales tax is also particularly troublesome in Alabama. As a general rule, sales tax on goods affects lower-income citizens at a greater percentage of their income than wealthier citizens, especially the tax on necessary goods like groceries. In 2002, the lowest 20 % of earners paid 10.6% of their income to the state in taxes, while the wealthiest 1% paid barely 4%. This disparity is largely attributed to sales tax. Further, Alabama fails to collect sufficient revenue and revenue is subject to market fluctuations because of the reliance on sales and income taxes. The implications of such a tax system are far-reaching and detrimental, (affecting the quality of public education, for instance). Reform is needed for improvement and progress. If Alabama does not allow low-income citizens to help themselves, it will be very difficult for them to escape their circumstances and improve their economic position.
More Tax Facts from The Institute on Taxation and Economic Policy
An Argument for Tax Reform based on Judeo-Christian Ethics by Susan Pace Hamill