PARCA’s How Alabama Taxes Compare, 2022 Edition, uses data published by the U.S. Census Bureau’s Annual Survey of State and Local Finances to compare tax revenues across the state. This most recent set of revenue and expenditure data cover state and local fiscal years ending between July 1, 2019, to June 30, 2020, identified as the fiscal year 2020. That means the state of Alabama’s data is from the fiscal year that ended September 30, 2019.

Key Findings

• In 2020, Alabama had the nation’s second-lowest state and local tax collections per capita.

• Alabama has the lowest per capita property tax collections in the nation.

• Alabama has among the highest sales tax rates in the U.S.

• Alabama is now the only state that allows state individual and corporate income taxpayers to fully deduct federal income taxes paid. That provides a tax advantage for high earners.

• Despite a recent change that provides some relief, Alabama begins taxing income at the lowest threshold in the U.S.

Alabama state and local taxes collections are low due to two factors: lower rates and a smaller resource base to tax. Alabama’s Per Capita Gross Domestic Product, the total value of all goods and services produced, ranks in the bottom five of states, meaning we have a lower resource base to tax. However, these other states make a greater tax effort and, thus, generate more money to provide services.

This gap between Alabama and other states will not be so obvious when newly elected lawmakers convene in March to craft budgets for FY 2024. A strong inflationary economy, high employment levels, and a flood of federal relief have supplemented state spending and stimulated record levels of state and local tax collections in the most recent year.

But as proposals are floated to make changes to tax rates, it’s important to understand the tax system in context, including a history of underinvestment compared to other states. Any changes should ensure adequate revenue, promote fairness and opportunity, and increase ease of collection and compliance.

How Alabama’s Taxes Compare, 2022 Edition, explores Alabama’s tax system in more depth and context.

Printable PDF version available here

Below are interactive versions of the charts in the report.

With elections for governor and legislature pending in the fall, Alabamians are united in support for public investment in education and healthcare, divided on how to raise money for new investments, and express a preference for local leadership and decision-making. That is according to PARCA’s annual public opinion survey.

The poll of over 400 Alabama residents was conducted by Dr. Randolph Horn, Samford University, Assistant Vice President for Enrollment Research and Professor of Political Science. 

Results from this year’s survey are consistent with previous years’ results in some important ways.

• Alabamians continue to rank education as the most important state government activity.
  

• Large majorities of Alabamians say the state spends too little on education and healthcare.
  

• Alabamians have an aversion to taxes but say upper-income residents pay too little.
  

• A slim majority say budget surpluses should be reinvested in state services, specifically education, rather than used to cut taxes.
  

• If budget surpluses are used to cut taxes, the most popular tax cut is the sales tax on groceries.
  

• Alabamians are willing to pay more taxes to support education but do not agree on which taxes should be increased.
  

• Alabamians are essentially split on tax-funded vouchers to pay for private school tuition. However, a majority believe vouchers, if allowed, should be available to all students.
  

• Alabamians continue to believe that they have no say in state government and that government officials in Montgomery do not care about their opinions.

Results of the survey indicate many opportunities for officials to demonstrate responsiveness to public concerns and leadership in crafting public policy solutions.

Download the full report here.

VOICES for Alabama’s Children published the 2021 Alabama Kids Count Data Book this month. For the 6th year in a row, PARCA provided the data and analysis for the project.

Since 1994, the Alabama Kids Count Data Book has documented and tracked the health, education, safety, and economic security of children at the state and county levels.

This annual statistical portrait is meant to provide a roadmap for policymakers who seek to improve the lives of Alabama’s children.
The Data Book can be used to raise the visibility of children’s issues, identify areas of need, identify trends and measure how previous efforts are working, set priorities in child well-being, and inform decision-making at the state and local levels.

Among the findings from this year’s data, VOICES points to the following challenges we must continue to address for Alabama’s children and families:

– Child Care: There are only 1,855 licensed child care providers in Alabama to support the workforce of today and tomorrow.  Lack of quality child care is a leading reason for decreased workforce participation. Further, babies need quality care and education as their parents work and their brains develop in pivotal years.

– Health: During a youth mental health crisis and increased family stress, there is 1 mental health provider available for every 923 Alabamians. The latest research shows that unaddressed childhood trauma and Adverse Childhood Experiences (ACEs) lead to lifelong chronic health issues, along with significant barriers to educational achievement and financial security.

– Economic Security: While 16% of Alabamians live in poverty, 23.9% of Alabama children live in poverty (ex. a household of 4 making $24,750 or less). Further, 1 in 5 children in Alabama are food insecure.

– Education: Poverty leads to significant disparities in education. For Alabama 4th graders in poverty, only 37.9% are proficient in reading and 12.1% are proficient in math.

–  Safety and Permanency: In 2021, 3,453 children entered foster care. While cases can have multiple causes of entry, 48% of cases involved parental substance abuse.

See how children in all 67 counties of our state are faring in education, health, economic security, and more.

Access the 2021 Alabama Kids Count Data Book here.

PARCA BELIEVES

Alabama can do better.
Sound public policy is essential.
It requires open, transparent and responsive government.
It is based on fact, pursues a clear goal, and is assessed honestly.

PARCA’s 2021 public opinion survey finds a growing majority of Alabamians support spending more on education but a lack of consensus on how to pay for the increase.

Among the findings:

Taxes

• 61% of respondents say upper-income Alabamians pay too little in state taxes. The percent of respondents who believe upper-income earners pay too little increased by 10% from 2020.
   
• 53% say lower-income earners pay too much, up from 40% in 2016.
   
• 49% say they pay the right amount of taxes, compared to 57% in 2016.

• Despite Alabama’s low per capita tax yield, 69% of residents believe they pay the same or more taxes than people like themselves in other states.

Public Education

Alabamians believe education is the most important service state government provides, but its lead over other services is declining.

• 44% rank education as the most important service, while 31.3% rank healthcare No. 1.

• 78% believe the state spends too little on education, compared to 74% in 2019 and 68% in 2013. Large majorities in every subpopulation have this belief.
   
• 69% support increasing taxes to support education, but no single tax increase option garners majority support.

• This year, respondents were asked what supplemental programs might improve education. No program received a majority response, but the top priorities were expanded tutoring, increased technology funding, and more mental health counseling.
  
  
• When asked what respondents’ top priority for new education funding would be, the highest percentage (41%) said that new revenue should go to increasing salary and benefits for teachers 
  
  
• 59% say local boards of education are best suited to decide how education dollars are spent.
  
  
• Respondents believe that the local board of education are best suited to decide school spending, school policy, and school closings.

Other notable education findings:

• 77% believe that taxes on Internet sales should be distributed to local schools in the same way as sales tax revenue from brick-and-mortar sales.
   
• Alabamians are almost evenly split on tax-funded vouchers to pay for private school tuition. However, 61% of Alabamians believe vouchers, if allowed, should be available to all students. 

Trust in State Government

Alabamians’ trust in state government improved slightly compared to 2019 but is still well below rates reported in the early 2000s.

• 77% support keeping the General Fund and Education Trust Fund separate, down from 80% in 2020 and 82% in 2019, but still well above the 69% reported in 2016.
   
• 63% believe state government officials do not care about their opinions, down from 66% last year. This compares to a low of 55% in 2008 and a high of 74% in 2010.
   
• 61% believe they have no say in state government, up from 55% last year, but well above the low of 43% in 2008.

Download the full report here.

In March, the nonprofit Business Education Alliance commissioned PARCA to provide research describing the unprecedented challenges and opportunities in education faced by the state in this moment.

For more than a year, schools have coped with the Covid-19 pandemic: reshuffled learning environments, the unknowns of delivering education digitally, and the disruptive and unequal effects that those conditions have had on student learning.

Meanwhile, the schools are working to meet the demands of the Alabama Literacy Act, the 2019 law that requires all children to be reading at grade level by the end of third grade in order to be promoted.

At the same time though, to meet those daunting challenges, the state and federal governments are making an unprecedented amount of money available. For that investment to pay off, the money must be spent with care and forethought if Alabama is to seize this generational opportunity,

Read the full Business Education Alliance report here: Stop the Slide, Start the Climb: Concepts to Enable Alabama Students to Achieve Their Fullest Potential

VOICES for Alabama’s Children recently released its 2020 Alabama Kids Count Data Book last month. This annual statistical portrait is meant to provide a roadmap for policymakers who seek to improve the lives of Alabama’s children. PARCA provides research support for the project.

The Data Book can be used to raise the visibility of children’s issues, identify areas of need, set priorities in child well-being, and inform decision-making at the state and local levels.

See how children in all 67 counties of our state are faring in education, health, economic security, and more.

View the 2020 Alabama Kids Count Data Book here.

When voters go to the polls on November 3, they will not only be voting in the primary race for President, Vice-President, one U.S. Senate seat, seven U.S. House of Representatives, multiple state judicial positions, and various other state and county offices, but voters statewide will also be asked to vote on six new amendments to the Alabama Constitution of 1901. An additional 36 amendments to the state constitution will appear on the ballots of individual counties across the state.

As always, PARCA provides a high-level analysis of each statewide amendment. We study the ballot wording, but also the authorizing legislation behind the language. We do not make recommendations or endorsements, rather we seek to understand the impact of the proposed changes and the rationales for them.

The Alabama Constitution is unusual. It is the longest and most amended constitution in the world. There are currently 948 amendments to the Alabama Constitution. Most state and national constitutions lay out broad principles, set the basic structure of the government, and impose limitations on governmental power. Such broad provisions are included in the Alabama Constitution. But Alabama’s constitution also delves into the minute details of government, requiring constitutional amendments for basic changes that would be made by the Legislature or by local governments in most states. Instead of broad provisions applicable to the whole state, about three-quarters of the amendments to the Alabama Constitution pertain to particular local governments. Amendments establish pay rates of public officials and spell out local property tax rates. An amendment from a few years ago, Amendment 921, granted municipal governments in Baldwin County the power to regulate golf carts on public streets.

Until serious reforms are made, this practice will continue, and the Alabama Constitution will continue to swell.

Read the full report here.

The National Institute of Early Education Research (NIEER) at Rutgers University has recognized research on the persistence of the impact of First Class Pre-K.

Researchers from the University of Alabama at Birmingham, PARCA, ThinkData, and the Alabama Department of Early Childhood Education published a peer-reviewed article in the International Journal of Child Care and Education Policy showing the persistence of gains in math and reading for students who received First Class Pre-K. This article is the culmination of several years of work involving five cohorts of students over time.

The article, written for an academic audience, offers a detailed statistical analysis of recent findings of the research team already shared with policymakers and pre-K advocates in Alabama and authored by UAB, the Alabama Department of Early Childhood Education, and PARCA.

Results indicate that children who received First Class Pre-K were statistically significantly more likely to be proficient in both math and reading compared to students who did not receive First Class Pre-K. Further, there was no statistical evidence of fadeout of the benefits of First Class Pre-K through the 7th grade, indicating the persistence of the benefits into middle school.

You can read the published article here.

To read previous research about additional academic benefits of Alabama First Class Pre-K, especially as it pertains to educational equity, click here.

PARCA’s 2020 Public Opinion Survey, completed before the onset of the COVID-19 in the U.S., hints at the challenges state policymakers will face in responding to the pandemic.  

The survey finds, once again, aversion to certain taxes, support for public education, and mistrust in state government. At the same time, the survey finds a lack of consensus in how the state should respond to other critical issues facing the state.

Taxes

Alabamians have a strong aversion to taxes but may not fully understand their tax burden.

• 57% believe they pay the same or more taxes than people like themselves in other states.
   
• 51% say upper-income earners pay too little. The percent of respondents who believe upper-income earners pay too little has dropped in each of the last four years.
   
• 49% say lower-income earners pay too much, up from 40% in 2016.
   
• 48% say they pay the right amount of taxes, compared to 45% in 2010.

Public Education

Alabamians believe education is the most important service state government provides.

• 78% believe the state spends too little on education, compared to 74% in 2019 and 68% in 2013.
   
• 69% support increasing taxes to support education, but no single tax increase option garners majority support.

Alabamians value local control of schools.

• 87% say the local board (45%) or state board of education (42%) should set school calendars, while only 3% say the legislature should decide.
   
• 59% say local boards of education are best suited to decide how education dollars are spent.

Other notable education findings:

• 76.5% believe that taxes on Internet sales should be distributed to local schools in the same way as sales tax revenue from brick-and-mortar sales.
   
• 66% say any potential lottery revenue should be restricted to the Education Trust Fund.
   
• 59% oppose using state tax credits to fund private school scholarships.
   
• 49% say charter schools provided expanded opportunities rather than diverting funds from other schools, but almost 25% don’t know or have no opinion.
   
• 41% say new education funding should be prioritized to increasing teacher compensation.

Trust in State Government

Alabamians’ trust in state government improved slightly compared to 2019 but is still well below rates reported in the early 2000s.

• 80% support keeping the General Fund and Education Trust Fund separate, down from 82%, but still well above the 69% reported in 2016.
   
• 66% believe state government officials do not care about their opinions, down from 69% last year. This compares to a low of 55% in 2008 and a high of 74% in 2010.
   
• 55% believe they have no say in state government, down from 57% last year, but well above the low of 43% in 2008.

Policy Preferences

Alabamians express a wide variety of opinions on pressing policy issues. We asked respondents to choose their preferred policy response or policy action to such issues as prison overcrowding, taxes, education, and healthcare. Each of these six questions offered multiple responses from a range of perspectives. No single policy proposal garnered a majority response. The closest was a proposal to expand mental health services for the homeless, identified as the most important response to homelessness by 45% of respondents.

Download the full report here.