The Alabama Constitution’s Impact on Taxes and Spending

PARCA is re-examining Alabama’s Constitution in light of the 2022 passage of a revised and reorganized version of the state’s fundamental law.

The approval of the Constitution of 2022 was the culmination of decades of advocacy. Some important changes were achieved, including a substantial reorganization and the removal of racist and unconstitutional provisions central to the spirit of the state’s 1901 Constitution.

And yet, the Alabama Constitution of 2022 maintains the fundamental shackles on government from the 1901 Constitution. Embedded in the Constitution is a tax system that is inadequate, inefficient, and inequitable.

Since the early 1990s, PARCA’s How Alabama Taxes Compare analysis has found that Alabama state and local governments consistently collect less per capita in taxes than almost all other states. After occupying the bottom spot for most of the past 30 years, Alabama has traded back and forth with Tennessee for last place since 2018. This year, Tennessee’s per capita collections came in $4 lower than Alabama’s, resulting in a rank for Alabama of No. 49.

Alabama continues to collect less per capita in state and local property taxes than any other state. Property taxes are strictly limited by provisions in the state constitution.

Low taxes create some advantages. Low property taxes on land and homes are attractive in some regards, decreasing the cost of homeownership and shielding rural land and farms from development pressure. Lower taxes also can be attractive to businesses and individuals moving to the state.

However, low property taxes come at a cost, creating a greater reliance on other taxes, mainly sales taxes. Those sales taxes put a particular burden on low-income Alabamians. Low tax collections also mean that Alabama state and local governments have less to invest in services such as education, health, public safety, and the justice system. That is in a state with high poverty rates, low educational attainment, poorer health outcomes, and higher rates of violent crime than most other states. In turn, high poverty and less economic activity mean less wealth to tax and, thus, lower tax collections.

Inadequate

In contrast to other states, where the state legislature and local governments generally have the power to adjust tax rates, Alabama’s constitution sets limits, rates, and procedural restraints on state and local taxes. That makes taxes hard to raise, adjust, or rebalance. In the end, Alabama’s lower base of wealth and structural and cultural resistance to taxes mean that governments here have less to spend on providing vital public services, placing Alabama in the bottom ten states in most spending categories.

Continue reading the full report here: The Alabama Constitution’s Impact on Taxes and Spending

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This report is one of a series of reports examining Alabama’s current constitutional framework, identifying remaining obstacles to a modern constitution and possible paths forward in areas such as education, economy, healthcare, democracy, liberty & justice, finances, and related areas. Other reports in the series include The Government Closest to the People? The Statehouse, the Courthouse and City Hall and How Alabama Democracy Compares.

The project is supported, in part, by the Alabama Citizens for Constitutional Reform (ACCR). Both ACCR and PARCA are nonpartisan organizations, and our members and supporters are Republicans, Democrats, and independents. Former Governor Albert Brewer and former Samford University President Thomas Corts, both deceased, were founding leaders in both organizations.