Analysis of the Distributional Impact of HB 577 and HB 578

In April of 2001, Alabama legislators considered a pair of bills, HB 577 and HB 578, designed to modify the state’s personal income tax structure by creating a state Earned Income Tax Credit while increasing the state’s standard deduction and personal exemption. The bills also would have eliminated a deduction for federal personal income taxes paid, extended the middle income tax bracket, and increased the top income tax rate from 5 percent to 6.5 percent. This analysis addresses the distributional impact of these bills, and also addresses the revenue impact of the bills. The analysis also compares various features of the Alabama tax system to the tax systems of other states.

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