January 13, 2015


State & Local Taxes in 2015


Alabama Tax Code Features

Progressive Features

• Provides a very large property tax homestead exemption

• Requires the use of combined reporting for the corporate in­come tax

Regressive Features

• Narrow income tax brackets mean majority of taxpayers pay top income tax rate

• Sales tax base includes groceries

• Provides an income tax deduction for federal income taxes paid

• Fails to provide refundable income tax credits to offset sales, excise, and property taxes

Tax Changes Enacted in 2013 & 2014

• Enacted a new income tax credit for annual donations to education scholarship organizations (not modeled in the report)

ITEP Tax Inequality Index

According to ITEP’s Tax Inequality Index, Alabama has the 12th most unfair state and local tax system in the country. States with regressive tax struc­tures have negative tax inequality indexes, meaning that incomes are less equal in those states after state and local taxes than before (See Appendix B for state-by-state rankings and more details).

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