Handbooks

We’re all in this together. All of us – people of every race, gender, age, income and background – benefit from a network of services from our local, state and national governments. From garbage collection to fire protection, from roads to schools, from public health to public safety, our tax dollars support the daily upkeep [...]

The common good We’re all in this together. All of us – people of every race, gender, age, income and background – benefit from a network of services from our local, state and national governments. From garbage collection to fire protection, from roads to schools, from public health to public safety, our tax dollars support [...]

How does state spending work? One state, two separate budgets Of the Legislature’s $39.1 billion in total appropriations for fiscal year (FY) 2022, about $20 billion came under the Education Trust Fund (ETF) Budget Act for education-related services. Another $19 billion came under the General Fund (GF) Budget Act for all other services. Lawmakers also [...]

How do state taxes work? Most people would consider a tax system to be unfair if those who earned less paid a higher percentage of their income in taxes than those who earned more. But that’s exactly how regressive taxes work. As we’ve seen, Alabamians contribute to the funding of public services by paying taxes [...]

Feeling the pinch Alabama’s nearly flat income tax can’t offset our regressive sales taxes. As a result, the lowest-paid 20% of Alabama residents pay more than twice the share of their incomes in state and local taxes that the top 1% pay. It’s an upside-down tax system: It reduces the consumer spending that fuels economic [...]

Sales taxes: The key driver of Alabama’s upside-down tax system Should wealthy people pay at a lower tax rate than everyone else? Most Alabamians would answer with a resounding “no.” Yet that’s exactly the result that our state’s tax system produces. Families with low incomes in Alabama pay more than twice the share of income [...]

How do Alabama’s property taxes work? The 1901 Alabama constitution established a property tax of 6.5 mills to help fund the state government. That was 30 years before our state had income or sales taxes. More than a century later, the state property tax rate has not changed. Property tax is applied to real estate, [...]

What taxes do businesses pay in Alabama? How does Alabama tax businesses? Business taxes provide the important “fourth leg of the stool” of our tax system. Alabama’s business taxes were restructured in 1999 after courts ruled the old system unconstitutional because it taxed out-of-state companies at a higher rate. Today’s structure relies on two taxes: [...]

How could we make our tax code more fair? Alabama can move forward by changing its outdated, imbalanced approach to raising revenue. Our state’s current approach is not helping workers get ahead, and it is not adequately funding education, health care and other vital services that help make widely shared prosperity possible. Alabama should consider [...]

This glossary includes keywords used in The Alabama Tax and Budget Handbook, as well as other terms commonly encountered in tax and budget debates. Terms that are italicized in the definitions are defined elsewhere in this glossary. act – a bill that has become law. adjusted gross income – total annual earnings after subtracting certain [...]