Alabama has had more economic success in recent years than ever before. Unemployment has been at record lows, and the state’s personal income growth has led the Southeast.
As a result, revenues from sales, income and property taxes also have grown rapidly.
Sales taxes are Alabama’s largest source of tax revenue. Most commerce occurs within cities, and municipal governments depend heavily on the sales tax. So do the state government and local school systems.
From 2003 to 2006, sales tax revenues grew by about 8 percent a year, reaching an estimated $850 for every state resident during 2006. About 60 percent of this was received by the state and 40 percent by local governments.
Income taxes are the second-largest tax source in Alabama. The state raises almost all income tax money, although a few cities and counties have so-called “occupational taxes” on personal income. Among these are Jefferson County and Birmingham, Gadsden, Auburn and Opelika.
From 2003 to 2006, state income tax revenues increased by 12 percent a year, reaching about $630 per Alabamian in 2006. Most of this comes from individual income, but revenue from business income has been the fastest-growing part of the tax.
Property taxes are the third-largest tax source in Alabama. The majority of property tax revenue comes from taxes on business property, but the tax also is paid on the value of automobiles, homes, farms and timberland.
From 2003 to 2006, property tax revenues in Alabama grew by 7 percent a year, reaching an estimated $440 per person in 2006. Local schools, counties and cities received almost 80 percent of this revenue.
But recent revenue growth has not solved every issue facing public services in Alabama.
Some types of taxes have not fared as well. For example, fuel and vehicle taxes that support roads increased by less than 3 percent a year from 2003 to 2006. And on a per-person basis, the total tax revenues received by Alabama governments remained the lowest in the country at the U.S. Census Bureau’s last tabulation.
Next month, we will look at how tax dollars are spent in our state.
EDITOR’S NOTE — Jim Williams is the executive director of the nonprofit, nonpartisan Public Affairs Research Council of Alabama.
Share with others: