Still, Alabama’s leaders puff out their collective chests and boast of how they keep taxes low.
For the 17 percent of Alabamians who live below the poverty line, the boast is a hollow one because low-tax Alabama is No. 1 when it comes to taxing the working poor. That well-worn story is one that can’t be told enough.
Most states decline to tax the incomes of poor people. The premise is they need the money to help them work their way out of poverty. Alabama’s income tax takes $548 annually out of the pockets of a family of four living at the poverty line of $23,018 a year — about a week’s wages. Add to this the taxes poor families pay on things like groceries and there is not much left to live on.
Alabama may be a low-tax state for people and businesses at the upper end of the income scale, but at the lower end, Alabama’s tax system adds to people’s misery.
That tax policy has hurt Alabama more than it has helped.
Today, Alabama has the fifth-highest percentage of families living on less than $30,000 a year and the sixth-highest percentage of families living below the poverty line. So where are all those good jobs that the state’s low-tax strategy was supposed to bring in?
On the other hand, some people are doing very well. Indeed, Alabama has the 10th-highest percentage of households making more than $100,000 a year. These Alabamians enjoy the low-tax approach because they are the ones who, thanks to the state’s tax policy, have the most left over after the tax man closes the books.
As a result, Alabama has the fifth-greatest income inequality in the nation — greater than Mississippi, greater than Georgia, greater than Florida. Of all the aforementioned statistics, Alabama’s rate of income inequality is among the most appalling.
You would think those at the top — those who have so much more than those at the bottom — would be more willing to let their taxes rise a little so that the poor might enjoy a little more of what life has to offer.
But that hasn’t happened. Indications from Montgomery are that it isn’t likely to, either.