How does Alabama’s tax code compare? Alabama has a graduated state individual income tax, with rates ranging from 2.00 percent to 5.00 percent. There are also jurisdictions that collect local income taxes. Alabama has a 6.50 percent corporate income tax rate. Alabama also has a 4.00 percent state sales tax rate and an average combined state and local sales tax rate of 9.29 percent. Alabama has a 0.36 percent effective property tax rate on owner-occupied housing value.
Alabama does not have an estate tax or inheritance tax. Alabama has a 30.2 cents per gallon gas tax rate and a $0.675 cigarette excise tax rate. The State of Alabama collects $4,227 in state and local tax collections per capita. Alabama has $6,833 in state and local debt per capita and has a 72 percent funded ratio of public pension plans. Alabama’s tax system ranks 38th overall on the 2025 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Alabama is no exception. The first step towards understanding Alabama’s tax code is knowing the basics. How does Alabama collect tax revenue? Click the tabs below to learn more! You can also explore our state tax maps, which are compiled from our annual publication, Facts & Figures 2024: How Does Your State Compare?
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
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Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
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Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
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Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections. How do income taxes compare in your state?
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Graduated corporate rates are inequitable—that is, the size of a corporation bears no necessary relation to the income levels of the owners.
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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 32 percent of state tax collections and 13 percent of local tax collections (24 percent of combined collections).
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
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Sports stadium subsidies are salient political gimmicks designed to appear as if politicians are providing tangible benefits to taxpayers. The empirical evidence shows repeatedly that stadium subsidies fail to generate new tax revenue and new jobs or attract new businesses.
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Many states regulate and tax legal marijuana sales and consumption, despite the ongoing federal prohibition. Explore the data here.
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