alabama's working families and the broken promise of economic ...

national standards, this is far less than that requiredto keep a family with two children out of poverty.Regressive tax systemThe combined local and state taxes for Alabamafamilies in the lowest quintile amount to 10.6 percentas a share of annual household income. 72 At firstglance, this rate would appear to compare favorablywith other states, but a closer look reveals the unfairdistribution of tax obligations across the incomespectrum. Alabama is consistently ranked as havingone of the lowest total tax burdens, yet oneof the most regressive tax systems in the country.While the poorest 20 percent of our neighbors payalmost 11 percent of their income in taxes, those atthe top of the income scale pay only 3.8 percent oftheir income in taxes. Alabama is also one of onlytwo states that fully tax food purchases and one of 31states without a state Earned Income Tax Credit.in the nation – the only state east of Colorado – thatrefused to make an investment of state revenues inpublic transportation programs. 73 The result is apublic transportation program that at best is inadequatefor user needs and at worst is non-existent.To access federal funds for public transportation,local governments or private entities must providethe entire amount of the required match. Because ofconstitutional restrictions on county and municipalauthority to generate revenue, the fixed-route systemsthat do operate in most urban areas offer onlypartial geographical coverage and limited hours ofservice. Seventeen counties, primarily those withhigh rates of poverty, have been unable to raise therequired match and therefore lack any transit systemthat could broaden residents’ access to employment,health care, commerce and entertainment.Until 2007, working Alabama families began payingincome taxes when earnings reached an annuallevel of $4,600 for a family of four. Changes madeto the state’s code in 2006 have increased thatthreshold to $12,600, still far below the federalpoverty level.TransportationOne of the most consistently identified barriers toeconomic advancement for low-income families isthe lack of public transportation throughout ourstate. In 2005, Alabama was one of only four statesHow our income tax threshold comparesAlabama’s income tax threshold remains one of the three lowest in thecountry, even after the Legislature increased it in 2006 from $4,600 a yearto $12,600 a year for a family of four. But it hasn’t always been that way.When Alabama’s income tax rates were set in 1936, the state’s tax thresholdat the time — $3,600 — meant that only about 7,000 people in theentire state, or less than one-fourth of 1 percent of the population, madeenough to owe any taxes at all.Today, though, Alabama’s threshold lags behind those of its neighbors.Mississippi’s income tax kicks in for families of four at $19,600 a year,while Georgia begins to tax such families at $15,900 a year. (Florida andTennessee do not assess income taxes.) Other Southern states also havehigher thresholds for families of four, including Louisiana ($16,900), NorthCarolina ($19,400) and South Carolina ($27,000).36 Bridging the Gap