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

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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
POLICY AGENDABridging the gap with stronger workforce supportsChild careAlong with lack of transportation, lack of access toquality child care is consistently cited as a leadingbarrier to employment for low-income families.Alabama could improve its child care program byincreasing state funding to accommodate the waitinglist for services and by eliminating the requiredco-pay for families with incomes below the federalpoverty level. The state could greatly improvethe accessibility and quality of services receivedby children in child care programs by increasingprovider reimbursements to match program costsmore closely.[ Alabama should increase its investment inquality child care programs by increasing thereimbursement to a minimum of 50 percent ofthe fair market rate.[ Alabama should eliminate the co-pay forfamilies with incomes below the federal povertylevel.[ Alabama should increase its commitment ofstate dollars to reduce the number of eligible childrenon a waiting list for available child care.Health careMore than 63,000 low-income working familieshave at least one parent without health insurance.Eligibility for Medicaid for Low-Income Families(MLIF) limits monthly income to the equivalent of26 percent of the poverty threshold. Time lost fromwork because of illness hinders both the individual’sability to meet financial responsibilities andthe employer’s ability to meet productivity standards.Policymakers need to take action to begin toaddress the health insurance crisis in our state.[ Alabama should implement financial incentivesthat encourage small employers to provide healthcare benefits to their employees and families.[ Alabama should raise the income cap forMedicaid participation by working families to130 percent of the federal poverty level (equalto the income cap for Food Stamps).Unemployment InsuranceAlabama provides one of the nation’s lowestmaximum benefits to eligible workers. Loss ofemployment, in and of itself, can be devastatingto an individual. The inability to meet even basicneeds can drive a family into financial ruin fromwhich they may never recover.[ Alabama should increase the maximumweekly benefits allowed under its unemploymentcompensation program to theSoutheastern U.S. average.TaxesAlabama relies on a regressive tax system thatplaces a disproportionate burden on low-incomeworking families.[ Alabama should remove the state sales taxfrom grocery purchases.[ Alabama should raise the threshold forstate income tax to the federal poverty levelby modifying dependent and standard deductions.Those changes should be indexed toinflation to ensure ongoing tax fairness.TransportationRising energy costs hit low-income families particularlyhard, and in many areas of the state, theyhave no options available other than using theirpersonal vehicle to seek work and, once employed,get to work regularly. A comprehensive state publictransportation policy with state financialsupport to local entities would offer low-incomeworkers both reliable transportation and a widerradius of employment opportunities. In addition,a state-supported transit system would benefit allAlabamians by reducing demands on the state’shighway infrastructure and improving urban andsuburban air quality.[ Alabama should provide a dedicated staterevenue source for public transportation programsthroughout the state.Alabama’s Working Families 37
Page 8 and 9: 6 Bridging the Gap
Page 11 and 12: Chapter 3 examines the state’s ec
Page 13 and 14: CHAPTER 1Alabama’s Low-IncomeWork
Page 16: For most of this decade, Alabama’
Page 19 and 20: CHAPTER 2The Education and Training
Page 22 and 23: level for the state, and ultimately
Page 24 and 25: programs, while responsive to emplo
Page 26 and 27: POLICY AGENDABridging the education
Page 30 and 31: Occupations with Highest Projected
Page 32 and 33: Recap of Capital Credit ProgramNOTI
Page 36 and 37: PER CAPITA SPENDINGIN WORK SUPPORT
Page 40 and 41: Endnotes1 Information provided by L
Page 42: Photography CreditsCover images: Va

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