Alabama has the worst tax climate for businesses in the Southeastern United States, according to the Tax Foundation's 2023 State Business Tax Climate Index.

The index ranked Alabama 41st overall nationwide for its business tax climate, dropping two spots since last year and finishing with the lowest score in the Southeast.

Alabama is in the top 20 in the nation when it comes to its corporate, property and unemployment insurance taxes. However, its ranking of 30th overall in individual income taxes and last in the nation for its sales tax burden weigh down the other areas of the tax code.

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Photo credit: Tax Foundation

According to the Tax Foundation, states with the best business tax climates don’t levy one of the major taxes measured in the index or levy all of the taxes with consistently low rates.

“The absence of a major tax is a common factor among many of the top 10 states,” said Tax Foundation’s Janelle Fritts and Jared Walczak in the report. “Property taxes and unemployment insurance taxes are levied in every state, but there are several states that do without one or more of the major taxes: the corporate income tax, the individual income tax, or the sales tax. This does not mean, however, that a state cannot rank in the top 10 while still levying all the major taxes. Indiana and Utah, for example, levy all the major tax types but do so with low rates on broad bases.”

Tax Foundation Alabama News

Many state legislators and statewide elected officials have either been silent about plans for permanent tax reductions in the near future or want to use record state surpluses for government savings accounts or a one-time tax rebate for Alabamians. Removing the cap on economic development incentives of $350 million has also been mentioned as a possibility in 2023.

According to a recent press release from the Governor's Office, since 2017, Gov. Kay Ivey has charged her administration, especially the Alabama Department of Commerce, with “creating quality jobs for Alabamiansm,” and “her focus on economic development has attracted over $32 billion in capital investment and 65,000 new jobs.”

“Make no mistake, rural Alabama … all of Alabama in fact is well-positioned for the future with a world-class workforce equipped with top training programs and absolutely pro-business business environment, unbeatable corporate partners, and a track record of success in economic development,” Ivey told attendees at the Rural Economic Developers Summit Tuesday afternoon. “Y’all, Alabama’s best days are still in front of us.”

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