The American Legislative Exchange Council (ALEC) has released the 18th edition of its annual Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, ranking Alabama in the top 20 for economic outlook. However, if the Yellowhammer State wants to out-compete its neighbors, it may have to change its income tax structure.
The organization describes the report as "an evaluation of each independent state and key areas of policy in that state to better understand its economic trajectory."
In a written statement, speaking to Alabama's current rankings, Josh Meyer, ALEC's director of the Tax and Fiscal Policy Task Force, said, "Alabama has consistently performed well on a national scale, ranking in the top 20 for economic outlook. It's a state with a solid foundation and strong in-migration, consistently drawing families and businesses looking for a reliable economic environment. However, when we look at neighboring states, it's clear there is untapped potential."
In the report, Tennessee is ranked second. The highest among the Southeastern states, while Georgia is ranked 13th and Florida takes the 15th-ranked spot.
"Alabama has everything it needs to become a top economic performer in the Southeast," Meyer said. "It's geographically well-positioned, has good in-migration, a right-to-work environment, and competitive personal income tax rates. They also have the lowest property taxes in the country. The building blocks are there, but Alabama could fall behind the competition by standing still. To compete with its neighboring states for growth and investment, income tax reform will be a critical piece of the puzzle."
Speaking to what can be done to improve Alabama's economic outlook, Meyer said, "Alabama's income tax rates are lower than most states, but more can be done to make its economy more competitive in the Southeast. Neighboring states like Florida and Texas, with their zero-income tax policies, and Georgia, North Carolina, and Louisiana, with their flat tax reforms, are pulling ahead in terms of economic outlook."
As 1819 News reported in March, lawmakers in Alabama have discussed eliminating the state income tax.
State Rep. DuBose (R-Hoover) told Birmingham radio's "Alabama's Morning News" she's interested in considering it, saying, "But one thing I'm interested in doing, and I heard Senator Arthur Orr bring it up last week, and so I kind of want to jump on this bandwagon, because it's been on my mind for a while, is slowly reducing our personal income tax, similar to what other states have done around us. Tennessee's at 0%. Florida's at 0%. Mississippi has taken a move to reduce theirs gradually to get down to 0%. And I'd love to see Alabama make some moves in that direction. We don't even have to necessarily get to 0%, but hey, can we cut it in half? Maybe half a percent reduction a year, get us down to 2.5% flat tax, something like that. Something that benefits everybody."
Meyer added, "Alabama is a strong contender, but it must take decisive steps in this fast-evolving region. If Alabama wants to move into the top tier and compete with the best, addressing its income tax structure will be essential to unlocking its true economic potential."
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