A study released by the Tax Foundation last month on states' business tax climates shows "which states are serious about competing for labor and capital," according to a recent editorial by the Wall Street Journal.
According to the Tax Foundation's 2023 State Business Tax Climate Index, Alabama has the worst tax climate for businesses in the southeastern United States. It is ranked 41st overall nationwide for its business tax climate, dropping two spots since last year.
According to the Wall Street Journal's Editorial Board, "none of the best four tax states levy a personal state income tax: Wyoming, South Dakota, Alaska and Florida."
"Foregoing an income levy is a hedge against the upward tax-rate rachet that typically happens," the Wall Street Journal's Editorial Board wrote. "Montana manages to get along with no sales tax. Wyoming and South Dakota have neither a corporate nor an individual income tax. North Carolina, in 10th, levies a 2.5% tax on corporations, the lowest rate nationally, as the report notes."
According to the Tax Foundation, Alabama is in the top 20 in the nation when it comes to its corporate, property and unemployment insurance taxes' competitiveness with the rest of the nation. However, its ranking of 30th overall in individual income tax burden and last in the nation for its sales tax burden weigh down the other areas of the tax code.
Alabama has the fifth-highest combined state and local average sales tax rate at 9.24%, according to the Tax Foundation in February. However, the four states with a higher average sales tax rate don't tax groceries at the full sales tax rate like Alabama.
"Too many Governors in both parties like to cut taxes only as temporary rebates or other sops in election years, but the real economic benefits come from making a state more competitive for the long haul," the Wall Street Journal's Editorial Board wrote. "Americans and their money have never been more mobile, and Florida and other low-tax states will continue to reap the benefits of good policy."
Most of the talk around the upcoming legislative session in 2023 in Alabama has centered around passing legislation creating a temporary income tax rebate or socking away the state's sizable surplus in a government savings account.
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