Alabama has a graduated state individual income tax, with rates ranging from 2.00 percent to 5.00 percent. There are also jurisdictions that collect local income taxes. Alabama has a 6.50 percent corporate income tax rate, a 4.00 percent state sales tax rate, and an average combined state and local sales tax rate of 9.46 percent. Alabama has a 0.37 percent effective property tax rate on owner-occupied housing value. Alabama does not have an estate tax or inheritance tax. Alabama’s gas tax is 31 cents per gallon, and its cigarette excise tax is $0.675 per pack of 20 cigarettes.
Alabama raises tax revenue primarily through general sales taxes (32.6 percent of total state and local tax revenue), individual income taxes (24.0 percent), and other taxes (21.6 percent). Alabama collects $4,950 in state and local tax collections per capita, carries $5,470 in state and local debt per capita, and has a 78 percent funded ratio of public pension plans. Alabama’s tax system ranks 37th overall on the 2026 State Tax Competitiveness Index.
Each state’s tax code is a multifaceted system with many moving parts, and Alabama is no exception. Use the tabs below to compare Alabama taxes with other states and to see how Alabama raises tax revenue. You can also browse our tax maps, which are compiled from our annual publication, Facts & Figures 2026: How Does Your State Compare?
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
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Facts & Figures serves as a one-stop state tax data resource that compares all 50 states on over 40 measures of tax rates, collections, burdens, and more.
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Individual income taxes are a major source of state government revenue, accounting for more than a third of state tax collections. How do income taxes compare in your state?
9 min read
Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for nearly a quarter of combined state and local tax collections.
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Forty-four states levy a corporate income tax, with top rates ranging from a 2 percent flat rate in North Carolina to an 11.5 percent top marginal rate in New Jersey. Four states—Georgia, Nebraska, North Carolina, and Pennsylvania—reduced their corporate income tax rates effective January 1, 2026.
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Thirty-nine states will begin 2025 with notable tax changes, including nine states cutting individual income taxes. Recent years have seen a wave of significant tax reforms, and the changes scheduled for 2025 show that these efforts have not let up.
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Tax avoidance is a natural consequence of tax policy. Policymakers should consider the unintended consequences, both to public health and public coffers, of the excise taxes and regulatory regimes for cigarettes and other nicotine products.
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Recent data suggest that tax competitiveness plays a significant role in residents’ relocation decisions.
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Growing cigarette tax levels and differentials have made cigarette smuggling both a national problem and a lucrative criminal enterprise.
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Tax reform in Alabama is desirable and very possible. However, the overtime exemption, which complicates the tax code, reduces neutrality, and adds to compliance and reporting costs, is not a good example.
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Over 500 million premium cigars were sold in the United States in 2023. With each sale comes a complex tax landscape.
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Policymakers can and should address taxpayers’ legitimate grievances about out-of-control property tax bills, but they should do so without upending a system of taxation that is more efficient, fair, and pro-growth, and better suited to municipal finance, than any of the alternatives.
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The State Tax Competitiveness Index enables policymakers, taxpayers, and business leaders to gauge how their states’ tax systems compare. While there are many ways to show how much state governments collect in taxes, the Index evaluates how well states structure their tax systems and provides a road map for improvement.
115 min read
States that tax GILTI increase filing complexity, drive up the cost of tax compliance, and introduce unnecessary economic uncertainty and legal risk. 21 states and DC continue to tax GILTI despite these challenges.
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