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Alabama ranks lowest in taxes
State finishing in last place not a disappointment this time

By Phillip Rawls
Associated Press Writer

MONTGOMERY — Alabama finished 50th in another national ranking, but this one is not viewed in a negative light by many state officials.

A new study shows that when state, city and county taxes are combined, Alabama ranks last in the nation in taxes paid per capita.

"It's a significant competitive advantage to be ranked where Alabama is," said Matthew Maguire, communications director for the Public Policy Institute of New York State.

Maguire said Alabama has been at or near the bottom every time his organization has done the ranking of states' tax burdens.

For some in Alabama, there can be a downside to being in 50th place.

With low taxes, Alabama ranks 45th in spending on public schools and 32nd in Medicaid spending even though the state has a high poverty rate, said Kimble Forrister, executive director of Alabama Arise, a lobbying organization representing the state's poor.

For the tax report, the Public Policy Institute takes tax information compiled by the Census Bureau and uses it to calculate the tax burden in each state. The institute, a think tank associated with the Business Council of New York State, combines state, city and county taxes for its rankings.

The institute said its formula gives a better picture of each state's overall tax burden and provides a better comparison between those states that levy most of their education taxes at the state level and those that put most of their education taxes at the city and county level.

Using new census numbers from 2004, the institute found that New York led the nation at $5,260 in taxes per capita. The national average was $3,447 per capita. Alabama came in last at $2,328.

Mississippi, which often finishes near Alabama in national rankings, came in 49th at $2,444.

No Southern states finished in the top 20, and most were in the bottom 20.

Alabama's low taxes may explain why the state finishes near the bottom on some other national rankings. But for many elected officials, this 50th-place ranking is a source of pride.

Gov. Bob Riley said Alabama has been able to maintain low taxes while increasing spending for public education by growing the state's economy.

"If we can continue to grow the economy in the way we have in the past, we are not only going to be able to satisfy most of the needs of the education community, but also do it at a remarkably low tax rate," Riley said.

Sen. Roger Bedford, D-Russellville, who is co-chairman of a Senate budget committee, said: "That's a tribute to the fact the Legislature has been controlled by Democrats for 120 years, and we've refused to allow unfair taxes."

House budget committee Chairman Richard Lindsey, D-Centre, said the study shows Alabama has been able to provide basic government services while keeping taxes low.

But he sounded a word of caution. He said Alabamians must realize that some services are not where they should be, such as an insufficient number of state troopers patrolling the highways.

Forrister said the per capita figures disguise who is paying the taxes in each state. Until the Legislature changed the law in April, Alabama was the only state levying an income tax on a family of four making less than $10,000 annually.

That tax cut, which starts taking effect in January, is supposed to reduce tax collections by $60 million annually.

And it could cinch 50th place for Alabama in future rankings.

"If anybody fusses in Alabama about high taxes, there is not another state they can go to and pay less," said Paul Hubbert, executive director of the Alabama Education Association.

Per capita rankings

How Southern states finished in a ranking of tax burdens compiled by the Public Policy Institute of New York State:

Place State Per Capita

23 Virginia . . . . . . . $3,342

27 Florida . . . . . . . .$3,094

31 N. Carolina . . . . $2,929

33 Louisiana . . . . . .$2,899

34 Texas . . . . . . . . .$2,881

35 Georgia . . . . . . . $2,877

39 Kentucky . . . . . . $2,767

44 S. Carolina . . . . .$2,662

47 Tennessee . . . . .$2,536

48 Arkansas . . . . . .$2,536

49 Mississippi . . . $2,444
50 Alabama . . . . . . $2,328

—The Associated Press

Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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