How does the Alabama tax code compare? 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. Alabama also has a 4.00 percent state sales tax rate and an average combined state and local sales tax rate of 9.43 percent. Alabama has a 0.36 percent effective property tax rate on owner-occupied housing value.
Alabama does not have an estate tax or inheritance tax. Alabama has a 30.2 cents per gallon gas tax rate and a $0.675 cigarette excise tax rate (per pack of 20 cigarettes). The State of Alabama collects $4,722 in state and local tax collections per capita. Alabama has $6,189 in state and local debt per capita and 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. The first step toward understanding Alabama’s tax code is knowing the basics. How does Alabama collect tax revenue? Click the tabs below to learn more! You can also explore our state tax maps, which are compiled from our annual publication, Facts & Figures 2025: 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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Tax burdens rose across the country as pandemic-era economic changes caused taxable income, activities, and property values to rise faster than net national product. Tax burdens in 2020, 2021, and 2022 are all higher than in any other year since 1978.
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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?
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Retail sales taxes are an essential part of most states’ revenue toolkits, responsible for 24 percent of combined state and local tax collections.
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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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6 min read
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.
122 min read
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The past four years have brought significant focus on state income tax reform and relief, and with that, something of a flat tax revolution.
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