Alabama has 158 census tracts that have been approved as Qualified Opportunity Zones. These communities were selected among a pool of more than 1,000 census tracts that were eligible for the program in the state of Alabama. Approval must go through the governor and the CEO of U.S. Territories. In Alabama, opportunity zones are spread throughout the state, although the following five cities have the highest concentration qualified opportunity zones:
Alabama has been lacking when it comes to programs that are directed at the underserved communities throughout the state. The installation of opportunity zones is a major step towards changing that trend. Opportunity zones were created to encourage private investors to utilize economically distressed areas, through the use of capital gains tax incentives. The opportunity zones are areas that suffer from high poverty rates and also feature low median incomes across the community. The objective of opportunity zones is to rejuvenate communities that have been impacted by economic hardships.
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Alabama Tax Situation
The Alabama tax situation is a bit different than how the federal tax situation operates. The federal tax system uses seven tax brackets while the state of Alabama uses only three. Those tax brackets consist of 2, 4 and 5 percent. The upper class in Alabama has the lowest average income of any state as the top 1 percent earn $488,630 per year.
Property taxes are the lowest among any state in the continental United States. Only Hawaii has lower property taxes, which makes home ownership affordable in Alabama. The annual taxes on a home priced at $185k is a very low $791. Those who own a home and are 65 years of age or older do not have to pay property taxes as they are exempt from this responsibility. There are also some cities in Alabama that assess individual property taxes different from the rest of the state.
Sales tax in Alabama is 4 percent, although local municipalities add percentages to provide an average of 8.45 percent across the state. This is one of the highest sales tax of any state in the country.
The overall tax situation is not impacted too heavily by the sales tax in Alabama. Cost of living remains lower than it does in many other states. Meanwhile, low property, sales and personal income tax rates have made life in Alabama manageable for those who are not members of the upper class.
Industries with Tax Breaks
Alabama has introduced tax incentive programs that have been widely used by a number of industries. However, there has been a continued effort to draw more companies to the state that are involved in certain areas of production. These efforts have resulted in tax breaks that have targeted the following industries:
- Chemical Manufacturing – This sector qualifies for the state’s economic incentives program, which has favorable tax abatements.
- Engineering and Design – In an effort to broaden the reach of this sector, Alabama has established several tax incentives.
- Biotechnology – Tax abatements allowed Alabama’s biotech industry to step to the forefront in 2018.
- Data Centers – Alabama offers generous tax breaks to companies looking to set up their data centers within the state.
- Automotive – A recent and very lucrative tax incentive allowed Alabama to bring a large Toyota-Mazda plant to the state, joining numerous automotive plants from other companies.
The tax breaks have done an adequate job of luring new companies to Alabama. However, certain industries have declined The state has also been hindered by the regression of Alabama’s coal industry. But that has paved the way for new industries and Alabama’s aggressive tax incentives have helped to maintain prosperity in the state.
Alabama State Financial Facts
The cost of living remains low in the state of Alabama, particularly when compared to other states. But that does not necessarily mean that Alabama residents have been able to put away sizable sums of cash. Here is more information on some of Alabama’s key financial facts:
- Median household income – $47,221
- Median household savings
- $0 in savings: 40%
- $1,000 or less in savings: 63%
- Total household investments
68.6 percent of families that own their home
Median value of Alabama home – $129,000
Average hourly wage in Alabama – $18.84
Current economic condition of Alabama
Alabama’s economy does not generate as much income as other states as its annual average income is the sixth lowest of all states. The state’s annual household median income is among the ten lowest in the nation. Its unemployment rate of 4.2 percent is higher than the national average. That ranks Alabama as one of the five worst states for unemployment numbers. All that has equated to one of the slowest economies of any state.
The GDP of Alabama has been lagging behind other states as there has been limited financial growth. There remains a lower percentage of residents with jobs in the tech industry which is also a contributing factor to the slow economic pace.
Part of the reason for the current economic climate in Alabama has been the state’s inability to respond to the recession that stemmed from the 2009 financial crisis. A lack of significant tax revenue in Alabama continued to leave the state searching for money. The slow growth of personal income also caused the recession to linger Personal income growth has barely exceeded one percent over the past decade. However, there has been progress recently as state revenue has been in recovery mode for a few years now.
Part of the pan to restore the economy was to host new companies, which explains the lucrative tax breaks offered in Alabama. However, looking past those taxes has not helped to strengthen the state’s revenue.
Primary Industries in Alabama
A few industries stand out in Alabama, although that does not demean the importance of other industries. As more tax incentives look to bring more companies into the state, here is a look at the top industries in Alabama:
- Metal Manufacturing
Opportunity Zones in Alabama
There are companies that have experienced high levels of success in Alabama. Encompass Health remains the largest company in Alabama and is responsible for employing approximately 30,000 residents. Also, Regions Bank is home to more than 22,000 Alabama workers. However, there are areas that do not feature these large companies, which does not help local economies. That has given way to a 158 opportunity zones which are based in the following locations:
- Baldwin (6)
- Calhoun (3)
- Covington (2)
- Cullman (2)
- Elmore (2)
- Jefferson (28)
- Lauderdale (2)
- Lee (7)
- Limestone (3)
- Macon (3)
- Madison (10)
- Marion (2)
- Mobile (14)
- Montgomery (12)
- Tuscaloosa (10)
There are some cities in Alabama that have been hit hard by economic distress. For example, the city of Selma has earned the distinction of being one of the 10 poorest cities in America, according to data collected by the U.S. census. Parts of many other Alabama cities feature very low average incomes along with high poverty rates. It are these types of communities that have been designated as opportunity zones, which were introduced through the 2017 Tax Cuts and Jobs Act.