Alabama
Business
CULVERHOUSE COLLEGE OF COMMERCE AND BUSINESS ADMINISTRATION
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
First Quarter 2003 / Volume 72, Number 1
In this issue:
Economic Outlook—Quarterly Update
January 2003
3
Selected Economic Indicators
7
Alabama Metropolitan Areas:
Brighter Days Ahead
8
Alabama Tax Reform: A Little
Progressiveness and Some Revenue Too
10
Alabama Business Leaders
Confidence Index: First Quarter 2003
12
THE UNIVERSITY OF
ALABAMA
B U S I N E S S
This report is also available in PDF format on the
Internet at
CENTER FOR BUSINESS AND ECONOMIC RESEARCH
Alabama Business
http://cber.cba.ua.edu
The Center for Business and Economic Research has
available at this site downloadable data on various
topics including population, retail trade, and
employment. Research briefs are also available.
Associate Dean for Research
and Technology
Carl Ferguson
Associate Director
Samuel Addy
Assistant Directors
Deborah Hamilton
Annette Jones Watters
Authors
Samuel Addy
Ahmad Ijaz
Carolyn Trent
Graphic Design
Sherry Lang
The Alabama Economic
Outlook 2003 examines
current economic conditions and trends and
their likely effects on
the national and
Alabama economies
in the coming year.
The Alabama
forecast focuses
on the short-term
outlook for output
and employment in the state by
sector and presents a look at state revenues.
Trends in the state’s metropolitan areas are
discussed.
The Alabama Economic Outlook 2003 is the
23rd in an annual series produced by the
Center for Business and Economic Research.
Copies are $18 each.
Please make checks payable to The University of
Alabama and send to:
Center for Business and Economic Research
The University of Alabama
Box 870221
Tuscaloosa, Alabama 35487-0221
Addtional Contributors
Deborah Hamilton
Sunja Park
Alabama Business is a quarterly publication of the
Center for Business and Economic Research,
Culverhouse College of Commerce and Business
Administration, The University of Alabama.
Articles reflect the opinions of the authors, but not
necessarily those of the staff of the Center, the faculty of the Culverhouse College of Commerce, or
the administrative officials of The University of
Alabama.
All correspondence should be addressed to:
Editor, Alabama Business, Center for Business and
Economic Research, The University of Alabama,
Box 870221, Tuscaloosa, Alabama 35487-0221.
For information on the Center for Business and
Economic Research, the Culverhouse College of
Commerce and Business Administration or The
University of Alabama:
http://cber.cba.ua.edu
http://www.cba.ua.edu
http://www.ua.edu
CBER
Economic Outlook—
Quarterly Update
January 2003
United States
Overview. After growing at an average annualized
rate of 4.0 percent in the third quarter of 2002, the
U.S. economy slowed significantly in the fourth
quarter. Although the economy continues to show
signs of gradual improvement, the recovery is likely
to be jobless—similar to the experience after the
1990-91 recession. This also has been one of the
weakest economic recoveries in the post World War
II period, but the recent recession was also one of
the mildest in terms of its duration and the decline
in growth of gross domestic product (GDP). The
first four quarters of all previous recoveries averaged
annualized GDP growth rates of over 7 percent. For
the first three quarters of 2002, GDP grew at an
annualized rate of 3.5 percent, roughly half the rate
of previous recoveries. A significant slowdown in
fourth quarter 2002 forced the Federal Reserve to cut
the fed funds rate to 1.25 percent, the lowest level in
over four decades.
In the first three quarters of 2002, consumer expenditures on durable goods increased by 5.5 percent,
while residential investment, one of the strongest
segments of the economy, increased by 6.2 percent.
Compared to previous economic recoveries, growth
in both consumer spending and residential investment seems low, but these two sectors of the economy never really experienced a downturn during the
three quarters of recession in 2001 so no pent up
demand developed. Cutbacks in business investment
spending are the main reason why the pace of the
current economic recovery seems tepid. Business
investment usually increases by over 8 percent in the
first year of recoveries but it has declined by more
than 5 percent in this recovery. Businesses continue
to suffer from excesses of capital investment made in
the late 1990s and thus the recovery will remain fairly modest as indicated by most economic statistics.
The index of leading economic indicators rose 0.5
percent in November and 0.1 percent in December.
Together with the widening spread between long
term and short term interest rates, these indicate
improving economic conditions six to nine months
into 2003. GDP growth is expected to be around 2.6
percent for first quarter 2003 and slightly over 3 percent for the entire year.
The Institute for Supply Management’s factory index
increased to 54.7 in December from 49.2 the previous month, the first increase since August and the
highest since June 2002; an index reading of above
50.0 indicates expansion in manufacturing. The
new orders index, accounting for about a third of
the total index, increased to 63.3 from 49.9 in
November—the highest rate since March 2002.
However, most of manufacturing still remains generally weak in terms of both exports and domestic
demand. The industrial production index declined
0.2 percent in December. Industrial production grew
3
by less than 1.0 percent for 2002, resulting in the
slowest rate of growth in any three-year period since
1983. In 2003 industrial production is expected to
increase by around 2.5 percent mainly due to high
levels of productivity rather than significant job
increases. Industrial machinery and equipment manufacturing is expected to remain weak.
New housing sales are also expected to continue
strong, at least in the short term. Housing starts
surged 5.0 percent in December to their highest level
since mid-1986, with sales increasing by 5.7 percent;
starts on single-family homes were at their highest
levels since 1978. At 5.85 percent, mortgage rates,
which have dipped to the lowest level since 1965,
may have contributed to this surge. In the last two
years, the average cashout during refinancing has
been over $26,000 and is partially responsible for the
high consumer spending levels through the recession
and current recovery. The strong housing market has
also improved households’ net worth and cushioned
some of the shock from declines experienced in the
stock market.
One of the strongest sectors of the economy this
year will be defense-related capital goods. Federal
government spending is expected to increase by over
10 percent in 2003, while gains in consumer spending are forecasted to dip slightly from 3.0 percent in
2002 to around 2.8 percent. Major downside risks to
the forecast include the possibility of war with Iraq,
its impact on energy prices, and reluctance of businesses to increase investment spending on capital
goods.
4
Employment. U.S. payrolls unexpectedly fell by
101,000 in December with the unemployment rate
remaining unchanged at 6.0 percent. This is the
largest drop in nearly 10 months. The economy has
lost 1.6 million jobs in the last two years, the largest
decline in overall employment since World War II;
the only other consecutive two-year employment dip
was in 1957-58. Retailers lost almost 104,000 jobs in
December, after losing 40,000 the previous month,
while manufacturing jobs declined by 65,000. The
employment situation is expected to remain generally weak in 2003, with payroll employment increasing
by just 0.7 percent, following a decline of approximately 1 percent in 2002. After dropping by over 5
percent in 2002, manufacturing employment will
decline further by around 2.5 percent in 2003. The
only sector that could see significant job growth will
be services, primarily health and business services.
The unemployment rate will inch upward with a
probable peak at 6.2 to 6.3 percent in the middle of
the year.
Alabama
Overview. From November 2001 to November
2002, the state lost 14,300 jobs. The manufacturing
sector lost 7,000 jobs overall but there were gains of
almost 2,500 jobs in transportation equipmentrelated manufacturing, specifically motor vehicle and
related production. Almost all other manufacturing
industries lost jobs. The most notable job losses
were in the steel industry (1,800 jobs), industrial and
other machinery manufacturers (1,700 jobs), and
apparel (2,800 jobs). Manufacturing continues to
remain weak, faced with excess capacity and lack of
demand growth, and is not expected to see a turnaround until the second half of 2003 or perhaps
2004. Lack of business investment in capital equipment is adversely affecting both industrial and other
machinery manufacturing in the state. However, it is
important to note that job losses in manufacturing
have slowed significantly; 2002 saw about half the
losses of 2001. Manufacturing sector output is
expected to grow by over 5 percent in 2003, with
automobile and related production accounting for
most of the growth.
One of the strongest sectors of the state economy
has been residential construction, primarily in the
state’s metro areas. Construction gained almost
1,300 jobs from November 2001 to November 2002,
compared to a loss of 1,000 jobs in the November
2000 to November 2001 period. The sector in turn
also helped the lumber and wood products industry
to gain about 100 new jobs. Overall construction
expenditures increased by almost 17 percent from
October 2001 to October 2002; expenditures on single-family homes increased by slightly over 25 percent. Expansion of both the Honda plant in
Talladega County and the Mercedes plant in
Tuscaloosa County contributed immensely to new
industrial construction in the state. Housing construction is expected to remain strong throughout
the year and together with ground breaking for the
Hyundai plant in Montgomery County, overall construction is expected to grow at approximately 3 percent.
Alabama gross state product is expected to grow 2.8
percent in 2003, with output in the motor vehicle
industry increasing by approximately 11 percent.
Output of the combined wholesale and retail trade
sector should grow by slightly over 2 percent. In
general, employment will remain sluggish with only
services-related businesses and motor vehicle-related
manufacturing showing any notable improvement in
payrolls. Unless there is a significant upturn in capital spending, employment is only expected to
increase by 0.6 percent during 2003.
Tax Revenues. For the first quarter of the current
fiscal year, which is actually the fourth quarter of the
calendar year, total tax revenues were up a very
5
Alabama Nonagricultural Employment
Change in Number of Jobs
Total Nonagricultural
Mining
Construction
Manufacturing
Durable Goods
Lumber Products
Primary Metals
Fabricated Metal
Industrial Machinery
Electrical Machinery
Transportation Equipment
Stone, Clay and Glass
Nondurable Goods
Food Products
Textile Mill Products
Apparel
Paper and Allied Products
Printing & Publishing
Chemicals
Rubber and Plastics
TCPU
Wholesale & Retail Trade
FIRE
Services
Hospitals
Total Government
Federal Government
State Government
State Education
Local Government
Local Education
Nov. 2000Nov. 2001
Nov. 2001Nov. 2002
-26,500
-200
-1,000
-17,100
-8,800
-1,700
-1,900
-800
-1,900
-1,700
500
-200
-8,300
200
-3,400
-2,100
-1,000
-500
-1,000
-300
-1,300
-10,100
-800
700
100
1,300
200
1,100
500
100
-2,000
-14,300
400
1,300
-7,000
-1,700
100
-1,000
-800
-1,300
-400
2,500
-100
-5,300
-300
100
-2,800
-500
-1,000
-400
-400
-3,900
-4,900
-300
-100
-200
200
-700
300
-100
600
700
Source: Alabama Department of Industrial Relations.
significant 4.8 percent ($64 million) to $1,387 million, much better than the 1.4 percent decline for the
same period in the previous year. Individual and
corporate income tax receipts rose sharply, 8.6 percent ($42 million) and 28.8 percent ($9 million),
respectively. However, a generally slow economy in
the fourth quarter of 2002, resulting in one of the
most sluggish retailing seasons in recent history, led
to a 1.2 percent ($4 million) decline in sales tax
receipts to $385 million. Appropriations made to
the state’s General fund were up by almost $78 million, an increase of about 33 percent to $314 million. State appropriations to the Education Trust
fund were up by 3.2 percent, increasing from $934
million to $963 million.
For the current fiscal year, total tax revenues are
expected to increase by 2.5 percent or $152 million
6
to $6,216 million. Income tax receipts (combined
individual and corporate) are estimated to rise 3.4
percent or $92 million to $2,796 million. Sales tax
receipts, which are heavily dependent on consumer
and business spending, will grow 2.7 percent (approximately $42 million) to total $1,592 million.
Ahmad Ijaz
Selected Economic Indicators
United States
Gross Domestic Product (billions)
Percent Change
30-Year Treasury Bond Rate
3-Month Treasury Bill Rate
Consumer Price Index
Inflation Rate
Housing Starts (millions)
Percent Change
Total Employment (millions)
Percent Change
Unemployment Rate
Industrial Production Index
Percent Change
Alabama
Total Nonagricultural
Employment (thousands)
Percent Change
Total Manufacturing
Employment (thousands)
Percent Change
Durable Goods Manufacturing
Employment (thousands)
Percent Change
Nondurable Goods Manufacturing
Employment (thousands)
Percent Change
Total Wholesale and Retail Trade
Employment (thousands)
Percent Change
Total Services Employment (thousands)
Percent Change
Alabama Unemployment Rate
Initial Benefit Claims (thousands)
Manufacturing Weekly Hours
Total Tax Revenues (millions)
Percent Change
Total Income Tax Revenues (millions)
Percent Change
Total Sales Tax Revenues (millions)
Percent Change
2001/Q3
2001/Q4
2002/Q1
2002/Q2
2002/Q3
2002/Q4
9,186.4
-0.4
5.5
3.2
177.6
2.7
1.6
6.6
137.6
-0.1
4.8
139.6
-1.2
9,248.8
0.1
5.3
1.9
177.5
1.9
1.6
1.9
137.1
-1.0
5.4
137.2
-1.7
9,363.2
1.4
5.6
1.7
178.1
1.2
1.7
7.1
136.7
-1.3
5.8
138.1
0.7
9,392.4
2.2
5.8
1.7
179.6
1.3
1.7
2.6
137.0
-0.7
6.0
139.5
1.0
9,454.6
3.3
5.2
1.6
180.4
1.6
1.6
5.9
137.4
-0.2
6.0
140.7
0.4
9,514.5
2.8
5.1
1.3
181.4
2.2
1.6
6.5
137.2
0.1
5.8
139.5
0.5
2001/Q3
2001/Q4
2002/Q1
2002/Q2
2002/Q3
2002/Q4
1,909.3
-1.1
1,917.9
-1.2
1,891.7
-0.8
1,900.2
-1.0
1,889.8
-1.0
1,901.0
-0.9
337.1
-6.4
334.8
-5.7
330.9
-4.5
329.5
-3.4
327.5
-2.9
327.1
-2.3
180.8
-6.5
180.2
-5.5
179.9
-3.3
179.7
-2.0
178.3
-1.3
178.5
-1.0
156.4
-6.3
154.5
-5.9
151.0
-6.0
149.7
-5.0
149.2
-4.6
148.6
-3.8
440.2
-1.0
484.9
1.4
5.4
29.1
41.1
1,452.0
0.8
622.7
0.9
380.3
0.6
441.8
-1.7
483.0
1.1
5.9
31.5
40.9
1,323.4
-2.1
522.4
-3.6
389.7
2.2
430.5
-1.1
477.2
0.9
5.5
33.9
40.8
1,480.9
0.7
670.4
7.9
371.4
0.3
436.0
-1.3
482.7
0.2
5.5
23.8
40.8
1,716.7
-0.8
833.7
0.2
394.1
3.4
435.1
-1.2
484.0
-0.2
5.9
23.8
40.8
1,542.1
6.2
678.0
8.9
395.0
3.9
433.9
-1.8
483.9
0.2
5.9
n/a
40.2
1,387.0
4.8
573.8
9.8
385.1
-1.2
Note: All percent changes indicate change over same period of the previous year.
Source: U.S. Bureau of Labor Statistics, U.S. Department of Commerce, Alabama Department of Industrial Relations,
Alabama Department of Revenue, and Center for Business and Economic Research, The University of Alabama.
7
Alabama
Metropolitan Areas:
Brighter Days Ahead
Weakness in the state and national economies hurt
both urban and rural sections of the state in 2002.
Alabama’s 22 metropolitan area counties lost about
15,000 jobs during the year and nonmetropolitan
counties lost over 4,600, a decline of a little over one
percent in both areas. Although the nonmetro areas
have been losing jobs for years, 2002 was only the
second year in the last decade for metro area job
losses and the first year metro area losses exceeded
nonmetro ones. While for the year every metro area
lost jobs, on a comparison of December 2001 and
December 2002, Auburn-Opelika and Dothan both
managed job gains. For December 2002 compared
to a year ago, Birmingham, Florence, Huntsville, and
Tuscaloosa each lost between 1,400 and 1,700 jobs.
Despite tough economic conditions, 2002 was a year
filled with exciting developments and the seeds of
future opportunity that will bring brighter days to
Alabama’s metro areas. Transportation equipment
manufacturing, including motor vehicles, as well as
ships, aircraft, and defense-related equipment, continues to prosper. New plants and expansions and
the promise of many more to come will benefit most
areas of the state. Some of the state’s metro areas
play unique roles in national defense and antiterrorism that will continue to expand. And development
funded by the Retirement Systems of Alabama will
help give other areas an edge in tourism or downtown development.
Across Alabama, enrollments at community colleges
and technical training programs grew as workers
sought to gain marketable skills. Every metro area
expanded its efforts to retrain displaced workers and
to ready workers for jobs brought about by new and
expanding industry and by a growing services sector.
In the face of adversity, each metro area worked to
improve the quality of life for its residents. And the
spirit of regional cooperation strengthened across
Alabama in 2002 as metropolitan areas broadened
their economic development focus to make sure
nearby rural counties are not left behind.
Most of the job weakness across Alabama’s metro
areas in 2002 was in the manufacturing, trade, and
transportation, communications, and public utilities
(TCPU) sectors. Between December 2001 and
December 2002, manufacturing jobs in the state’s
metro areas declined by
Metropolitan Area Nonagricultural Employment
about 5,000. Two areas
bucked the trend—
Change from
Unemployment
Auburn-Opelika added
December 2001
Rate (Percent)
200 manufacturing jobs,
December 2002
Number
Percent
December 2002
while Dothan gained 600.
Metro area trade employ- Alabama
1,903,900
-12,300
-0.6
5.8
ment declined by 3,400
Anniston
48,200
-100
-0.2
5.1
from December 2001 to
Auburn-Opelika
45,600
200
0.4
3.7
485,700
-1,600
-0.3
4.2
December 2002. But two Birmingham
Decatur
56,400
-700
-1.2
6.3
areas that saw substantial
Dothan
69,600
900
1.3
3.9
new retail development
Florence
52,200
-1,600
-3.0
8.3
during the year added
Gadsden
37,500
-800
-2.1
5.7
jobs—Birmingham and
Huntsville
184,800
-1,700
-0.9
4.1
Montgomery each gained Mobile
228,800
-800
-0.3
5.6
500 retail trade jobs.
Montgomery
165,500
-300
-0.2
4.6
TCPU employment,
Tuscaloosa
81,300
-1,400
-1.7
3.2
which was off 3,500, was
flat or declining in every
Net Jobs in Metropolitan Areas
-9,100
Net Jobs in Nonmetro Counties
-3,200
area except Dothan,
which added about 100
Note: Metropolitan Areas total includes Russell County which is in the Columbus, AL-GA MSA.
jobs during the year.
Source: Alabama Department of Industrial Relations.
8
The weak economy and job losses of the past two
years have challenged Alabama's metropolitan areas
to work even harder in areas including job training,
infrastructure development, business and industry
recruitment, and strategic planning. We take a brief
look at some of the developments in the state's
metro areas in 2002 and at some of the prospects
that surfaced during the year.
Developments and Opportunities in 2002
Anniston: Expanding role in national security;
ongoing redevelopment of Fort McClellan; attracting
auto suppliers; proposed McClellan research park as
well as National Preparedness University.
Auburn-Opelika: Growing manufacturing sector,
including auto suppliers; expanding recreation with
new lodge and conference center at Grand National;
Colonial Mall expansion planned.
Birmingham: Strong suburban residential and retail
growth to continue over next five to 10 years;
expanding biotechnology; manufacturing growth
including auto suppliers; new office towers downtown and plans for domed stadium.
Decatur: Manufacturers improving and expanding
facilities; successful Boeing satellite launch with
Delta IV rocket; identifying sites for new industrial
park; plans for possible sports arena and hotel.
Dothan: Growing manufacturing, especially transportation equipment and machinery; large and stable
TCPU employment; downtown revitalization progressing.
Florence: Diversifying manufacturing with SCA
Tissue plant; strong tourism industry will expand
with RSA investment in golf course and River
Heritage Hotel project; new industrial parks opening.
Gadsden: Metal fabricating manufacturing expanding; area workforce benefiting from Honda jobs; trying to attract Honda suppliers; ongoing downtown
revitalization with plans for convention center and
riverfront development.
Huntsville: Toyota engine plant to open in 2003;
developing new government-related propulsion and
rotocraft systems research centers; area firms involved
in national defense-related contracts; Parkway Place
mall opened; downtown development underway.
Mobile: Tourism strong with Mobile Tricentennial
and beach area condo development; expanding shipbuilding industry; continuing State Docks expansion;
RSA working on Battle House Tower and renovated
hotel in downtown Mobile.
Montgomery: Hyundai site preparation underway
with plant test production planned for summer 2004;
working on supplier locations, with Hyundai Mobis
locating in Montgomery; Shoppes at East Chase
opened; plans for downtown riverfront and stadium
development.
Tuscaloosa: Mercedes expansion underway for 2004
opening; auto suppliers expanding and locating in
area; major retail development planned; substantial
public school construction and workforce development projects underway.
Carolyn Trent
9
Alabama Tax Reform:
A Little Progressiveness and
Some Revenue Too
This article presents a couple of ideas for making the
Alabama tax system more progressive while raising
some revenue. The recent Institute on Taxation and
Economy Policy (ITEP) report titled “Who Pays: A
Distributional Analysis of the Tax Systems in All 50
States” is just the latest in a long line of reports and
news about the regressive nature of Alabama’s tax
structure. The state tax structure has even been
labeled immoral. The share of income that taxes
constitute is highest for the state’s poorest and drops
quickly with rising income so that those who can
afford to pay more actually pay much less.
According to the ITEP report the share of income
that goes to Alabama state and local taxes is 10.3 percent for non-elderly families earning less than
$13,000, 9.4 percent for those with income between
$21,000 and $36,000, and just 3.7 percent for those
with more than $229,000 in income. The quoted
shares of income are after the Federal Deduction
Offset. Families in the last group, the top one percent, have an average 2002 income of $682,000. So
our taxes are unfair since they hit low- and middleincome families much harder than the wealthy. The
sad part is that they are becoming increasingly unfair
with time and inaction.
In addition to problems with fairness, the Public
Affairs Research Council of Alabama (PARCA) has
documented that Alabama taxes are neither adequate
nor efficient. Efficiency deals with balance among
revenue sources, flexibility of revenue distribution
and use (the earmarking issue), and general management of tax revenues to avoid waste and promote
best use. It is important to rid the government of
waste but resources are needed for that effort. As
such, raising revenues would seem to be the best way
to address both adequacy and efficiency. With a new
administration and general calls for tax and constitutional reform, the time may perhaps be right to
address these problems.
We do not have to look far for solutions. Two reports of the early 1990s from the Alabama Commission on Tax and Fiscal Policy Reform (ACTFPR) and
the Tax Reform Task Force (TRTF) contain some
10
gems. Two recommendations of the TRTF could
generate an additional $518 million in property
taxes based on 2002 receipts; raising the state property tax rate from 6.5 mills to 14 mills ($222 million)
and tacking on an extra 10 mills for schools ($296
million). This would free us somewhat to focus on
the fairness issue and design a less regressive or even
a progressive tax system.
Alabama taxes are regressive because of the high
dependence on sales and excise taxes, especially
when applied to food items and medicines. To make
our tax system fairer a progressive income tax rate
structure would be needed to counter sales and
excise taxes, which are based on price or unit of
goods purchased. It has been publicized that a twoparent family of four begins to pay Alabama income
taxes when earnings exceed $4,600, although the figure is actually $7,600 when one considers both
exemptions and deductions. Additionally, our “graduated” income tax rate structure has essentially
become a flat tax because the rate does not adjust
over time with some index such as inflation.
Solution: Alabama needs a progressive income tax.
Taxes are about provision of public services and
redistribution. Hence the rich who would be paying
more under a progressive tax system can be proud of
their altruism and civic-mindedness. Table 1 shows a
more progressive Alabama income tax schedule that
proposes a doubling of the exemption to $3,000 for
single taxpayers and married couples who file separately and $6,000 for married couples and unmarried
heads of family as well as a new graduated schedule.
Estimates of its effects are shown in Table 2 and are
based on Alabama Department of Revenue individual income tax data for 2000. Clearly, filers with less
than $38,000 adjusted gross income (AGI) will be
paying less income tax than under the current system. The break-even AGI is in the $40,000 to
$50,000 range depending on filing status. Actual tax
payments under the proposed progressive system are
also shown. AGI levels below which filers will not
owe any income tax are $5,000 for single and married filing separately, $8,300 for unmarried heads of
family, and $10,000 for married couples filing jointly.
A two-parent family of four will not pay Alabama
income tax on the first $10,600 of income. In addition, an extra $38 million in income taxes would be
generated with the proposed schedule.
Yes, we can solve the problems with our tax system.
Hopefully, any reform will have dynamic features
built in so that the system does
not become regressive over time.
The two reports mentioned earlier have other good recommendations that can be exploited. A
couple of them involve designing
a more progressive property tax
component of taxes and dropping sales taxes on food items.
Designing and adopting a progressive Alabama tax system is
possible and the time for it is
now.
Samuel Addy
Table 1. Existing and Proposed Alabama Individual Income Tax Rate Schedules
Current
Exemption
1,500
- Joint Filers and Heads of Family 3,000
Standard Deduction
2,000
Dependent Exemption
300
Threshold ($)
Above
0
500
3,000
Minimum Tax
0
10
110
Proposed
Exemption
3,000
- Joint Filers and Heads of Family 6,000
Standard Deduction
2,000
Dependent Exemption
300
Rate
2.0%
4.0%
5.0%
Threshold
0
3000
6000
12,000
18,000
Minimum Tax
0
90
210
510
870
Rate
3.0%
4.0%
5.0%
6.0%
6.5%
Source: Alabama Department of Revenue and Center for Business and Economic Research,
The University of Alabama.
Table 2. Estimated Effects of a Progressive Alabama Individual Income Tax
Adjusted
Gross Income
Change in Income Tax per Filing by Status
Single
Married
Married
Head of
Joint
Separate
Family
Less than 1,500
1,501-3,000
3,001-6,000
6,001-8,000
8,001-10,000
10,001-12,000
12,001-14,000
14,001-16,000
16,001-18,000
18,001-20,000
20,001-22,000
22,001-24,000
24,001-26,000
26,001-28,000
28,001-30,000
30,001-32,000
32,001-34,000
34,001-36,000
36,001-38,000
38,001-40,000
40,001-45,000
45,001-50,000
50,001-55,000
55,001-60,000
60,001-65,000
65,001-70,000
70,001-75,000
75,001-80,000
80,001-85,000
85,001-90,000
90,001-95,000
95,001-100,000
100,001-200,000
200,001-300,000
300,001-400,000
400,001-500,000
500,001-600,000
600,001-700,000
700,001-800,000
800,001-900,000
900,001-999,999
Over 999,999
(17)
(7)
(52)
(72)
(95)
(109)
(125)
(125)
(125)
(125)
(125)
(113)
(100)
(87)
(73)
(59)
(44)
(23)
(8)
8
9
63
107
151
200
240
335
309
359
396
441
476
835
1,566
2,332
3,135
3,894
4,267
5,412
5,965
7,403
15,734
na
(2)
(7)
(31)
(62)
(102)
(127)
(149)
(171)
(184)
(198)
(200)
(200)
(200)
(200)
(193)
(177)
(163)
(150)
(135)
(55)
(54)
(2)
48
97
142
188
231
273
314
364
398
658
1,518
2,299
3,032
3,871
4,456
5,427
5,944
6,776
16,076
(41)
(5)
(50)
(67)
(91)
(107)
(122)
(125)
(125)
(125)
(125)
(115)
(106)
(91)
(78)
(74)
(54)
(40)
(23)
(13)
32
52
85
132
177
211
260
296
316
352
410
424
660
1,489
2,068
2,768
3,583
4,176
6,342
6,404
6,726
16,026
(22)
(1)
(12)
(69)
(119)
(152)
(178)
(195)
(200)
(200)
(200)
(200)
(198)
(186)
(175)
(164)
(153)
(140)
(126)
(104)
(57)
(29)
11
63
104
146
192
230
274
311
343
416
656
1,525
2,291
3,140
3,545
3,580
4,787
4,998
10,908
Single
5
55
92
147
208
284
361
435
504
582
662
737
820
897
962
1,051
1,117
1,184
1,408
1,426
1,616
1,806
2,017
2,192
2,605
2,489
2,705
2,868
3,063
3,214
4,769
7,938
11,255
14,738
18,028
19,642
24,602
27,000
33,229
69,332
Progressive Tax per Filing by Status
Married
Married
Head of
Joint
Separate
Family
25
58
95
147
202
268
344
417
480
553
647
731
812
893
1,236
1,245
1,468
1,685
1,896
2,093
2,293
2,479
2,661
2,837
3,053
3,199
4,327
8,054
11,437
14,617
18,251
20,786
24,995
27,235
30,841
71,138
1
48
84
138
197
271
343
427
480
569
625
713
794
818
917
980
1,053
1,095
1,290
1,375
1,521
1,722
1,920
2,067
2,279
2,435
2,520
2,679
2,929
2,990
4,014
7,606
10,112
13,145
16,679
19,249
28,636
28,901
30,298
70,598
14
63
123
192
262
336
402
465
524
592
659
725
790
871
931
1,026
1,231
1,350
1,525
1,748
1,926
2,109
2,311
2,472
2,664
2,826
2,964
3,278
4,318
8,086
11,406
15,083
16,838
16,990
22,218
23,136
48,743
Source: Statistics of Income: 2000 Tax Year, Alabama Department of Revenue and Center for Business and Economic Research,
The University of Alabama.
11
First Quarter 2003
The Business Leaders Confidence Index entered its
second year in 2003. Panelists registered their opinions in December 2002 about the direction of the
national and state economies as well as industry
sales, profits, hiring plans, capital expenditures, and
interest rates for the first quarter of 2003.
Respondents represented a broad range of Alabama
businesses—while 28.8 percent employed at least 100,
43.9 percent had fewer than 25 employees. By sales,
27.6 percent of participating firms reported annual
sales of more than $20 million and 44.6 percent
under $5 million.
Alabama business leaders correctly anticipated not
only the continued modest recovery during the
fourth quarter of 2002 but also the slowing pace of
that recovery, especially where jobs are concerned.
In the face of the economic and geopolitical uncertainties facing the nation early in 2003, panelists
forecast a continued modest recovery that will
strengthen slightly in the first quarter. At 58, the
index is two points higher than the fourth quarter
2002 reading. About 60 percent of business leaders
expect stronger growth in the U.S. economy during
first quarter 2003. However, expectations for the
The University of Alabama
Center for Business and Economic Research
Box 870221
Tuscaloosa, Alabama 35487-0221
Address service requested.
state are less
robust with
just 49 percent anticipating improvement in the
Alabama
economy.
BLCI
Current Quarter vs. Previous Quarter
100
80
Index
Alabama Business
Leaders Confidence
Index
60
63 60
Strongest
56 58
54
impetus for
40
growth should
come from
20
increases in
sales and
profits, with
0
Q1 Q2 Q4 Q4 Q1
about 55 per2002
2003
cent of panelists expecting increased sales in their industry early in 2003 and
about the same share forecasting industry profit
gains. Weak job creation and a slow rebound in capital spending will continue to constrain the recovery.
Just 26.9 percent of Alabama business leaders expect
their industry to add jobs during first quarter 2003,
while 17.3 percent foresee job cuts. Capital spending
may begin to pick up modestly during the quarter,
with 44.2 percent of panelists forecasting increased
capital expenditures in their industry.
Carolyn Trent
The BLCI is developed in partnership between
Compass Bank and the Center for Business and
Economic Research. Complete results can be found
at blcindex.cba.ua.edu.
Nonprofit Organization
U.S. Postage Paid
Tuscaloosa, AL 35401
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