Cato Institute Policy Analysis No. 302
State-by-State Tax Comparison


Employer Costs, Take-Home Pay, and Tax Wedge for an Average Manufacturing Wage Worker in ALABAMA
  Annual Amount Rank
Total Cost to Employer* $30,894 23
Take-Home Pay $22,134 41
Take-Home Pay, % of Employer Costs 71.6% 30
Tax Wedge* $8,760 15
Tax Wedge, % of Employer Costs 28.4% 15
Gross Earnings $27,200  
Taxes Withheld from Worker's Paycheck    
Social Security/Medicare Payroll Tax $2,081  
Federal Income Tax $2,048  
State Income Tax $938 11
Total Taxes Withheld $5,066  
Hidden Taxes Paid by Employer on Worker's Behalf    
Social Security/Medicare Payroll Tax $2,081  
Workers' Compensation Contribution $1,485 18
State Unemployment Insurance Tax $72 47
Federal Unemployment Insurance Tax $56  
Total Employer-Paid Taxes $3,694  
Employer-Paid (hidden) Share of the Tax Wedge 42.2% 29
Source: Dean Stansel, "The Hidden Burden of Taxation: How the Government Reduces Take-Home Pay," Cato Institute Policy Analysis No. 302, April 15, 1998.
*Total cost to employer does not include the cost of fringe benefits (such as employer contributions to private health insurance plans and pensions) and tax and regulatory compliance. The tax wedge does not include the host of other taxes--property taxes, sales taxes, gas taxes, cigarette taxes, etc.--that workers must pay with their remaining take-home pay.

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