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

Alabama

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.