As a socially conservative Deep South state, it is unsurprising that Alabama does much better on economic freedom than on personal freedom. Some of its neighbors do better on economic freedom (Tennessee and Florida), one does about as well (Georgia), and one does much worse (Mississippi).
Alabama has always been one of the lowest-taxed states in the country. Its combined state and local tax collections, excluding motor fuel and severance, were an estimated 7.7 percent of personal income in FY 2013. State-level taxes fell quickly in the early stages of the Great Recession and have not increased much since then. Local taxes crept up a bit over the 2000–2008 period. Alabama has a moderate degree of choice in local government. Municipalities are more important than counties, but counties are still important, and municipalities are not numerous enough to give Alabama even one competing jurisdiction per 100 square miles.
Unlike some other southern states, Alabama spends little on subsidies to business. Its debt burden is also fairly low. However, public employment is high because of publicly owned utilities and hospitals.
On regulatory policy, Alabama does especially well on land-use and labor policies, but it does well below average on its tort system and certain cronyist policies. Local zoning has a light touch, allowing the housing supply to rise elastically with the state’s growing population. Alabama enjoys a right-to-work law, no minimum wage, and liberal workers’ compensation mandates. Unfortunately, the state passed an E-Verify mandate on employers in 2011–12.
Alabama has made some moves to improve its civil liability system, but it could do further reforms. The standard of evidence for punitive damages remains unreformed. The state has not abolished joint and several liability.
Some cronyist regulations on business and occupation entry are as follows. Like several other southern states, Alabama suffers from strong physicians’ and dentists’ lobbies that have prevented nurse practitioners and dental hygienists from practicing independently. There is a certificate-of-need requirement for hospital construction. Personal automobile and homeowner’s insurance rates require the insurance commissioner’s prior approval. Alabama has a long-standing anti-price-gouging law that will create real harm if the state is ever struck by a major natural disaster. The state also bans sales below cost of gasoline and direct-to-consumer wine shipments.
The state is one of the worst in the country on personal freedom, although its ranking is set to rise substantially because of the Supreme Court’s Obergefell decision, which has the effect of nullifying Alabama’s prohibition on all same-sex partnership contracts.
Alabama was long below average for conservative states on gun rights, but in 2013–14 it moved to shall-issue on concealed carry, and permit costs are low. Alcohol regulations have gradually loosened over time, but the state still has some of the highest beer and spirits taxes in the country, along with local blue laws. The state has done nothing to reform its cannabis laws; it is possible to receive life imprisonment for a single marijuana trafficking offense not involving minors or a school zone. Alabama has a much higher incarceration rate than the national average, even adjusting for its violent and property crime rates. However, its police are actually not very vigorous in pursuit of arrests for victimless crimes. The state does much better than average on tobacco freedom because of low taxes and relatively lenient smoking bans on private property. The state is mediocre on educational freedom but did enact a modest private scholarship tax credit law in 2013–14.