Report shows Arkansas sees an increase in resident numbers

Arkansas – The COVID-19 pandemic, a global crisis, unexpectedly turned the tide of internal migration in the United States. A new report based on Internal Revenue Service and Census data reveals an interesting trend: Arkansas, a state not typically known for high in-migration, saw a significant influx of new residents during the pandemic. This shift in population dynamics during 2020 and 2021 brings to light the changing preferences and priorities of American taxpayers.

Arkansas, a state often overlooked in migration trends, welcomed over 15,600 new residents through interstate migration during the pandemic. This number is not just a statistic; it represents a significant movement of people and, importantly, their economic contributions. These new Arkansans brought with them a staggering $537,621,000 in adjusted gross income. This influx placed Arkansas 17th in the nation for adjusted gross income gain and 12th for the number of new residents gained. Such figures are noteworthy, especially considering that nationally, 26 states gained income tax filers from interstate migration while 24 states and the District of Columbia experienced a loss.

What makes Arkansas’s situation unique is the state’s tax system. During the influx period, the Tax Foundation’s report on states’ business tax climates ranked Arkansas 45th in the country. The state received particularly low scores for its individual income tax and sales tax systems. This ranking suggests that Arkansas was attracting new residents before any major reforms to create a more favorable tax environment. However, change was on the horizon.

Under the leadership of Gov. Sarah Huckabee Sanders, Arkansas underwent significant tax reforms. The state rolled back income and corporate taxes, resulting in $250 million being returned to individual taxpayers and $58 million to corporations. These changes reflect a broader national trend identified in the report: the correlation between a state’s tax competitiveness and its net migration.

The report highlights a notable pattern in interstate migration: states attracting the most new residents generally have more favorable tax structures, such as the absence of individual income taxes, the implementation of a flat tax, or a transition towards a flat income tax system. This trend is especially pronounced among taxpayers with higher incomes. States with progressive tax codes, where tax liability increases with higher income, tend to lose affluent residents. The big winners in this interstate migration have been states like Florida, Texas, North Carolina, Arizona, and South Carolina. Conversely, states like New York, California, and New Jersey, known for their progressive tax codes, have seen a significant outflow of affluent residents.

The pandemic period saw a reshuffling of U.S. internal migration patterns, with Arkansas emerging as a surprise beneficiary. This shift underscores the influence of tax policies on migration trends and the evolving preferences of American taxpayers. As states continue to adjust their tax policies, it will be interesting to see how these migration patterns evolve in the post-pandemic era.