(The Center Square) – Arkansas received an influx of new residents during the COVID-19 pandemic, a new report shows.
Independent tax policy nonprofit the Tax Foundation analyzed Internal Revenue Service and Census data showing location changes that occurred between tax returns filed during 2020 and 2021 and found Arkansas received over 15,600 new residents through interstate migration.
Those residents brought $537,621,000 worth of adjusted gross income, placing Arkansas 17th in the nation for its AGI gain and 12th for the new residents gained.
Nationally, 26 states gained income tax filers from interstate migration, while 24 states and the District of Columbia lost tax filers.
The report found a strong relationship between a state’s tax competitiveness and net migration.
What stands out for Arkansas is its tax system at the time received poor marks in another Tax Foundation report analyzing states’ business tax climates. It ranked 45th in the country, receiving its lowest individual income tax and sales tax scores. This means Arkansas could attract new residents at a time before it adjusted to a more favorable tax system.
Since then, Gov. Sarah Huckabee Sanders signed a bill rolling back income and corporate taxes, which led to $250 million returned to taxpayers in income taxes and $58 million back to corporations.
“Sometimes taxpayers choose to move to a lower-tax state at least in part to reduce their own tax burden. But even those who do not consciously select for lower taxes may be doing so indirectly when they prioritize job opportunities and other factors related to the state’s economic competitiveness,” the report said.
In general, states that received the most significant gains in new residents either did not levy individual income taxes, had a flat tax, or were moving to a flat income tax.
The report found top destinations for taxpayers with $200,000 or more in AGI were states that do not have highly progressive tax codes, which raises tax liability according to higher income. The big winners for interstate migration were Florida, Texas, North Carolina, Arizona and South Carolina, according to the report.
Meanwhile, states with progressive tax codes like New York, California, and New Jersey lost thousands of affluent residents.
States that received the most new tax filers were Florida, Texas, and North Carolina. The states that lost the most were California, New York and Illinois, the report said.
