American migration patterns change over time and these moving patterns can have an impact on corporate mobility, talent recruitment, and talent retention. When considering migration patterns, especially in light of tax reform, it’s important to understand the tax implications as transferees move from state to state, especially those with high volumes of inbound and outbound population.
Add Tax Reform to the Mix and it Makes for Challenging Times
Compounding the issue of American migration patterns is tax reform. After more than a quarter of a century, a major federal tax overhaul was signed into law at the close of 2017. The implications for business are significant throughout the organization—including corporate mobility pros, talent recruitment and retention teams, finance executives, and senior leaders. The biggest change for HR and corporate mobility pros brought about by tax reform is the complete elimination of the moving expense deduction. Add to that data from a recent study on American migration patterns—how they are changing and where they are staying the same—and it’s a challenging time for businesses.
The Data: Where Americans Are Moving
We recently completed our annual study: Where Americans Are Moving: 2017 Migration Report, and while some things have stayed the same, there are also some changes worth noting. Here are a few key takeaways:
- This is the first year Arizona has been the leader in inbound moves. They have come in second each of the last 3 years.
- Illinois topped the outbound moves list for the 3rd time since 2011.
- For the last 5 years, the states with the highest move totals haven’t changed. They are as follows: Florida, California, and Texas.
- Tennessee made its first debut in the Top 5 most inbound states.
- California made its first debut in the Top 5 most outbound states.
How Might Migration Patterns Affect HR and Corporate Mobility Pros?
For HR and Corporate Mobility pros, American migration patterns can impact talent recruitment and retention, as well as the business of relocating existing employees within the company. As an example, tax reform has resulted in the elimination of state and local tax deductions, which means the pressure is on for high tax jurisdictions. The data shows states like California, New Jersey, and New York in the top 10 for outbound population. For financial considerations, transferees and potential new hires may resist moving into these higher tax jurisdictions, reinforcing the outbound trend.
There are considerations for high inbound states as well. Across the country, housing inventory is tight. For high inbound states like Arizona, Idaho, the Carolinas, and Tennessee, we could see all the more pressure on housing inventory, driving up home prices in places currently viewed as more advantageous than high tax areas. Job markets could be affected as well, as spouses/significant others seek employment in their new communities.
Want to know more about where Americans are moving? Click here to explore an interactive map and download the report.
And if you’re navigating the process of updating corporate mobility policies to reflect changes brought about by tax reform and would like a deeper dive on the topic, we’ve prepared a comprehensive breakdown in this downloadable Guide: 2018 Tax Reform: Key Points of Interest for Corporate Mobility, HR Pros, and Senior Executives.
Without question, it is a challenging time for businesses. While a reduction in corporate tax is a welcome change, changes brought about by tax reform are generally requiring a comprehensive review and complete overhaul of existing corporate mobility and corporate relocation policies.
For HR pros focused on talent recruitment and talent retention, corporate relocation offerings factor significantly into employment decisions. For corporate mobility pros, transferees have more questions than ever before, and decisions to relocate are infinitely more complicated than they have been in the past. Hopefully these resources prove helpful to you.