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Hitting the Road: Majority of Executives in High-Tax States Would Consider a Move to Avoid New Tax Law Implications, According to Korn Ferry Survey
- While Three-Quarters Say Legislation is Good for Business, 71 Percent Cite Negative Impact on Workforce –
- Less than 40 Percent Say Exec Teams Have Met to Discuss Allotment of Tax Savings –
LOS ANGELES, Feb. 15, 2018 — A new survey by Korn Ferry (NYSE: KFY) shows that executives believe new tax legislation will bring both positive and negative outcomes to business, depending on which state workers reside.
The early February 2018 survey showed that while 74 percent of respondents agreed that the new tax legislation will help business, 71 percent believe that companies located in high tax-states face the risk of talented employees leaving for states where the tax burden is less.
“Organizational leaders must understand that their business strategies and their talent strategies are inextricably connected,” said Bob Wesselkmper, Global Head of Korn Ferry Rewards and Benefits Solutions. “Businesses will not succeed if they aren’t able to keep qualified talent, so compensation strategies must be put in place to help ameliorate increased tax burdens of workers in affected states.”
On a broad level, 51 percent of executives surveyed think professionals who live in high-tax states should consider moving. On a personal level, 58 percent of the executives said that if they live in a high-tax state, they would consider looking for a job in a lower-tax state to avoid paying more taxes, and 44 percent said they would ask their company for a transfer.
In terms of how much the new legislation will truly affect income, 45 percent of the executives surveyed say they believe they’ll see more in their paycheck, with a third expecting to see the same amount and 22 percent expecting to bring home less due to the new legislation.
“It’s still too early to understand the full effect of the tax law changes on business, but it’s critical that organizations keep a close eye on the impact, and to the extent possible, adjust compensation packages accordingly,” said Wesselkamper.
Organizations Have Work to Do to Understand Tax Law Implications
A separate Korn Ferry survey fielded at the same time asked executives about their organizations’ readiness for the new tax laws. In that survey, less than half (39 percent) of respondents said their executive teams have met to discuss high-level plans regarding how their organizations will allocate savings associated with the new tax cuts.
More than half (52 percent) said they have not yet been able to quantify the savings from the new tax law, and only 16 percent say their organization is firm on their direction on how to allocate savings associated with the new tax cuts, with 84 percent saying they are only somewhat firm or not firm at all on the new direction.
When asked what would be most likely to happen in the next year due to the tax cuts, the largest percentage said increasing capital investments at a faster rate, followed by enhanced employee training and development, and increasing acquisitions of new business.
When asked what would be least likely to happen in the next year due to the tax cuts, the largest percentage said one-time bonuses, followed by increasing the rate of share buyback, and increasing 401K values.
“This is the most sweeping tax overhaul in decades, and it is critical that organizations put in place comprehensive strategic plans to address the wide range of implications,” said Wesselkamper.
About the Surveys
The executive surveys were fielded in early February 2018 and garnered a total of 465 responses.
About Korn Ferry
Korn Ferry is a global organizational consulting firm. We help companies design their organization – the structure, the roles and responsibilities, as well as how they compensate, develop and motivate their people. As importantly, we help organizations select and hire the talent they need to execute their strategy. Our approximately 7,000 colleagues serve clients in more than 50 countries.