Business

America’s next migration movement and its effect on funeral service

United States net migration by state since 2016

I’m a history buff and I love to look back and learn what has happened in our country.  I’ve found that many times a “precipitator” happens and that event or group of events causes history to happen.  I was running on my treadmill the other morning watching CNBC for business news and Fox News for other news and in switching back and forth between channels I realized that in different ways they were talking about the same thing.

What they were talking about was income taxes and the new Trump tax laws where we are getting our first returns filed this spring based on income in 2018.  The issue was what is referred to as the limitation for SALT reductions. . . SALT stands for “State and Local Taxes”.  As you may know, while the Trump tax cuts lowered your tax rates overall, it also put in a limitation on what one can deduct for SALT. . . which before had been unlimited.

The net effect of this change is that people who live in states with high state and local taxes will, in real dollars, probably pay more in because of the non-deduct ability of SALT. i.e. they cannot deduct state and local taxes so there taxable income, albeit taxed at lower rates, is much higher.

Now, as I thought, how will that fit into funeral service.  As an amateur historian I know that the United States has had four great migration movements.  First of all it was the people that came from Europe and northern Europe that settled our country.  Then came the westward land expansion after the Louisiana purchase where people moved from the east to the west – this was the latter half of the 19th century. People continued to move west following the dust bowl days of the 1930’s and finally thanks to Willis Carrier inventing air conditioning we were able to migrate in bunches to the hot or humid cities of the deep south and west – and make mega cities of Miami, Atlanta, Phoenix, Las Vegas,  and even Houston — in the latter half of the 20th century.

So, what do I think will be the next great migration and why?  I believe it is already occurring and the SALT issue will exacerbate the movement.     The movement will be economic in nature and you will see those with the means and ability, such as a person with a computing job where they can work from wherever they want to – or retired people who no longer need to be tied geographically to where they once worked.  People will choose with their pocketbooks and move from high tax states to lower tax states. . . and, of course, some of the movement will also be for climate.

Take a look at the map.  . high tax states like Illinois, California, New York, Connecticut, and Massachusetts  are already losing population to “business friendly” states like Florida, Tennessee, North Carolina, South Carolina, Arizona, and Nevada.  Even in the upper midwest where I live, you can see business friendly South Dakota growing, and it is not for weather,  while most states around it are declining.  Anecdotally, I have a lot of friends moving/retiring to Sioux Falls – and to the southern states -instead of staying in Minnesota, partly because of our tax climate.

The other issue I see in migration is that people who are really rural in geography — like communities of 4,000 to 5,000 people — no longer stay in those communities once they retire.  If they stay in their home state they seem to move to larger urban areas or regional centers where they can enjoy restaurants, the theatre, sporting events, the arts, and quality medical care.

Here is where I think funeral directors have to be smart.  In those 4,000 – 5,000 person communities, that maybe because of an average age that is older than the norm, have a death rate of 10 per thousand.  That is only 40-50 deaths per year in that community.  And, with cremation and especially direct cremation growing so fast, will there be enough revenue to support a funeral home?

And in larger cities of states that are losing population.  What happens when there are less businesses and people to pay the taxes your state seems to need?  Unless budgets can be cut, your rates will go up and more people will move out and the cycle viciously continues.  All in an environment where your revenue per service is declining.  Where state and local taxes are high – and an employee cannot deduct that number for federal taxes, can you imagine it being any easier to keep employees in your state?  Of course, this could lead to an evolution of the strong — where the strongest funeral homes survive and the weakest disappear with their calls and staff moving on to the survivors.

Funeral homes and their owners need to be smart and they need to look at the demographic changes unique to their community as they plan for the future.  Death care professionals will always be needed in our world, but how we do our work and where the business will be needs to be part of your future planning.

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