INTRODUCTION:
As any CPA will tell you, understanding taxes is a big job. Taxes vary by locality, special district, and state. There are also differences by Industry as some businesses are required to pay taxes specific to their work. This article outlines the basics of how taxes work in IMPLAN and what is included in each type of tax.

If you want to know where a specific tax exists in the IMPLAN data, choose a keyword and then use control + F and search for its name. Under each type you may see an entry for both “alcohol” and “liquor” to aid in searching. Note that a few types of taxes show up more than one area. For example, business motor vehicle taxes are located in TOPI while personal motor vehicle taxes are located in Personal Income Tax.

MODELING TAX CHANGES:
Every analysis in IMPLAN will give you tax results, however, specifically modeling tax impacts falls under the heading of socio-political impacts. Therefore in order to model a tax impact or change, the analyst needs to determine what the change to the economy would look like because of the tax impact/change. For more information, visit the article Taxes: The Basics of the Breaks.

KEY CONSIDERATIONS:
Tax Impact results are based on the collected and reported taxes within the region for the given data year. The categories within the Tax Impact Report correspond to the categories in the SAM. So, when you go Behind the i, you can look them all up.

The Tax Impact Report information simply provides more detail to IMPLAN’s economic impact estimates. Remember, tax results cannot be added to any summary or detailed results as they are already included as a portion of Output.

The data you have may just be more specific to your Industry than the estimates in IMPLAN. If you have exact information on your Direct Taxes, these should be used to replace IMPLAN’s Direct tax estimate. Then use IMPLAN’s Indirect and Induced tax estimates.

Taxes are levied at different levels of government. In IMPLAN, we can see the results at the following levels; State + Local, Federal, County, Sub County General, Sub County Special Districts, and State. Sub County General includes city and township governments. Sub County Special includes fire and public school districts.

TAXES ON PRODUCTION & IMPORTS NET OF SUBSIDIES (TOPI):
Taxes on Production & Imports net of Subsidies (TOPI) is one of the four components of Value Added. Because TOPI is net of subsidies, it can be negative for a given Industry in a given year if that Industry received more subsidies from the government than it paid out in these taxes in that year. I-O models by default treat TOPI as a leakage, meaning that any TOPI generated as part of an analysis will not generate any additional effects.

Taxes are Industry and geographically specific. However, the breakout by tax category (e.g., sales tax, property tax, etc.) is not Industry specific, due to raw data limitations. Also, there is no way within IMPLAN to know the break out of the components of each subset of tax (ie Sales Tax) into additional detail; the raw data we use do not have this level of detail.

The tax impact report splits the TOPI tax impacts into subcategories based on the picture of each region’s economy. IMPLAN does not have industry-specific taxes paid (other than total TOPI, which is industry-specific) so the distribution will be an all industry average.

Even if the tax is treated as an excise tax, rather than a traditional sales tax in a certain state, it will still show up in IMPLAN as a sales tax. You’ll notice that there is no excise tax category for State/Local Government in the tax impact report. For example, if a resort tax is charged on a per-unit basis (i.e., $ per hotel room) then it is technically an excise tax; however, in our data source, state and local excise taxes are lumped in with sales tax and will therefore show up as sales tax in the IMPLAN tax report.

TOPI does not include all taxes paid by an industry. For example, social insurance taxes are a part of Employee Compensation and profits taxes are part of OPI.

Property Taxes paid by Households on their primary residences are not displayed as a payment from Households but rather from the TOPI column. This is because Households pay these Property Taxes through Sector 449 – Owner-occupied dwellings. The property taxes shown as being paid by Households are for other big-ticket items such as boats and cars. Direct property taxes on construction impacts are not property taxes on the built structure itself – just on the construction companies’ properties. To get the building’s property taxes you have to run the operations phase.

TAXES INCLUDED IN TOPI
Type of Tax

Specific Taxes Included

Where Levied

Sales Tax

Alcohol, amusement, bed, cigarettes, consumption, cosmetic medical procedures, fuel, gallonage, gasoline, general sales, gross receipts, hotel, insurance premium, internet, local general, lodging, liquor, luxury, meals, occupancy, other selective, parimutuels, plastic surgery, public utilities, recycling, state general, sewer, ticket, tobacco, transfer, occupancy, resort, sin, turnover, use, utilities, waste management, value added (VAT), vanity tax, water

State, County, Sub County General, Sub County Special

Property Tax

Boats, business personal property, intangible property, machinery and equipment, property, real estate, school

State, County, Sub County General, Sub County Special

Motor Vehicle License

License fees – business, license plates, operators license – business, registration fees – business, vehicle license – business

State, County, Sub County General, Sub County Special

Severance Tax

Carbon dioxide, crude oil, natural gas, methane, severance, timber, uranium

State, County, Sub County General

Other Taxes

Alcoholic beverage license, amusements license, business license, business registration renewal, concession license, corporation license, documentary fee, documentary and stock transfer, fishing license, franchise tax, food and beverage license fees, hunting license, gun license, mortgage recording, Nonemployee Compensation (NEC), occupation and business license, other license, permit, public utility license, tourism license, stamp tax

State, Sub County General, Sub County Special

Special Assessments

Fee, fine, special assessment, toll

State, Sub County General, Sub County Special

Excise Tax

Air transportation, alcohol, biodiesel, cable, “Cadillac” tax (high-cost employer-sponsored health insurance), charitable hospitals for failure to meet the community health needs, cigarettes, cell phone, coal, crude oil windfall profit, development impact, diesel, fuel, environmental, gas-guzzler, gasoline, hazardous materials, health insurance, indoor tanning, inspection fee, insurance receipts, jewelry, liquor, medical devices, nuclear fuel, ozone-depleting chemicals, pharmaceutical, public utilities (electric, gas, phone), refunds (other than for alcohol and tobacco), satellite, tires, storage fee, soda, telephone, tobacco, trucks, windfall profit, wireless

Federal

Custom Duty

Custom duties, export tax, import tax, tariff

Federal

OTHER PROPERTY INCOME (OPI):
Other Property Income (OPI) represents gross operating surplus minus Proprietor Income. OPI includes consumption of fixed capital (CFC), corporate profits, and net business current transfer payments. It includes income derived from dividends, royalties, corporate profits, and interest income. Thus, OPI provides a source of income for households, businesses, and governments. The other key component of OPI is corporate profits tax.

Just like TOPI, I-O models by default treat OPI as a leakage, meaning that any OPI generated as part of an analysis will not generate any additional effects. This is because there is no assumption built into the model as to how, when, and where OPI will be spent.

TAXES INCLUDED IN OPI
Type of Tax

Specific Taxes Included

Where Levied

Corporate Profits

Corporate profits tax, corporate income tax, private enterprise tax, profits tax

Federal, State,
County, Sub
County General

SOCIAL INSURANCE TAXES:
Social Insurance taxes (commonly referred to as payroll taxes) are paid under Employee Compensation. Remember this is always a fully-loaded number so it should include all wages and benefits. They include both employee-paid and employer-paid portions and show up in the SAM and tax impact report as payments from the Employee Compensation column. All payroll taxes are paid at the place of employment; this is in contrast to personal taxes, which are discussed in the next section

TAXES INCLUDED IN SOCIAL INSURANCE
Type of Tax

Specific Taxes Included

Where Levied

Employee Contribution

Disability, Children’s Health Insurance Program (CHIP), estimated payments, Federal Insurance Contributions Act (FICA), IRA rollover, Medicare, Medicaid, non-qualified health savings account distributions, Old Age Survivors and Disability Insurance (OASDI), pay-as-you earn (PAYE), pay-as-you-go (PAYG), penalty for underpayment of estimated tax, retirement early withdrawal penalty, surtax, Social Security, survivors, State Government Retirement

Federal, State, County

Employer Contribution

Disability, hospital, Children’s Health Insurance Program (CHIP), Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act (FUTA), Medicaid, Medicare, Military medical, Old Age, Survivors and Disability Insurance (OASDI), payroll, pension, Social Security, State Government Retirement, Federal Insurance Contributions Act (FICA), State Unemployment Tax Act (SUTA), survivors, retirement, Unemployment, Workers’ Compensation

Federal, State, County

PERSONAL INCOME TAX:
Employees pay payroll tax on their Labor Income (EC + PI) and then pay personal income tax on their Household Income, which may include more than just employment-based income. Personal income taxes are also paid on other types of income (e.g., rental income, dividend income, interest income, capital gains, retirement income). The effective personal income tax rate in IMPLAN is basically a weighted average of the individual rates of all these types, depending on the amount of each paid in a given region in a given year.

In IMPLAN, all personal income tax is assumed to be paid at the place of residence; however, in the real world, the personal tax paid on wage income (which is part of what is withheld from an employee’s paycheck) is paid to the place of employment. This is true of state and local personal taxes on wage and salary income, which are levied based on where people work. 

TAXES INCLUDED IN PERSONAL INCOME TAX
Type of Tax

Specific Taxes Included

Where Levied

Motor Vehicle License

Cars – personal, motor vehicle – personal

State, County, Sub County General, Sub County Special

Other tax

Dog license, fishing license, hunting license, other personal license, pet license

State

Income Tax

Alternative Minimum, capital gain, dividend, income, individual income, interest income, Kiddie Tax (Tax on a Child’s Investment and Other Unearned Income), personal income, rental income, wage income, withholding

Federal, State, County, Sub County General, Sub County Special

Estate and Gift Tax

Death, estate, gift, inheritance

Federal

INTRODUCTION:
Where your impact is taking place is a pretty easy question to answer. However, you may want to talk about that impact at the local, regional, or state level as well. You may even want to look at how an Event in one Region impacts another Region.

DETAILS:
The Region you define determines the boundary for which estimated spending is captured as an effect to the Region. The spending that does not affect the Region you’ve defined (according to the model) are called leakages.

GEOGRAPHY LEVELS IN IMPLAN:
Regions can be accessed by clicking Regions via the IMPLAN Dashboard at app.implan.com. Once a Region has been built, it can also be selected via the Region field of a Group in the Impact Screen. Data about a Region can be accessed “behind the i” in the Regions screen once a Region is selected and built.

From the Regions screen, you can select a Region by typing the name of one of the following US geography levels in the Search field:

ZIP Codes
Congressional Districts
Counties
States
Country (United States)
You can also select States and Counties by clicking on them on the map. Toggle the map between State View and County View by using the map view dropdown at the bottom right-hand corner of the map shown below.

Framing_Where_-_Map_View.jpg

SINGLE & COMBINED REGIONS
You may want to look at a change in your county and how that affects your county. Pretty straightforward. In IMPLAN you can also combine smaller geographies to create a custom region. To do this, navigate to your Regions screen and click on or type in the names of all of the geographies you want to combine into one new combined region.

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Next, click on the Advanced Options in the upper right corner of your screen just above your first listed Region.

Framing_Where_-_Map_Arrow.jpg

A new box will pop up prompting you to give your combined region a name. If you want to use this same combination in the future, give it a logical name that you will remember as IMPLAN will save all of your combined regions for you.

Framing_Where_-_Name_Combo.jpg

Click SAVE and IMPLAN will start building your new combined Region for you. When the teal icon shown below appears, your new Region has been built and you are ready to input your Events.

Framing_Where_-_Combo_Created.jpg

Be aware of aggregation bias – which stems from the loss of detail that occurs when you combine regions together to form a blended larger region.

FUNCTIONAL ECONOMIES
In addition to defining your analysis Region based on where the impact is taking place and where you want to measure the effect, it’s also important to consider the functional economy. A functional economy encompasses the major labor and production shed of the impact or contribution being modeled. This means that the region captures the local supply chain and areas in which employees are living and spending their income.

A functional economy has established economic networks and can support demand for labor as well as goods and services needed by both households and businesses. How long spending will circulate within an economy depends on the functionality of the economy. This is because there will be less leakage of spending in a more functional economy, relatively. Leakages of spending into other Regions occurs primarily due to imports of goods and services into your Region as well as non-resident employees (in-commuters) working in your Region. IMPLAN estimates these leakages for you based on your defined Region. You can adjust your commuting rate if you know specific information that you would like to model.

COMPARING & CONTRASTING
IMPLAN does have the ability to show you how the Event might look different if it were in Indiana or in Illinois. You can create one Event on your Impacts screen and drop it into both counties. Then on the Results screen, use your Filter to flip between the two geographies to see the differences.

Framing_Where_-_Same_Event_in_2_States.jpg

RESULTS ACROSS GEOGRAPHIES
You may want to look at how your event in Mecklenburg County, NC, but also how it will affect nearby Gaston County. This can be done using a feature in IMPLAN called Multi-Regional Input-Output Analysis (MRIO) which links Regions together. Remember, different stakeholders may be interested in the results at different geographies. MRIO will estimate the interregional linkages of trade and commuting effects across these different geographies.

Framing_Where_-_MRIO_Button.jpg

INTRODUCTION:
The first question to think through when preparing your analysis is who is being impacted. The “who” of an analysis is the entity experiencing the initial change or economic activity you’d like to analyze. Keep in mind, IMPLAN is designed to estimate backward linkages, preparing your analysis determines the starting point.

Answering the “who” question will inform the definition of your Event Type and Specification in IMPLAN.

INDUSTRY & COMMODITY EVENTS:
When an Industry is experiencing the initial economic activity being analyzed, the question of who is answered by choosing one or more Industry Sectors. There are four different Event Types for analyzing a change in production in a given Industry: Industry Output, Industry Employment, Industry Employee Compensation, and Industry Proprietor Income. If you only have one Industry Event Value, simply select 1 of the 4 Industry Event Types based on the value you have.

Your analysis can include more than one of these Event Values. For example, you might want to look at a change in crop production and associated manufacturing.

When you have more than one Event Value, we recommend choosing your Event Type based on the chart below. Your Industry Event Values will be processing based on this prioritization of Event Values regardless of the Type you select:

Industry [Impact] Event Type

When to Use

Industry Output Events

When Output is known

Industry Employment Events

When only Employment is known

Industry Employee Compensation

When Employee Compensation is known, but Output is unknown

Industry Proprietor Income

When Proprietor Income is known, but Output and Employee Compensation are unknown

Once you’ve picked your Event Type, you’ll be able to pick the Industry that best represents the “who” of your analysis. For example, if you want to look at an increase in production for a local car assembly plant, you would choose Sector 340 – Automobile manufacturing.

To analyze the contribution of existing production or spending an Industry Contribution Event may be appropriate. Who is still answered by choosing one or more Industry Sectors.

To analyze the change in production or spending on a Commodity, who is answered in the Commodity Output Event with the appropriate Commodity. If you want to look at an increase in the production of cars in your region, choose Commodity 3340 – Automobiles. This is because although the cars will primarily be produced by Industry 340, adjacent Industries may also produce some cars in addition to their primary products.

LABOR & HOUSEHOLD INCOME EVENTS:
Maybe the who you want to affect is actually individuals. If these individuals are producing something and you know the Industry and associated Employment, Employee Compensation, or Proprietor Income, this should be modeled through an Industry Event. However, sometimes we don’t know what Industry is being affected or there isn’t an Industry being directly affected at all. A few examples of when an industry may not be directly affected by a change in spending by individuals include minimum wage increases, personal tax changes, or an increase in population of individuals who do not work in the Region (perhaps retirees or commuters).

Using a Labor Income Event allows you to choose either Employee Compensation or Proprietor Income to model changes in spending, without specifying a particular Industry.

A Household Income Event allows you to choose what income group would see a change in spending. Again, this is not associated with a specific Industry. This is helpful when you want to model an Event like a subsidy to a particular group of earners, for example households that make less than $15,000 per year.

Note that Labor Income and Household Income Events do not include Direct Effects as these Event Types are only modeling the spending of households without an associated Industry or Commodity.

INDUSTRY SPENDING PATTERNS EVENTS:
Spending Patterns measure the business to business backward linkages or supply chain effects of the Industry. Industry Spending Pattern Events are best used when modifications to an Industry’s Production Function are necessary that cannot be made with a standard Industry Event. When detailed information is known about the specific Industry’s spending, a Spending Pattern Event can be adjusted to reflect the specific purchases or ratios of purchases. Industry Spending Patterns include all Intermediate Expenditures for a given Industry. Note that Industry Spending Pattern Events also do not include Direct Effects.

INSTITUTIONAL SPENDING PATTERNS EVENTS:
Institutional Spending Pattern Events are most appropriate when an analyst would like to model the effect of a fiscal spending change. This is only at a high level as the specification options for Institutional Spending Pattern are general government entities rather than specific government programs. Other Event Types are more appropriate when the analyst knows more specifically how the government may be changing their spending. Unlike Industry Spending Patterns, Institutional Spending Patterns include payroll expenditures for employees. Institutional Spending Pattern Events do yield a Direct Effect.

EVENT TYPES & WHEN TO USE THEM:
So here’s the basics of each Event Type and when to use them:

Event Type

When to Use

Industry [Impact] Events

Modeling change in an industry’s production/spending on the industry

Industry Contribution Events

Estimating effect of an existing industry’s production

Commodity Output Events

Modeling change in a commodity’s production or spending on the commodity

Labor Income Events

Modeling change in labor payments isolated from an industry’s production

Household Income Events

Modeling a change in household income isolated from an industry’s production

Industry Spending Pattern

Customizing an industry’s purchases or the amount an industry spends on inputs is necessary.

Institution Spending Pattern

Modeling general fiscal spending changes