Generation and Interpretation of IMPLAN’s Tax Report

OVERVIEW

The IMPLAN Social Accounting Matrix (SAM) of a region tracks the monetary flows, both market and non-market, between Industries and Institutions. Non-markets flows are flows between Institutions, which include transfers from people to government (taxes and other transfers) and government to people (benefits and other transfers), among others. This inclusion of inter-institutional transfers expands a traditional input-output (I-O) model into a SAM. When an analysis is conducted in IMPLAN, the software combines data from the SAM with data from the results of an analysis to produce a Tax Impact report.   

This article discusses the generation and interpretation of the Tax Impact report, including a key containing a detailed description of each data element in the Tax Impact report. For more information about the data sources and assumptions underlying the Tax Impact report, please see Government Institution Data Sources and Methods.   

GETTING STARTED WITH THE TAX IMPACT REPORT

The Tax Impact report provides detailed information about taxes and other payments received by governments. This section provides a high-level introduction to some important definitions and assumptions in the Tax Impact report. The rest of the document reports considerations and interpretations in greater detail.  

Government taxes consist of the following levels of government:   

  • The Federal table estimates revenue collected by the Federal government.   
  • The State table estimates revenue collected by state governments.   
  • The County table estimates revenue collected by county governments.  
  • The Sub County General table estimates revenue collected by city, township, and village, etc., governments.  
  • The Sub County Special table estimates revenue collected by units of government such as public-school districts and fire districts. 

Note, if a particular level of government does not exist in the study area, it will have zero tax impacts.  In some places, city and county governments are consolidated. Whether a consolidated government is reported in the “County” or “Sub County General” table depends on how that government is classified according to the Census of Governments.  

DETAILS

Within the Tax Impact report and SAM, tax revenue flows to the government via different tax types and from various paying entities. 

First, taxes flow from each of the four components of Value Added, with each component paying a different type of tax:   

  1. Employee Compensation (EC)
    • Social Insurance Tax- Employee Contribution 
    • Social Insurance Tax- Employer Contribution
  2. Proprietor Income (PI)
    • Social Insurance Tax- Employee Contribution 
  3. Other Property Income (OPI)
    • Corporate Profits Tax  
  4. Taxes on Production and Imports net of Subsidies (TOPI) 
    • Excise Taxes
    • Custom Duty
    • Sales Tax  
    • Property Tax  
    • Motor Vehicle License
    • Severance Tax  
    • Other Taxes 
    • Special Assessments

Taxes also flow from Household Income. In the IMPLAN Tax Impact report and SAM, there are nine household groups, which are grouped by household income-level. Each household pays taxes related to their household income level. These tax types include:  

  • Personal Tax: Income Tax 
  • Personal Tax: Non-Taxes (Fines, Fees)  
  • Personal Tax: Motor Vehicle License  
  • Personal Tax: Property Taxes  
  • Personal Tax: Other Tax (Fish/Hunt)  

In the SAM, taxes also flow from regions outside the model study area and are characterized as “taxes from the rest of the world”.  

Note, not all tax types are applicable to all levels of government; if the tax type does not exist at that level of government, it is not displayed in the report.   

THE RELATIONSHIP BETWEEN THE SAM AND TAX IMPACT REPORT

As mentioned previously, the region’s SAM tracks non-monetary flows like taxes and transfers. Generally, we think of taxes flowing from people to governments, but the SAM is more specific, with the paying entity in the columns and level of government and type of tax represented in the rows.   

Note that the breakout of State & Local Government to its constituent levels (State, County, Sub-County General, and Sub-County Special) is not reflected in the SAM. However, the Tax Impact report contains this additional detail. IMPLAN uses data from the Census Bureau’s Annual Survey of State and Local Government Finances, Census of Government, and Annual Survey of State Government Tax Collections to estimate the taxes at these more detailed, lower-levels of government. For more information about these data sources and methods please see Government Data Sources and Methods.  

ESTIMATING TAX IMPACTS

Tax impacts are estimated using data from the SAM along with the results of analysis. The Tax Impact report adopts the same assumptions used in IMPLAN (and input-output models in general) whereby marginal changes (impacts) will use the same distribution of taxes in the SAM. More specifically, an IMPLAN input-output impact analysis generates changes in Value Added, which consists of EC, PI, OPI, and TOPI. The levels of change in these components are unique to the level of direct effects specified in the impact analysis and the Industries affected directly or indirectly.   

IMPLAN creates the Tax Impact report by first converting the values in the SAM into shares of column totals (so that total payments in the column are distributed amongst the Federal Government and State & Local Government (combined). IMPLAN then applies these shares to the change(s) in Value Added. For taxes not directly paid from Value Added, such as personal income tax, the percent of Value Added that flows to an Institution is applied first (e.g., the percent of EC flowing to a household income group) and then personal income tax’s share of total household income is applied.   

The combined State and Local Tax impacts estimated using values in the SAM are then distributed to State, County, Sub-County General, and Sub-County Special levels of government according to the three Census Bureau datasets listed above.    

IMPORTANT CONSIDERATIONS

When interpreting the Tax Impact report, there are a few best practices to follow. Similarly, a user should be aware of some of the limitations in the underlying data and the necessary assumptions to generate the Tax Impact report.   

  1. The Tax Impact report estimates total taxes paid, by level of government and by tax type, by the Industries and Institutions affected in an impact scenario.  Be careful not to characterize taxes as “new” revenue for a government unless the value of the impact scenario is net new activity in that government’s taxing jurisdiction. For example, if the analyst is modeling an increase in the manufacture of motor vehicles in county A, but county B (in the same state as county A) loses an equivalent amount of motor vehicle production (i.e., it is a shift in production from one county to the other, rather than a net increase in overall production), the Tax Impact report will show an increase in taxes paid to County Government, which reasonably could be characterized as new revenue for county A, but it will also report an increase in taxes paid to State and Federal Governments, which should not be characterized as new revenue.  
  2. In principle, the Tax Impact report captures all tax revenue in the study area across all levels of government that exist in that study area for the specific Industries and Institutions affected by an Event or group of Events. However, due to the lagged nature of the Survey of State and Local Government Finances, if a state or county were to begin collecting a new type of tax that wasn’t previously collected in the region, that tax type wouldn't show up in the IMPLAN SAM or Tax Impact Report. In that rare case, the total tax values would still be accurate; it would just be the breakout by specific tax type that would need to be adjusted to incorporate the new tax type.  
  3. When a user conducts an Industry Impact Analysis (IIA) Detail Event and specifies more than one value, the Tax Impact report will produce results that no longer reflect the distribution or flows of money in the SAM as the user has overwritten the SAM estimation with their own input values. This is an acceptable practice, but is something to be aware of.   
  4. The underlying data that support the Tax Impact report do not always embody the same level of detail that is available in the Tax Impact report. For example, raw data sources only report State Government revenue at the state geographic level (i.e., the data do not tell us how much state income tax comes from which counties) and Federal Government revenue is only known at the national geographic level. Data for State and Federal Government revenue are allocated to counties based on proxies (e.g. personal income by county is used to estimate each county’s share of the parent state’s personal income tax revenue).  That said, all State and Local Tax (combined) data are controlled to nationwide, current-year control totals from the BEA’s National Income and Product Accounts (NIPA) tables. The BEA reports taxes by tax type for two levels of government: (1) Federal Government and (2) State & Local Government combined. IMPLAN distributes the national data to states and counties, resulting in geographically balanced data by tax type.  
  5. While total TOPI taxes are both industry- and place-specific, the allocation of TOPI among its component tax types (sales tax, property tax, severance tax, etc.) is only place-specific. Thus, while tourism would have a greater effect on sales and lodging taxes, and mining would be heavily weighted towards severance taxes, these differences will not be reflected in the SAM or the Tax Impact report.   In such cases, the analyst is advised to construct his or her own estimates of direct taxes (based on analyst knowledge of the study area and project), using the model estimates for Indirect and Induced tax impacts. 
  6. Likewise, Corporate Profits Tax (which is paid out of OPI) is only place- and level-of-government specific, not Industry-specific. Therefore, analyses involving government sectors should zero out Corporate Profit direct effects and subtract them from the total tax impact. 
  7. Note that multiple cities within a county can have different taxes. IMPLAN tax impacts effectively show a weighted average of the city tax impacts in the Sub-County General table.   
  8. IMPLAN does not distinguish individual units of government (e.g. XYZ School District); rather it distinguishes only the level of government.   

For more information about the data sources and methods used in the production of study area tax data and the data sources and methods underlying the Tax Impact Report please see Government Data Sources and Methods.   

DEFINITIONS AND TAX IMPACT KEY

The following definitions and sources provide a key to the Tax Impact report, with letters corresponding to the positions in Figures 1 and 2. The key in Figure 1 applies to all components of Federal Government. Figure 2 applies to all sub-components of State and Local Government (State, County, Sub County General, and Sub County Special District). 

Figure 1: Federal Government Tax Impact Report Key

Transfer Type Code   Description   Institution Type Code 
5001  6001  8001  10000  13001 
EC  PI  TOPI  Households  Enterprises
15014   Social Insurance Tax- Employee Contribution        
15015   Social Insurance Tax- Employer Contribution          
15017   TOPI: Excise Taxes          
15018   TOPI: Custom Duty          
15026   OPI: Corporate Profits Tax          
15027   Personal Tax: Income Tax          
15028   Personal Tax: Estate and Gift Tax          

A. Employee-paid portion for Federal social insurance. This item includes social security, survivors insurance, disability insurance, hospital insurance, supplemental medical insurance, unemployment insurance, veterans’ life insurance, and railroad retirement plans. The U.S. value comes from NIPA Table 3.6. The U.S. value is distributed to states and counties based on Personal Contribution for Social Insurance from the BEA’s CA05 table. 

B. Employer-paid portion for Federal social insurance. This item includes social security, survivors insurance, disability insurance, hospital insurance, military medical insurance, unemployment insurance, pension benefit guaranty, veterans’ life insurance, and railroad retirement plans. The U.S. value comes from NIPA Table 3.6. The U.S. value is distributed to states and counties based on Personal Contribution for Social Insurance from the BEA’s CA05 table. 

C. Self-Employed contribution to Federal social insurance. This item includes social security, survivors insurance, disability insurance, and hospital insurance. The U.S. value comes from NIPA Table 3.6. The U.S. value is distributed to states and counties based on Personal Contribution for Social Insurance from the BEA’s CA05 table. 

D. TOPI Federal Excise Taxes. This item includes federally levied excise taxes on alcohol, tobacco, telephones, coal, fuels, air transportation, vehicles, etc. The U.S. value comes from NIPA Table 3.2. The U.S. value is distributed to states and counties based on IMPLAN estimates of total TOPI for all industries in relationship to U.S. total TOPI. 

E. TOPI Federal Custom Duties. These are gross collections less refunds. The U.S. value comes from NIPA Table 3.2. The U.S. value is distributed to states and counties based on IMPLAN estimates of total TOPI for all industries in relationship to U.S. total TOPI. 

F. Personal Income taxes paid to the Federal Government. These are taxes paid through withholding, declarations and final settlement less refunds. The U.S. value comes from NIPA Table 3.2. The same value can also be found in NIPA Table 3.4. The U.S. value is distributed to states based on each state’s value of “Federal government: Individual Income taxes (net of refunds)” from the BEA’s SA50 table. State values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. 

G. Personal estate and gift taxes paid to the Federal Government. This is no longer a reported tax type and will have a value of zero in the Tax Impact report. 

H. Federal Corporate profits tax. The U.S. value comes from NIPA Table 3.2. The U.S. value is distributed to states and counties based on their proportion of U.S. Other Property Income (from IMPLAN database). 

Figure 2: State & Local Government Tax Impact Report Key

Transfer Type Code   Description   Institution Type Code 
5001  8001  10000  13001 
EC  TOPI  Households  Enterprises
15014   Social Insurance Tax- Employee Contribution        
15015   Social Insurance Tax- Employer Contribution        
15020   TOPI: Sales Tax        
15021   TOPI: Property Tax        
15022   TOPI: Motor Vehicle License        
15023   TOPI: Severance Tax        
15024   TOPI: Other Taxes        
15025   TOPI: Special Assessments        
15026   OPI: Corporate Profits Tax        
15027   Personal Tax: Income Tax        
15030   Personal Tax: Motor Vehicle License        
15031   Personal Tax: Property Taxes        
15032   Personal Tax: Other Tax (Fish/Hunt)          

I. Employee-paid portion for State & Local social insurance. This represents accident, disability, and death benefits administered by state governments and employee contributions for those benefits. The U.S. value comes from NIPA Tables 3.3 and 3.6. This value is distributed to states based on each state’s share of the following items from the SLGF: Workers Compensation System Contributions and Other State Social Insurance Trust Systems Contributions. This state value is then distributed to the counties based on each county’s proportion of the state’s Employee Compensation. 

J. Employer-paid portion for State & Local social insurance funds. This represents accident, disability, and death benefits administered by state governments, employer contributions. The U.S. value comes from NIPA Tables 3.3 and 3.6. This value is distributed to states based on each state’s share of the following items from the SLGF: Workers Compensation System Contributions and Other State Social Insurance Trust Systems Contributions. This state value is then distributed to the counties based on each county’s proportion of the state’s Employee Compensation. 

K. TOPI sales taxes paid to State and Local Governments. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of Total General Sales Tax from the SLGF. State government values are then distributed to counties based on total retail output. Local government sales tax collections are distributed to counties using the SLGF. 

L. TOPI property taxes paid to State and Local Governments. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of Total Property Tax from the SLGF. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government property tax collections are distributed to counties using the SLGF. 

M. TOPI motor vehicle license taxes paid to State and Local Governments. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of Motor Vehicle Operator’s License Tax and Motor Vehicle License Tax from the SLGF. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

N. TOPI severance taxes paid to State and Local Governments. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of Severance Tax from the SLGF. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

O. TOPI other taxes paid to State and Local Governments. This item consists largely of business licenses and documentary and stamp taxes. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of the following tax items from the SLGF: Corporation License; Amusement License; Other License; Documentary and Stock Transfer; Public Utility License; Alcoholic Beverage License; Occupation and Business License, NEC; and NEC. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

P. TOPI special assessments paid to State and Local Governments. This item includes special assessments. The U.S. value comes from NIPA Table 3.5. The U.S. value is distributed to states based on each state’s proportion of the following tax items from the SLGF: Miscellaneous – Special Assessments. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties directly using the SLGF. 

Q. Personal income tax payments to State and Local Governments. The U.S. value comes from NIPA Table 3.3. The U.S. value is distributed to states based on BEA’s SA(50) table. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

R. Personal motor vehicle fee payments to State and Local Governments. The U.S. value comes from NIPA Table 3.4. The U.S. value is distributed to states based on each state’s proportion of Motor Vehicle Operator’s License Tax and Motor Vehicle License Tax from the SLGF. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

S. Personal property tax payments to State and Local Governments. The U.S. value comes from NIPA Table 3.4. The U.S. value is distributed to states based on BEA’s SA(50) table. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

T. Personal other tax payments to State and Local Governments. This item consists largely of hunting, fishing, and other personal licenses. The U.S. value comes from NIPA Table 3.4. The U.S. value is distributed to states based on Hunting and Fishing License Tax from the SLGF. State government values are then distributed to counties based on total Personal Income from the BEA’s CA05 table. Local government collections are distributed to counties using the SLGF. 

U. State & Local Government corporate profits tax. The U.S. value comes from NIPA Table 3.3. The U.S. value is distributed to states based on Corporate Net Income Tax from the SLGF. State government values are then distributed to counties based on their proportion of the state’s Other Property Income (from IMPLAN database). Local government collections are distributed to counties using the SLGF.

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Updated August 30, 2024