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 to Region Details, 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. For government enterprise Industries, subsidies from the same level of government (i.e. state to state, federal to federal) will show up in TOPI. 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 (i.e. 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 (i.e. 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 Industry 449 - Owner-occupied dwellings. The property taxes shown as being paid by Households are for other big-ticket items such as boats and cars. Therefore, TOPI: Property Tax reflects a combination of property taxes paid by businesses and property taxes paid by Households on their primary residences. 
Direct TOPI: 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, sin tax, 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.

For government enterprise Industries, subsidies from different levels of government (i.e. federal to state, state to county) will show up in government enterprise OPI. 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

RELATED ARTICLES

The Curious Case of the Negative Tax: Agriculture Subsidies, Profit Losses, and Government Assistance Programs

Generation and Interpretation of IMPLAN's Tax Impact Report

Tax Impact Report FAQ

Taxes: The Basics of the Breaks

OTHER RESOURCES

Bureau of Economic Analysis Underlying Estimates

Internal Revenue Service Publications

National Income and Product Accounts

Nerd Wallet: How FICA Tax and Withholding Tax Work in 2019-2020

Where do those numbers come from?

Video: Tax Data in IMPLAN



Written January 7, 2020

Updated July 20, 2020