INTRODUCTION
Taxes on Production and Imports Net of Subsidies (TOPI) is a component of Value Added and is remitted to the Government Institutions by Industries. TOPI is comprised of sales and excise taxes, customs duties, property taxes, motor vehicle licenses, severance taxes, other taxes, and special assessments. TOPI does not include all taxes paid by an Industry. For example, employee and employer contributions to social insurance are a part of Employee Compensation and corporate profits taxes are part of Other Property Income.
IMPLAN develops estimates of TOPI by Industry for every zip code, county, and state in the U.S. In IMPLAN, total TOPI is Industry- and geography-specific. However, the breakout by tax category (e.g., sales tax vs. property tax, etc.) is not Industry specific, due to raw data limitations. Importantly, IMPLAN estimates TOPI in a way such that they are controlled to national values.
TOPI is paid to Government Institutions and is a source of funds through which Governments can spend. However, because IMPLAN does not know how, where, or when the Government will use this fiscal revenue, taxes paid by Industries in the form of TOPI are treated as leakage and do not continue to circulate in the regional economy and generate Multiplier effects.
This article describes TOPI within the context of the production function, briefly discusses the data sources, and highlights how TOPI is incorporated in Economic Impact Analysis.
A COMPONENT OF THE INDUSTRY PRODUCTION FUNCTION
The production function of an Industry in IMPLAN determines how an Industry will allocate Output to operate. It consists of Intermediate Inputs and additional factors called Value Added. The combination of an Industry’s spending on Value Added and Intermediate Inputs equals the Industry’s Total Output.
Taxes on Production and Imports Net of Subsidies (TOPI) is a component of Value Added. Because Subsidies are recorded as a negative value towards TOPI, TOPI can take on a positive or negative value for a given Industry in a given region if that Industry received more subsidies from the Government than it paid out in these specific taxes in that year.
TOPI is distributed to Government in the following manner:
Federal Government
Excise Taxes
Custom Duty
State and Local Government
Sales Tax
Property Tax
Motor Vehicle Tax
Severance Tax
Other Taxes (consists largely of state and local documentary and stamp taxes)
Special Assessments
HOW IS IT CALCULATED?
Taxes on Production & Imports, Net of Subsidies (TOPI) is one piece of Output. For details on how IMPLAN estimates TOPI, visit the article Generation and Interpretation of IMPLAN's Tax Report.
MEASURING TOPI
As mentioned previously, total TOPI is Industry- and geography-specific in IMPLAN. IMPLAN uses several data sources to estimate regional TOPI and TOPI by Industry. IMPLAN estimates TOPI in a way such that zip codes must add up to counties, counties must add up to state, and states must add up to national values. The governing controls for all IMPLAN industry-level and sub-national TOPI data come from the Bureau of Economic Analysis (BEA) National Income and Product Accounts (NIPA) tables. This national-level data has no industry resolution and only provides two levels of governments: Federal and State & Local. IMPLAN turns to other data sources to obtain more detailed geographic and industry-level TOPI. Read more about the data sources and process in Taxes on Production and Imports Net of Subsidies Data.
While IMPLAN has industry-specific data on the total amount of TOPI paid, the distribution of TOPI among the various types (e.g. sales tax, property tax, etc.) is not Industry specific. Also, there is no way within IMPLAN to know the break out of the components of each subset of tax (e.g., each type of Sales Tax).
TOPI IN ECONOMIC IMPACT ANALYSIS
Every analysis in IMPLAN will provide tax results. 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.
In IMPLAN, we can see the tax results at the following levels: Federal, State, County, Sub County General, Sub County Special Districts, and Sub County General and State. Sub County General includes city and township governments. Sub County Special District includes fire and public school districts. Read more about the tax impact report data sources and interpretation in Generation and Interpretation of IMPLAN’s Tax Report.
The tax impact report splits the TOPI tax impacts into subcategories based on each region's contribution of the collected tax. 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.
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.
Additionally, 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.
I-O and SAM models by default treat TOPI as a leakage, meaning that any TOPI generated as part of an analysis will not generate any additional Multiplier effects.
RELATED ARTICLES
Generation and Interpretation of IMPLAN's Tax Report
Updated August 1, 2024