proprietor jobs v wage/salary jobs

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    cathythomas
    Hi, I have a follow-up question about this analysis. In the survey, I have collected data from people on labor expenditures and non-salary intermediate expenditures. I don't ask them anything about taxes or fees. So the total project cost = sum of intermediate expenditures and labor expenditures. So any taxes paid (for example sales tax) are included in the intermediate expenditures. I am running a combination of industry changes and commodity changes to model the intermediate expenditures. The values I am entering for the industry or commodity changes would be after tax values. Am I somehow double counting or otherwise miscalculating the secondary effects of the intermediate expenditures because of the tax issue? Thank you for your help! Cathy
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    IMPLAN Support
    Hi Cathy, In regards to your second question, for estimating Direct taxes on a project (as regards Detailed projections)we typically recommend choosing the closest IMPLAN Industry to your custom Industry (just as you are suggesting to do with your FTE conversions) and run your Direct Industry Sales estimate through this. You can then sort the Tax Impact to show you your estimated tax splits for just the Direct component of the analysis and keep these values. If you are only interested in determining the Direct values for the purpose getting an appropriate Value Added estimation you can use the Explore> Social Accounts> Balance Sheet (Tab), and select View By: Industry Balance Sheet and the Commodity Demand tab, and use the proportions of Other Property Type Income and Taxes on Production & Imports to estimate the remaining portion of Value Added as described in the above paragraph for Labor Income. As regards double counting the taxes, if the purchases are business to business purchases the sales values will be inclusive of the operational taxes of the businesses selling product but will not include sales tax values and are thus part of Intermediate Industries Value Added. If you are concerned about this, if you could help us understand a little further your concern in this regard, it would be appreciated. If the purchases are made retail or wholesale and the concern is about dividing the expenditures appropriately and the taxes related therein we can provide you information on Margining your spending pattern. As regards the Labor Income component the only taxes included in IMPLAN’s tax impact report for this component are the taxes generated in the spending of Labor Income and the successive iterations, the actual taxes paid on the Direct Labor Income are not included in the results of the Labor Income Change analysis. If you aren’t using Labor Income values the same FTE spreadsheet can help you convert your Wage & Salary data to Labor Income for analysis. Finally since none of the tax data is applied to the Multipliers, as both taxes and profits are considered leakages, you do not have to worry about double counting in your analysis results in this regard.
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    cathythomas
    Hello, Thank you for your response. Based on your response, I feel better about using the ratios you have suggested to estimate direct value added. I can estimate direct value added using a VA per output ratio for a surrogate sector. I am still a little concerned about the included sales tax issue. To be clear, I'm not worried about estimating tax impacts; I just want to understand any shortcomings in my methods to estimate jobs, LI, VA, and output. Here is a more detailed description of the data I have and of my concern with how I am entering this data as sales values in IMPLAN. I am asking for a total project cost. As an example, suppose the total project cost is $1,000,000. I am then asking for a percent breakdown of specific expenditures. My breakdown does not ask about taxes or about profit. So, I get a total labor cost, and I get intermediate purchases for goods and services. I also get where in the supply chain the intermediate purchases came from (i.e. direct, wholesale, or retail). The percentages for labor and intermediate goods and services sum to 100%. So, labor income + intermediate expenditures = output. So in my example, labor income + intermediate expenditures would equal $1,000,000. The $1,000,000 is the total cost of the project and so it includes things like sales tax and any profits. Therefore, I am realizing that my intermediate expenditures must include some portion of value added (most specifically things like sales tax). My concern is that I am entering sales values for the intermediate expenditures that include sales tax on the intermediate expenditures, and I am afraid that this will lead to slightly inflated estimates. It may be a minor issue, but I would still like to understand if I am introducing a bias in the results. I think the approach of running the surrogate sector and getting some sort of tax split from the results feels too cumbersome (I am running many of these, and there are many different intermediate expenditures within each model). I am curious if there is a way that I can adjust the margins to account for this issue (though I'm still not entirely clear as to if this is an issue or not). However, it seems that sales tax would vary by region, and my margin values are hardwired in the template, so based on this I am skeptical that adjusting margins would work. I have attached my template model so that you can see what I have already done with the margins. I used industry margins that you provided me with. To summarize, I think I have found a small error in my methodology. I have three specific questions for you: (1) am I thinking about this correctly? (i.e., is this in fact an issue), (2) is there anything I can do to fix this, given the constraint that I am trying to develop a methodology that I can repeat for many projects (i.e., it can't be too cumbersome), and (3) am I correct in thinking that if this is an issue that it probably has a relatively minor effect? Thank you for all of your help! Cathy
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    IMPLAN Support
    Hi Cathy, It really depends on your Industry whether it was minor or not. We appreciate you clarifying your concerns because if highlights something we weren't clear on and something we did not make clear in our previous response, at least as we are understanding your response currently. Just to try to be sure we are understanding and responding correctly, we are going to recap our understanding. Our understanding is that you are doing an Analysis-by-Parts on a single Industry but creating the entire spending pattern from your raw data, including Margining the appropriate impacts. Based on your current post you have data that doesn't properly match the expected Value Added portion of the equation Output = Intermediate Expenditures + Value Added because the Value Added component is equal to Labor Income instead of Value Added following the expected equation of Value Added = Labor Income + Other Property Type Income + Taxes on Production, and you believe that the OPTI and TOPI are rolled into the Intermediate Expenditures value that you have received for the Directly impacted Sector. If we are understanding what you are describing correctly, then you can use your proxy Sector for the Direct Effects to help you determine the value you should reduce Intermediate Expenditures by in order to account for Other Property Type Income and Taxes on Production & Imports (although it isn't necessary to calculate these separately since they aren't applied to the Multipliers). For this you can use the Explore> Social Accounts> Balance Sheet (Tab), and select View By: Industry Balance Sheet and the Value Added tab to see what the total expected proportion of VA:IE should be, you also know what proportion of the total Output is you Labor Income portion so the proxy VA portion less your known LI portion would give you the expected proportion to remove from Intermediate Expenditures (and thus Activity Level) to account for these factors in the Direct Effect. As regards the tax impact we described that would also just be for determining the Direct tax impact by proxy if you don't know it already since the Analysis-by-Parts methodology will only yield Indirect and Induced tax impacts in the report. Hopefully this helps to help you resolve your concerns, but please let us know if we aren't accurately describing the problem or addressing the right issue. We are more than happy to help and apologize about the delay on this response. Again, please let us know if you have any additional questions. IMPLAN Support Team
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    cathythomas
    Thank you so much! This is really helpful. I used your logic to reduce the intermediate expenditures using estimates of the difference between VA and LI, where VA is estimated using the proxy sector. Thank you again! Cathy
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    cathythomas
    Hi, I have another short follow-up question about this. I've been wondering more about the components of VA. Is sales tax included in VA? In a separate set of analyses, I use visitor spending profiles to estimate tourism impacts. These profiles are comprised of spending on things like lodging, groceries, restaurants, retail goods, transportation, and amusement industries. In some sense, these expenditures profiles for individuals are similar to the expenditure profiles I have put together for the restoration projects. But they are totally different in the way that the tourists aren't producing any good or service. I am entering total visitor spending into a variety of sectors. This spending would be total after sales tax expenditures. I assume that I don't need to do anything to adjust these expenditure profiles. Thanks for any clarification you can help with! Cathy
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    IMPLAN Support
    Hi Cathy, Yes. Sales tax is included in Value Added, specifically in the Taxes on Production category of Value Added. This article will help to explain how the IMPLAN tax impacts are calculated: http://implan.com/index.php?option=com_content&view=category&id=339 I also wanted to confirm that you do not need to make any adjustment to your retail value; you need to ensure that the Retail Sectors are set to Gross Revenue Sales. Thanks!
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