Tax Changes from Expected Utility Costs

I'm working on a project that requires the estimation of the economic impacts of an increase in water utility costs. One idea I had on performing this analysis would be to reduce the overall household income(with some assumption or estimation of the cost breakdown among the income groups) by the cost change for the utility and increase the sales for either 525-local electric utilities or 526-other local government enterprises to balance out the reduced income. Would this be considered an adequate method or is there a more accurate way of showing the impact of tax changes? Thanks, Peter
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  • Hello, This is not something IMPLAN is designed to model without making your own assumptions. When reducing the overall Household Income, you are reducing all of it at the same rate when realistically Households may cut spending in other areas while maintaining things like rent and other bills. You will need to determine how spending changes, and use that information as inputs into IMPLAN. Because you don't want to assume a unilateral reduction In addition different Household's may respond differently, depending on the size of the rate increase, their need and income level. If the increase is small enough it may have little to no impact on Household spending for any group. A larger increase will likely affect the spending of lower income Households but may not affect the spending of higher income households as these payments may come from savings (typically leakages). In addition, once the necessities are purchased Households have a couple of options. If they have to spend more on water, they may spend less on going out to dinner or capital purchases, but if they can, they may also choose to simply use less water to mediate their costs. In addition to this, unless the increase will only affect Household consumption, the rate increase will affect every industry in the Model that purchases water (Explore> Social Accounts> Balance Sheet (Tab), and select View By: Commodity Balance Sheet and the Industry Demand tab). These also may have a variety of behavioral responses including profit reduction (no impact), increasing costs to customers (outside the scope of IMPLAN), switching to an alternative energy source or a higher level or importation if these are possible (substitutions), or if the change of cost is drastic enough relative to their water need, relocation. As far as using the Government Enterprise Sectors to Model the increased income, is it a local government owned and operated water plant? If so 526 would be the correct Sector for local government water and waste water. 

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