Corporate Profits Taxes

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alhall

• June 01, 2016 18:17

Hello, I have a question about the tax impacts of a contribution analysis that I am updating. In both studies, the only inputs were employment by industry (a proxy for industry sales). Employment across the two studies has grown 25% but the corporate profits tax contributions for corporations by total effect have increased 92%. I realize that I am comparing nominal dollars, but I would expect only a small part of the variation to be from inflation. I ran the current employment inputs in the older model and the corporate profits tax contributions by total effect grew by 45%, which suggests that about half of the variation that I am observing is being driven by the model. The other half might come from changes in the state tax structure or maybe even the way that IMPLAN estimates tax impacts. Has there has been any change to how IMPLAN estimates the corporate profits tax impacts from the software using the 440 industry sector scheme to the current version using the 536 industry sector scheme? Also, where does the tax data that provide the basis of the tax impacts come from? Thank you very much! Andrew

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  IMPLAN Support

  • June 02, 2016 19:19

  Hi Andrew! Thank you for your forum post. The determinants of Implan’s estimates for corporate profits tax levels can vary significantly from year to year. We allocate corporate profits tax revenue to states based on data from the Census of Governments, which typically is lagged one or two years with respect to the Implan reference year; e.g., Implan 2014 data uses 2012 tax data, since it was the latest available at the time. In the social accounting matrix (SAM), corporate profits tax are paid by the Enterprises institution, which obtains all of its revenue from Other Property Income (OPI). OPI varies by industry and varies significantly from year to year. We have state-level data on OPI by industry (at roughly the 3-digit NAICS level, typically lagged by one year versus Implan data) from the Bureau of Economic Analysis (BEA), but we allocate that to the more detailed Implan sectors using data from the 5-year BEA input-output benchmark. So, the total level of corporate profits tax for a given state should match available data sources, and 3-digit NAICS-level OPI should match available sources, but beyond that, we are forced to rely on extrapolations based on older, national-level data. Additionally, you should note that while OPI varies by industry, once it makes a payment to the Enterprise sector, that Enterprise sector pays a certain percentage of its total receipts as corporate profits tax, and that rate varies only by area, not by industry. For direct corporate profits tax payments, we recommend using your own estimates, if you have them, and use the Implan results for indirect and induced tax revenue. Also, part of the difference in corporate profits tax might be related to changing output-employment ratios; to make a better comparison, you should enter the same value for output in each model; however, please also note that we don’t recommend treating Implan data as a time series, since our source data are revised over time and our estimation methods change. There has not been a change in what the software does, but see here for release notes for changes in data estimation methods: http://implan.com/index.php?option=com_content&view=article&id=399:399&catid=222:222 Thanks.

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