I'm modeling the impact of a local business, and they have given us fairly detailed expenditure data that breaks down various categories of spending, including that for state and local tax payments. I've modeled everything except the tax payments on a commodity basis. But my question is what is the best way to model the tax payments?
My first thought was to just ignore these payments as they didn't seem like a direct impact in the local economy as they are taxed away by the government. My understanding is that IMPLAN generally treats tax payments as "leakage" outside the model. Is this the case?
However, the tax payments do result in government spending, which does have an impact in the state and local economy. So I was thinking about including an activity with an institutional spending pattern for state and local government.
Either way, I'm including the taxes paid in the total direct output, I just don't know if they should also produce induced effects from government spending. What is your recommendation?
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