44 Chapter 3: Investment analysis From the taxpayer perspective, the pivotal step is to determine the public benefits that specifically accrue to state and local government. For example, benefits resulting from earnings growth are limited to increased state and local tax payments. Similarly, savings related to improved health, reduced crime, and fewer welfare and unemployment claims, discussed below, are limited to those received strictly by state and local government. In all instances, benefits to private residents, local businesses, or the federal government are excluded. Growth in state tax revenues As a result of their time at SUNY WCC, students earn more because of the skills they learned while attending the college, and businesses earn more because student skills make capital more productive (buildings, machinery, and everything else). This in turn raises profits and other business property income. Together, increases in labor and non-labor (i.e., capital) income are considered the effect of a skilled workforce. These in turn increase tax revenues since state and local government is able to apply tax rates to higher earnings. Estimating the effect of SUNY WCC on increased tax revenues begins with the present value of the students’ future earnings stream, which is displayed in Column 4 of Table 3.2. To these net higher earnings, we apply a multiplier derived from Lightcast’s MR-SAM model to estimate the added labor income created in the state as students and businesses spend their higher earnings.34 As labor income increases, so does non-labor income, which consists of monies gained through investments. To calculate the growth in non-labor income, we multiply the increase in labor income by a ratio of the New York gross state product to total labor income in the state. We also include the spending impacts discussed in Chapter 2 that were created in FY 2021-22 from operations and student spending, measured at the state level. To each of these, we apply the prevailing tax rates so we capture only the tax revenues attributable to state and local government from this additional revenue. 34 For a full description of the Lightcast MR-SAM model, see Appendix 5. Taxpayer perspective Taxpayer costs Taxpayer benefits State/local funding Increased tax revenue Avoided costs to state/local government
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