A new report by researchers at the College of William and Mary’s Thomas Jefferson Program in Public Policy sheds new light on the positive impact infrastructure investment has on the economy and government tax receipts.
The study commissioned by Associated Equipment Distributors (AED) found that over two years, one dollar spent on infrastructure construction produces roughly double ($1.92) the initial spending in direct and indirect economic output. The long-term impact is also significant, with a dollar in aggregate public infrastructure spending generating $3.21 in economic output (GDP) over a 20-year period.
The impact of infrastructure investment is felt well beyond the construction industry. The researchers determined each dollar spent on infrastructure generates roughly 35 cents in indirect economic activity for manufacturers, 20 cents for professional and business services providers, and 10 cents for the finance, insurance, real estate, rental and leasing sector. Sectors ranging from agriculture to entertainment to retail also benefit.
Beyond encouraging economic activity, infrastructure investment also produces revenue for federal, state, and local governments. Over 20 years, one dollar in aggregate infrastructure spending generates 96 cents in taxes. Each dollar invested in highways and streets returns approximately 35 cents in tax revenue over two decades, of which 23 cents accrues at the federal level. Investing $1 in sewer systems and water infrastructure generates $2.03 in tax receipts ($1.35 for the federal government) over the same time period.
“The bottom line is that there’s a big difference between investment and wasteful spending,” said AED president and CEO Toby Mack. “When the federal government pays to build a road or sewer, it’s like a business buying a bulldozer or computer. It’s a productive asset that will spur economic activity and generate revenues for years to come.”
“The William and Mary report strengthens the fiscal conservative case for infrastructure,” said AED Vice President of Government Affairs Christian Klein. “On top of all the other well-documented economic, social, national security, environmental, and public health benefits, the $39 billion the federal government invests in roads and bridges this year will generate close to $9 billion in additional federal tax revenues over the next 20 years. That’s a win-win proposition for both the American people and the government.”
With infrastructure issues front and center on Capitol Hill, the AED/William and Mary report is helping to shape the policy debate. House Highways & Transit Subcommittee Vice Chairman Richard Hanna (R-N.Y.) cited the study in his opening statement at last week’s highway bill mark up and introduced the report into the official record of the meeting. The report findings have also been distributed to all House and Senate offices are part of AED’s ongoing efforts to help build momentum for the highway bill and other infrastructure legislation.
The report is available at http://www.aednet.org/government/pdf-2012/infrastructure_report.pdf.