+0.1% Long-Run Gross National Product (GNP)
+0.1% Wage Rate
Borrowing (issuance of federal debt)
Increase the Corporate Tax Rate
Impose User Fees or Excise Taxes Economic and Revenue Impact of $1 Trillion in Additional Infrastructure Spending and Three Financing Options
Long-Run Gross Domestic Product (GDP)
+0.1% We find that financing $1 trillion in new infrastructure through additional borrowing would raise long-run GDP by about 0.2 percent. New borrowing raises long-term interest costs for the federal government, both because of the immediate infrastructure spending and long-term maintenance costs, but it does not result in substantially higher interest rates or crowd-out of private investment. However, much of the borrowing would be financed internationally, so the returns to that financing would accrue to foreign investors, reducing American incomes (GNP) in the long run by 0.1 percent.
Source: Tax Foundation General Equilibrium Model, May 2021. On the other hand, financing the new infrastructure with an increase in the corporate tax rate reduces long-run GDP by 0.3 percent, because it raises the cost of corporate investment. It also reduces GNP by 0.2 percent, lowers the capital stock by 0.7 percent, reduces employment by 48,000 full-time equivalent jobs, and reduces wages by 0.2 percent. While this option would be deficit neutral in the long run on a conventional basis (which holds GDP constant), on a dynamic basis annual revenue would drop by $39 billion in the long run due to a smaller economy. Long-Run Annual Dynamic Deficit, 2031 Dollars
Long-Run Annual Conventional Deficit, 2031 Dollars
$0 Full-time Equivalent Jobs
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