If there's one thing Democrats and Republicans can both agree on, it's that investment in infrastructure is vital to the future strength of our country. At a time of stagnant economic growth and dismal job prospects, especially for the youngest members of the workforce, real investment in infrastructure has the potential to create employment opportunities, spur economic growth and ensure that this country remains competitive. According to a report from the University of Massachusetts/Alliance for American Manufacturing entitled "Employment, Productivity and Growth," every billion dollars invested in infrastructure creates 18,000 jobs.
On March 29, President Obama made a call for billions of dollars in infrastructure investment. This is not the first time the Administration, as well as members of Congress, have called for ways to spur investment to upgrade our infrastructure. But the president's entreaty included a previously unheard call: a rethinking of the Foreign Investment in Real Property Tax Act, or FIRPTA. This is an achievable first step toward encouraging investment in infrastructure.
FIRPTA was enacted in 1980 and essentially levies surtax on foreign individuals or entities selling property, including infrastructure, in the United States. Capitol Hill lore has it that Jimmy Carter was afraid of the Japanese buying up Georgia peanut farms. Whatever the genesis, this has always been poorly thought out tax policy, driven more by an outmoded protectionist impulse than by good sense.
As the managing partner of an infrastructure investment firm, I know firsthand the significant limiting effect this punitive measure has on foreign investment in U.S. infrastructure. There are many billions of dollars in overseas capital sitting on the sidelines because those investors are wary of the burden FIRPTA will have on their investments.
FIRPTA emerged from the fertile political soil of isolationist fear that global investors hurt, rather than help, U.S. global competitiveness. While apocalyptic visions of hostile nations taking over crucial assets, or owning treasured landmarks like the Chrysler Building, play well in the 24-hour news cycle, they are dangerously misleading for a number of reasons.
First, these assets are immovable. They will always serve their home markets, and money for upgrades and expansions -- whether it comes from home or abroad -- is a good thing and a necessary tool to ensure global competitiveness and create well paying, sustainable jobs.
Second, security and control of the borders lies with the federal and local authorities and the Department of Homeland Security, not the operating company that owns the asset - so even if a foreign owner wanted to harm our infrastructure in some way, they would encounter the same national security protections as any other would-be saboteur.
An insidious red herring in the political scare tactics of FIRPTA is the fear of meddling by hostile regimes. In truth, the vast majority of the capital that would come into this country to invest in our infrastructure would come from friendly nations; most of them are key allies. Allowing these investors to own U.S. assets and invest in our infrastructure is a win for both sides. It would open up new sources of capital eager to invest in the U.S., which is still viewed globally as the most attractive market in the world. And it would shore up and improve key alliances around the globe, actually enhancing, rather than threatening, our national security.
Far from being a fiscal burden for the federal government, I believe that repeal of FIRPTA will score positive or at least neutral in the federal budget. First, the Treasury will benefit from increased tax receipts from so many newly employed people, including new income and payroll tax revenue and decreased spending on unemployment insurance. Second, some of this capital could replace state and local spending on infrastructure, much of which is tax exempt and a drain on federal resources.
Repealing FIRPTA would be a positive, concrete first step towards a rational and constructive infrastructure policy for the United States and would increase our international strength and security. I support the president's call as a move in the right direction, and strongly encourage the Congress to act decisively on this crucial measure.