In November 2021, Congress passed the Infrastructure Investment and Jobs Act, a roughly $1 trillion package that reauthorized existing programs and provided more than $550 billion in new funding over the next five years to help upgrade aging U.S. transportation, water, power generation, and communication systems.1 The American Society of Civil Engineers applauded the bipartisan legislation, calling it a significant down payment on the $2.5 trillion in deficiencies identified in the industry group's 2021 Report Card for America's Infrastructure.2
This large injection of funds is likely to affect how many Americans commute, travel, transport goods, access the Internet, power homes and buildings, and more.
The Act aims to improve public safety and grease the wheels of commerce by making a historic federal investment in physical infrastructure. This large injection of funds is likely to affect how many Americans commute, travel, transport goods, access the Internet, power homes and buildings, and more, with implications for communities, businesses, industries, and the economy.
Where the Money Goes
The new spending is a combination of targeted funds for overdue repair projects and forward-looking programs intended to make the nation's critical infrastructure assets more resilient to climate risks.3 Here's an overview of the Act's allocated funds:
Transportation funds are normally allocated to states according to a formula based on population, gas-tax revenue, and other factors, and each state typically decides how to spend the money. Most of the new funding will be distributed under this traditional formula, but $120 billion will be awarded through dozens of new competitive grant programs.4 The Transportation Department will select recipients from applications submitted by state and local governments, and Congress will have direct oversight, so lawmakers can monitor projects and call hearings to assess the results. It's likely to take at least six months to pass out the money, finalize plans, and kick off projects — and timelines could run longer for grant programs.
Moody's Analytics projects that the law's economic impact will peak in about five years and fade as spending tails off, creating an estimated 556,000 jobs and raising U.S. output by 0.5% by year-end 2026. Other projections vary, but economists tend to agree that greater infrastructure spending eases worker mobility and the transportation of goods, providing a boost to labor productivity, business efficiency, and economic growth.1
The additional infrastructure spending will be partially paid for by new revenue and unspent COVID-19 relief funds. However, the Congressional Budget Office found that the Act would add $256 billion to budget deficits over the next decade, so borrowing to cover the difference could offset some of the law's economic benefits.5IMPORTANT DISCLOSURES: Broadridge Investor Communication Solutions, Inc. does not provide investment, tax, legal, or retirement advice or recommendations. The information presented here is not specific to any individual's personal circumstances. To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances. These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable — we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.
