When the second session of the 110th Congress opened in January, lawmakers returned to the nation’s capital to find a new hot topic front and center on the national agenda — namely, a sputtering economy and new talk about the dreaded “R” word, recession. Almost immediately, everybody — the Bush Administration, Congress, advocacy groups, think tanks and others — began coming forward with their plans and/or policies aimed at providing an effective economic kick-start. Ideas that crossed the finish line would be included in a new economic stimulus package.

Of course, while all agreed that stimulus legislation was needed, there were immediate disagreements about what actually attracts and enhances economic activity. What, if anything, can Congress do to encourage people to get out there and spend money? What encourages businesses to buy equipment and materials and hire more workers? One thing was clear upfront: Only stimulus policies that were “timely, targeted and temporary” would be considered.

NUCA worked the Economic Stimulus Act of 2008 from start to finish, as the whole process flew through Congress like a rocket and within weeks, was signed into law by the president. While NUCA is pleased with the business tax incentives, it believes lawmakers were shortsighted when they neglected to provide infrastructure investment as part of the final deal.

Tax Incentives for New Purchases

Media coverage on the stimulus package has focused on the tax “rebates” to some 130 million individuals, expected to be delivered later this spring and into the summer. However, will these checks actually be used on new purchases or will they be used to pay off credit cards, cover mortgages or simply put in a savings account? Recent surveys have reported that only 19 percent of the individuals who responded plan to use their rebate checks on new purchases.

The true stimulus provisions in the Act are tax incentives intended to spur economic activity by American businesses. NUCA likes the depreciation bonus and expensing provisions in the legislation. Such business tax incentives are a wise approach to encouraging economic activity because the only companies that benefit are those that purchase new equipment and materials. Lawmakers didn’t waste time patting themselves on the back. “This is a good package,” said Sen. Charles Grassley (R-Iowa), Ranking Member of the Senate Finance Committee. “It will get money to consumers and incentives to businesses so they can buy equipment or add employees.”

Here’s how it works. The bill allows businesses to write off (over 20 years or less) an additional 50 percent of the value of new investment expenditures in 2008 for items subject to current depreciation law. The remaining value of these investments would be depreciated over the life of the item. Additionally, small businesses would be allowed to write off the entire cost of new investment expenditures up to $250,000. This would just about double the current expensing limit and would apply to businesses with overall investment limits of less than $800,000 in 2008.

In the past, NUCA has worked with the Associated Equipment Distributors (AED) on lobbying efforts to include similar incentives in past stimulus measures, as well as to alert NUCA and AED members around the nation to these opportunities. AED encourages those who want to take advantage of the depreciation and expensing provisions to act early.

“If you’re thinking about taking advantage of the depreciation bonus, you should probably start looking around for equipment now,” said Christian Klein, vice president of Government Affairs and Washington Counsel for AED. “The depreciation bonus law requires that the equipment be purchased and placed in service in 2008. Given the lead times that are necessary for certain types of equipment, I wouldn’t recommend waiting until just before Christmas to place your order.”

(NUCA thanks AED for developing an online guide with important information about the depreciation bonus provisions in the stimulus package. Visit www.depreciationbonus.org.)

A Missed Opportunity to Create Jobs

Thinking of buying a new machine or two because of the stimulus package? Start looking for equipment now. The depreciation bonus law requires that the equipment be purchased and placed in service in 2008.

While NUCA applauds the business incentives in the stimulus package, the association also believes that the inclusion of federal resources for badly needed underground infrastructure improvements would have provided even more incentive for equipment purchases, not to mention tens of thousands of new jobs. In light of the pending crisis in the housing market, it is little wonder that the construction industry lost almost 200,000 jobs last year — or about three percent of the industry’s total. The worry is that the “ripple effect” from the homebuilding industry will impact other facets of construction.

House Transportation and Infrastructure Chairman Jim Oberstar (D-Minn.), a longtime champion of legislative efforts to boost clean water funding, took action early to put underground infrastructure on the stimulus agenda. NUCA and the Clean Water Council, a coalition of 31 national construction organizations who work collectively to increase funding for America’s environmental infrastructure, supported Chairman Oberstar’s proposal to include a $5 billion provision to fund wastewater infrastructure projects as part of the stimulus package.

Through letters and Hill visits, NUCA and the CWC immediately pushed the issue with lawmakers, arguing that this funding could be put to use within only a few months on pending and new projects. In a letter of support, the CWC stated that “investment in water infrastructure is an efficient, fiscally sound and environmentally successful way to enhance public health, protect the environment, create thousands of jobs and expand the local tax base.”

NUCA and the CWC made the point that while expensing and depreciation incentives can serve to stimulate the economy, coupling them with sound investment in a critical market would be a much more effective and comprehensive approach. NUCA CEO Bill Hillman asked, “What better way to encourage purchasing of equipment and the hiring of new personnel than to fund essential projects that are ready to go now?” Unfortunately, in the end, no infrastructure funding of any kind was included.

Round Two?

Providing funding for this critical infrastructure is a sound investment and one that will encourage more construction companies to take advantage of the business incentives included in the first stimulus package. This approach would encourage the buying of equipment, materials and supplies, create countless American jobs that cannot be exported overseas and begin to repair and rebuild our underground environmental infrastructure that has been neglected for too long.

To that end, some key lawmakers in the House and Senate have promised to develop another stimulus proposal that focuses on infrastructure. If and when they are ready to introduce such legislation, NUCA and the CWC stand ready to move on it.

Eben Wyman is a NUCA Vice President of Government Relations.