EB5 Investors Magazine Volume 1 Issue 2 | Page 13

Table 5. Economic Impact of Household Income and Other Expenditures of a Typical Immigrant Investor Contribution

Activity Impact Type Employment Federal Taxes to GDP

Household Expenditures Net Income $ 225,000

Other Expenditures

Direct Effect Indirect Effect Induced Effect Total Effect

Direct Effect Indirect Effect Induced Effect Total Effect

1.4 0.5 2.1 3.9

0.6 0.4 1.3 2.4

$ 115,989 $ 46,812 $ 193,694 $ 356,495

$ 62,709 $ 39,410 $ 124,588 $ 226,707

State & Local Taxes

$ 48,726 $ 35,239

$ 31,516 $ 19,458

Total Household & Other Expenditures 6.3 $ 583,202 $ 80,242 $ 54,697

Household expenditures by the investor create four jobs, while other expenditures generate an additional two jobs, resulting in a total of six jobs. Likewise, the combined contribution to GDP is $ 583,202—$ 80,242 is generated in federal taxes, and $ 54,697 in state & local taxes.

Table 6. Final Impact of Investor Investment, Household and Other Expenditures Contribution

Total Combined Impacts Impact Type Employment to GDP

Investor’ s $ 500k Investment( Average Hotel Impact), Household Expenditures Net Income of $ 225,000 and Other Expenditures

Direct Effect Indirect Effect Induced Effect

The direct effect of the investor’ s investment and personal consumption spending is seven jobs and $ 443,585 contributed to GDP. Indirect and induced effects of the investor’ s spending include two and nine jobs, and $ 212,822 and $ 808,104 contributed to GDP. Thus, the investor in this example creates a total of 18 jobs, contributes $ 1.46 million to GDP, and increases federal and state & local tax revenues by $ 204,168 and $ 142,429, respectively.

A total of 2,695 visas were approved in 2012 by the U. S. Department of State( Kay et al., 2013). Given that an average household size is 3.07( Homeland Security), there were approximately 878 new immigrant households in 2012. Multiplying the individual immigrant investor results cited above by the number of immigrant households implies that, if all investor projects were in the LA area, the EB-5 program created

So what is the total combined impact of the immigrant investor’ s $ 500,000 investment, along with household and other moving related expenses in this case study? Table 6 presents the combined results of these three expenditure patterns.

7 2 9

$ 443,585 $ 212,822 $ 808,104

Federal Taxes

Total Effect 18 $ 1,464, 511 $ 204,168 $ 142,429

State & Local Taxes

15,541 new jobs, contributed an additional $ 1.286 billion to GDP, and generated $ 179.26 million and $ 125.05 million in federal and state and local tax revenues, respectively. The figures from this case study are surprisingly similar to Kay, et al., who estimated an annual average of 16,674 jobs, $ 1,325 billion contribution to GDP, and $ 173.40 million and $ 109.22 million in federal and state / local tax revenue.

Escalating these figures to account for projected or anticipated increases in visas issued in the United States results in the figures reported in Table 7. For example, an increase in the number of visas issued to 6,000 per year could create 34,593 new jobs, contribute $ 2.86 billion to GDP, and generate an additional $ 399.02 million and $ 278.36 million in federal and state & local tax revenue.

One final point to note is that the impacts from each new wave of immigrant investors coming to the United States each year is a new and distinct economic event. This, of course, implies that the economic impacts cited above would be additive over time as new immigrants enter the United States. For example, if 6,000 visas are issued over the next ten years and, assuming the investments and household expenditures are as outlined above, up to 345,928 jobs could be created with a corresponding contribution to GDP of up to $ 28.62 billion( in 2013 dollars). Therefore, the effects of the EB-5 program are indeed quite large.

Cora Barnhart, Ph. D. is Vice President of Barnhart Economic Services, LLC. She is also an Associate Professor of Economics at Palm Beach Atlantic University, where she teaches International Finance, Financial Institutions, and Economics. Her articles have appeared in Economic Inquiry, Public Choice, and The Journal of Futures Markets, as well as Bankrate, Yahoo and USA Today.

Scott W. Barnhart, Ph. D. is President of Barnhart Economic Services, LLC and Associate Professor of Finance at Florida Atlantic University. The firm has estimated job creation impacts in support of I-924 regional center applications for projects with capital expenditures in excess of $ 4.5 Billion and accompanying gross revenues of $ 2.7 Billion. He is also active on the EB-5 lecture circuit, having discussed EB-5 job creation and RFE issues in seminars across the United States and in China.

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