Friday, June 10, 2011

Jump-Start:How BTA Proposes to Help the Economy Through Tax Incentives

The Building Trades Association (BTA) is made up of 23,000 member companies.  The companies are primarily small in employee size.  Membership consists of companies providing service in all aspects of the construction industry.  BTA is approximately 50% general contractors and 50% sub-contractors, suppliers and service providers.  Membership is national.

The Building Trades Association is proposing a $15,000 tax credit for extensive remodeling projects totaling $45,000 or more with a minimum tax credit of $5,000 per project.  We are suggesting this offer be made available to taxpayers earning under $500,000 a year.  Why should we do this now?
Upon writing this proposal the national unemployment rate was 9.8% in November of 2010, according to the U.S. Bureau of Labor Statistics, with the construction industry having an 18.8% unemployment rate (roughly double the national rate and highest amongst all the industries).  To Jump-Start the building industry would be the best, fastest and most effective way to decrease the national unemployment rate. The construction services sector lost another 5,000 jobs since October, according to an analysis of the most recent federal employment data released by the Associated General Contractors of America.  The data indicates that the construction sector has suffered more than any other industry during the economic downturn.  The construction industry has lost 2.1 million jobs since employment in the sector peaked in August 2006.  The sector has continued to lose jobs during the past twelve months even as overall private employment has picked up.  Since November 2009, the industry has lost 117,000 jobs while the private sector has added 1,088,000 jobs.  The only construction segment to add jobs in the past year has been heavy and civil engineering construction, which has benefited from federal stimulus, military base realignment and Gulf Coast hurricane-prevention projects.  Meanwhile, residential construction has lost 79,000 jobs over the past twelve months, while nonresidential specialty trade contractors and nonresidential building - the other two segments in the nonresidential category - have lost 62,000 jobs.

How do we lower the national unemployment/construction industry unemployment rate while Jump-Starting the economy?  By offering tax credit stimulus to property owners who want to improve the property they have an interest in.  We should keep in mind that there are many small businesses in the remodeling industry, many of which have no employees.  Some of the proprietors’ income and corporate profits in remodeling go to sustaining these small, individual entrepreneurs.  Although these are not technically counted as jobs, many would probably think of them as such.  The wages, salaries, and profits earned are subject to Income and Social Security taxes.  Profits earned by owners of the businesses are similarly taxed.  Beyond this, states often impose sales taxes on materials sold to home builders, and many local jurisdictions levy fees for approving permits.  At the federal, state, and local levels combined, the National Association of Home Builders estimates that every $100,000 spent on residential remodeling generates $28,479 in tax and other government revenue if the spending is on additions and alterations, and $27,759 if the spending is on maintenance and repairs.  The estimate for additions and alterations assumes that the remodeling contractor pays 1.25 percent of the value of the job to a local jurisdiction in the form of permit fees.  No such fees are assumed for maintenance and repairs.  Workers have relatively high hourly earnings.

About 68 percent of establishments employ fewer than 5 people.

Construction includes a very large number of self-employed workers.

Construction offers a great variety of career opportunities.  People with many different talents and educational backgrounds—managers, clerical workers, accountants, engineers, truck drivers, trades workers and construction helpers—find job opportunities in the construction industry (table 3).
Construction trades occupations- Most of the workers in construction are construction trades workers, which include master, journey, and apprentice craft workers, and construction laborers.  Most construction trades workers are classified as either structural, finishing, or mechanical workers, with some performing activities of more than one type.  Structural workers build the main internal and external framework of a structure and can include carpenters; construction equipment operators; brick masons, block masons, and stonemasons; cement masons and concrete finishers; and structural and reinforcing iron and metal workers.  Finishing workers perform the tasks that give a structure its final appearance and may include carpenters; drywall installers; ceiling tile installers; plasterers and stucco masons; segmental pavers; terrazzo workers; painters and paperhangers; glaziers; roofers; carpet, floor, and tile installers and finishers; and insulation workers.  Mechanical workers install the equipment and material for basic building operations and may include pipe layers, plumbers, pipefitters, and steamfitters; electricians; sheet metal workers; and heating, air-conditioning and refrigeration mechanics and installers.  Opportunities for workers to form their own firms are better in construction than in many other industries.  Construction workers may need only a moderate financial investment to become contractors and they can run their businesses from their homes, hiring additional construction workers only as needed for specific projects.  The contract construction field, however, is very competitive, and the rate of business turnover is high.  Taking courses in business helps to improve the likelihood of success.

The most obvious way remodeling impacts the national economy is by employing the workers who are directly engaged in the remodeling activity, but the impacts are broader and extend to other industries as well.  For example, jobs are generated in the industries that produce and distribute lumber, lighting fixtures, heating equipment, and other products that go into a home remodeling project.  remodelers.  The National Association of Home Builders estimates that $100,000 spent on residential remodeling generates 1.30 jobs if the spending is on additions and alterations, and 1.25 jobs if the spending is on maintenance and repairs.  The jobs are expressed in “full-time equivalents," where one job means that the labor required is sufficient to keep one worker employed full time for one year.  Jobs by industry are shown below.  Most of the jobs are in construction and manufacturing, but trade and business services account for substantial shares as well.

National Income and Employment Impacts of $100,000 Spent on Residential Remodeling -
 Number of Full-time Jobs; Wages and Salaries; Proprietors' Income; and Corporate Profits:
A. $100,000 on Additions & Alterations
Total for all industries                                                         1.30          $53,886          $10,925          $15,962
Construction                                                                       0.50          $20,109          $3,493            $2,440
Manufacturing                                                                    0.36          $14,454          $1,212             $7,955
Wholesale and retail trade                                                  0.17          $5,844            $426                $1,642
Professional & business services                                         0.12           $6,406            $3,144            $979
Transportation, communication, utilities                             0.06           $2,722             $716               $1,562
Agriculture, forestry, mining, etc.                                        0.04           $1,509             $1,086            $965
Finance, insurance & real estate                                         0.02           $1,739             $569               $286
Other                                                                                   0.03           $1,104             $279               $133

B. $100,000 on Maintenance & Repairs
Total for all industries                                                      1.25           $52,145           $11,175          $17,942
Construction                                                                   0.33           $13,451           $2,623            $1,833
Manufacturing                                                                0.44            $17,560           $1,476            $9,879
Wholesale and retail trade                                              0.16            $5,980             $387                $1,703
Professional & business services                                     0.12            $6,483             $3,195             $1,001
Transportation, communication, utilities                           0.07            $3,284             $848                 $1,818
Agriculture, forestry, mining, etc.                                     0.06            $1,975             $1,628             $1,215
Finance, insurance & real estate                                      0.02             $2,027             $627                $313
Other                                                                             0.04             $1,384             $392                $181
Source: NAHB estimates, based primarily on data from the U.S. Bureau of Economic Analysis.
Median hourly wages of the largest occupations in construction, May 2008 by Occupation:
Construction managers:
Construction of buildings                                           $37.45 
Heavy and civil engineering construction                    $39.87
Specialty trade contractors                                       $38.34
All industries                                                             $38.39

First-line supervisors/managers of construction trades and extraction workers:
 Construction of buildings                                      $28.49
 Heavy and civil engineering construction               $28.10
 Specialty trade contractors                                   $27.49
 All industries                                                        $27.95

Plumbers, pipefitters and steamfitters:
 Construction of buildings                                           $22.83
 Heavy and civil engineering construction                    $21.27
 Specialty trade contractors                                        $21.78
 All industries                                                             $21.94

 Construction of buildings                                          $21.26
 Heavy and civil engineering construction                   $22.85
Specialty Trade Contractors                                     $21.69
 All industries                                                           $22.32

Operating engineers and other construction equipment operators:
 Construction of buildings                                          $20.48
 Heavy and civil engineering construction                   $20.02
 Specialty trade contractors                                       $18.98
 All industries                                                            $18.88

 Construction of buildings                                         $19.17
 Heavy and civil engineering construction                  $19.42
 Specialty trade contractors                                     $18.50
 All industries                                                          $18.72

Cement masons and concrete finishers:
 Construction of buildings                                         $17.41
 Heavy and civil engineering construction                  $17.13
 Specialty trade contractors                                     $16.85
 All industries                                                          $16.87

Painters, construction and maintenance:
 Construction of buildings                                        $15.41
 Heavy and civil engineering construction                 $16.84
 Specialty trade contractors                                    $15.46
 All industries                                                         $15.85

Construction laborers:
 Construction of buildings                                         $14.35
 Heavy and civil engineering construction                  $14.29
 Specialty trade contractors                                     $13.57
 All industries                                                          $13.71

Heating, air conditioning, and refrigeration mechanics and installers:
 Heavy and civil engineering construction                   $18.54
 Specialty trade contractors                                       $18.25
 All industries                                                            $19.08

** Data not available.
SOURCE: BLS Occupational Employment Statistics May 2008.
As you can see, enactment of this Jump-Start program will help reduce the deficit and increase employment.  This program will also help the quality of life of property owners by having nicer homes to live in, hopefully increasing the values of those homes.
For further information please contact

Richard Oleck,
Building Trades Association
800 326-7800

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