AGC Member Survey Highlights Impact of Fiscal Cliff/AGC Leaders Hear from Capitol Hill

Yesterday, AGC executive board members, along with other AGC tax policy leaders within the association, participated in a call with House Majority Whip Kevin McCarthy (R-Calif.) where McCarthy described the fiscal cliff situation as “going nowhere.”  This statement comes the day after AGC concluded a survey that illustrates how the fiscal cliff is already impacting AGC members and how they conduct their business.  The survey results also highlight the drastic action that members will potentially be forced to take if indiscriminate tax increases and indiscriminate spending cuts go into effect on Jan. 1. According to the nearly 600 AGC members who responded to the survey, the construction industry is already feeling the impact of the fiscal cliff, especially the weight of the potential threats of higher tax rates and cuts to federal construction spending. The majority of AGC’s members are small businesses organized as pass-through entities – they pay business taxes at the individual rates and so do many of their customers.  The results of this nationwide survey show the potential for reduced job opportunities, reduced capital investment, layoffs and benefit reductions if fiscal cliff negotiations fail to produce a resolution. If a compromise is not reached, it will result in significantly higher tax rates and reduced federal construction spending. The macroeconomic impacts of going over the fiscal cliff – as stated in a recent Congressional Budget Office report – has the potential to “spark a recession,” reduce GDP growth from 2.2 percent to 0.5 percent and cause unemployment to spike to over 9 percent by the end of next year.  Many of the respondents to the AGC survey were found to be small businesses,  with 67percent employing less than 100 employees and 74 percent doing less than $50 million in work annually. Fifty-four percent of these respondents have already taken action with regard to the fiscal cliff, typically by postponing hiring and capital investment.  Of the 46 percent of the contractors who have not already taken action, 63 percent plan to take action if rates rise. They also plan to reduce job opportunities, capital investment, employer contributions to health care and 401(k)s, and their workforce. Construction program cuts as a result of sequestration – AGC  has already estimated a potential $6 billion reduction in federal construction spending based on the sequester – will have similar impacts according to the survey. AGC is sending the survey results to all members of Congress and to the White House. For more information, please contact Jeff Shoaf at 202-547-3350 or shoafj@agc.org.