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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