The distributive effects of Public Law 92-500

Title II of the 1972 “Clean Water Act” provided for a potentially massive federal construction grant program for the construction of publicly owned wastewater treatment plants. Part of this subsidy accrues to municipalities and the remainder to industry. The regulations for these federal grants are somewhat perplexing and it is not obvious who will benefit and by how much. The objective of this article is to quantify the subsidies received by municipalities and industry and estimate the effect on the distribution of income under certain assumptions. It is concluded that these federal construction grants are likely to redistribute income from the middle-income classes to primarily the very rich.