Executive Summary
Unlawful immigration and amnesty for current unlawful
immigrants can pose large fiscal costs for U.S. taxpayers. Government provides
four types of benefits and services that are relevant to this issue:
* Direct
benefits. These include Social Security, Medicare, unemployment insurance, and
workers' compensation.
* Means-tested
welfare benefits. There are over 80 of these programs which, at a cost of
nearly $900 billion per year, provide cash, food, housing, medical, and other
services to roughly 100 million low-income Americans. Major programs include
Medicaid, food stamps, the refundable Earned Income Tax Credit, public housing,
Supplemental Security Income, and Temporary Assistance for Needy Families.
* Public
education. At a cost of $12,300 per pupil per year, these services are largely
free or heavily subsidized for low-income parents.
* Population-based
services. Police, fire, highways, parks, and similar services, as the National
Academy of Sciences determined in its study of the fiscal costs of immigration,
generally have to expand as new immigrants enter a community; someone has to
bear the cost of that expansion.
The cost of these governmental services is far larger than
many people imagine. For example, in 2010, the average U.S. household received
$31,584 in government benefits and services in these four categories.
The governmental system is highly redistributive.
Well-educated households tend to be net tax contributors: The taxes they pay
exceed the direct and means-tested benefits, education, and population-based
services they receive. For example, in 2010, in the whole U.S. population,
households with college-educated heads, on average, received $24,839 in
government benefits while paying $54,089 in taxes. The average college-educated
household thus generated a fiscal surplus of $29,250 that government used to
finance benefits for other households.
Other households are net tax consumers: The benefits they
receive exceed the taxes they pay. These households generate a "fiscal
deficit" that must be financed by taxes from other households or by government
borrowing. For example, in 2010, in the U.S. population as a whole, households
headed by persons without a high school degree, on average, received $46,582 in
government benefits while paying only $11,469 in taxes. This generated an average
fiscal deficit (benefits received minus taxes paid) of $35,113.
The high deficits of poorly educated households are
important in the amnesty debate because the typical unlawful immigrant has only
a 10th-grade education. Half of unlawful immigrant households are headed by an
individual with less than a high school degree, and another 25 percent of
household heads have only a high school degree.
Some argue that the deficit figures for poorly educated
households in the general population are not relevant for immigrants. Many
believe, for example, that lawful immigrants use little welfare. In reality,
lawful immigrant households receive significantly more welfare, on average,
than U.S.-born households. Overall, the fiscal deficits or surpluses for lawful
immigrant households are the same as or higher than those for U.S.-born households
with the same education level. Poorly educated households, whether immigrant or
U.S.-born, receive far more in government benefits than they pay in taxes.
In contrast to lawful immigrants, unlawful immigrants at
present do not have access to means-tested welfare, Social Security, or
Medicare. This does not mean, however, that they do not receive government
benefits and services. Children in unlawful immigrant households receive
heavily subsidized public education. Many unlawful immigrants have U.S.-born
children; these children are currently eligible for the full range of
government welfare and medical benefits. And, of course, when unlawful
immigrants live in a community, they use roads, parks, sewers, police, and fire
protection; these services must expand to cover the added population or there
will be "congestion" effects that lead to a decline in service
quality.
In 2010, the average unlawful immigrant household received
around $24,721 in government benefits and services while paying some $10,334 in
taxes. This generated an average annual fiscal deficit (benefits received minus
taxes paid) of around $14,387 per household. This cost had to be borne by U.S. taxpayers.
Amnesty would provide unlawful households with access to over 80 means-tested
welfare programs, Obamacare, Social Security, and Medicare. The fiscal deficit
for each household would soar.
If enacted, amnesty would be implemented in phases. During
the first or interim phase (which is likely to last 13 years), unlawful
immigrants would be given lawful status but would be denied access to
means-tested welfare and Obamacare. Most analysts assume that roughly half of
unlawful immigrants work "off the books" and therefore do not pay
income or FICA taxes. During the interim phase, these "off the books"
workers would have a strong incentive to move to "on the books"
employment. In addition, their wages would likely go up as they sought jobs in
a more open environment. As a result, during the interim period, tax payments
would rise and the average fiscal deficit among former unlawful immigrant
households would fall.
After 13 years, unlawful immigrants would become eligible
for means-tested welfare and Obamacare. At that point or shortly thereafter,
former unlawful immigrant households would likely begin to receive government
benefits at the same rate as lawful immigrant households of the same education
level. As a result, government spending and fiscal deficits would increase dramatically.
The final phase of amnesty is retirement. Unlawful immigrants
are not currently eligible for Social Security and Medicare, but under amnesty
they would become so. The cost of this change would be very large indeed.
* As noted,
at the current time (before amnesty), the average unlawful immigrant household
has a net deficit (benefits received minus taxes paid) of $14,387 per
household.
* During the
interim phase immediately after amnesty, tax payments would increase more than
government benefits, and the average fiscal deficit for former unlawful
immigrant households would fall to $11,455.
* At the end
of the interim period, unlawful immigrants would become eligible for
means-tested welfare and medical subsidies under Obamacare. Average benefits
would rise to $43,900 per household; tax payments would remain around $16,000;
the average fiscal deficit (benefits minus taxes) would be about $28,000 per
household.
* Amnesty
would also raise retirement costs by making unlawful immigrants eligible for
Social Security and Medicare, resulting in a net fiscal deficit of around
$22,700 per retired amnesty recipient per year.
In terms of public policy and government deficits, an
important figure is the aggregate annual deficit for all unlawful immigrant
households. This equals the total benefits and services received by all
unlawful immigrant households minus the total taxes paid by those households.
* Under
current law, all unlawful immigrant households together have an aggregate
annual deficit of around $54.5 billion.
* In the
interim phase (roughly the first 13 years after amnesty), the aggregate annual
deficit would fall to $43.4 billion.
* At the end
of the interim phase, former unlawful immigrant households would become fully
eligible for means-tested welfare and health care benefits under the Affordable
Care Act. The aggregate annual deficit would soar to around $106 billion.
* In the
retirement phase, the annual aggregate deficit would be around $160 billion. It
would slowly decline as former unlawful immigrants gradually expire.
These costs would have to be borne by already overburdened
U.S. taxpayers. (All figures are in 2010 dollars.)
The typical unlawful immigrant is 34 years old. After
amnesty, this individual will receive government benefits, on average, for 50
years. Restricting access to benefits for the first 13 years after amnesty therefore
has only a marginal impact on long-term costs.
If amnesty is enacted, the average adult unlawful immigrant
would receive $592,000 more in government benefits over the course of his
remaining lifetime than he would pay in taxes.
Over a lifetime, the former unlawful immigrants together
would receive $9.4 trillion in government benefits and services and pay $3.1
trillion in taxes. They would generate a lifetime fiscal deficit (total
benefits minus total taxes) of $6.3 trillion. (All figures are in constant 2010
dollars.) This should be considered a minimum estimate. It probably understates
real future costs because it undercounts the number of unlawful immigrants and dependents
who will actually receive amnesty and underestimates significantly the future
growth in welfare and medical benefits.
The debate about the fiscal consequences of unlawful and
low-skill immigration is hampered by a number of misconceptions. Few lawmakers
really understand the current size of government and the scope of
redistribution. The fact that the average household gets $31,600 in government
benefits each year is a shock. The fact that a household headed by an
individual with less than a high school degree gets $46,600 is a bigger one.
Many conservatives believe that if an individual has a job
and works hard, he will inevitably be a net tax contributor (paying more in
taxes than he takes in benefits). In our society, this has not been true for a
very long time. Similarly, many believe that unlawful immigrants work more than
other groups. This is also not true. The employment rate for non-elderly adult unlawful
immigrants is about the same as it is for the general population.
Many policymakers also believe that because unlawful
immigrants are comparatively young, they will help relieve the fiscal strains
of an aging society. Regrettably, this is not true. At every stage of the life
cycle, unlawful immigrants, on average, generate fiscal deficits (benefits
exceed taxes). Unlawful immigrants, on average, are always tax consumers; they never
once generate a "fiscal surplus" that can be used to pay for government
benefits elsewhere in society. This situation obviously will get much worse
after amnesty.
Many policymakers believe that after amnesty, unlawful
immigrants will help make Social Security solvent. It is true that unlawful
immigrants currently pay FICA taxes and would pay more after amnesty, but with
average earnings of $24,800 per year, the typical unlawful immigrant will pay
only about $3,700 per year in FICA taxes. After retirement, that individual is
likely to draw more than $3.00 in Social Security and Medicare (adjusted for inflation)
for every dollar in FICA taxes he has paid.
Moreover, taxes and benefits must be viewed holistically. It
is a mistake to look at the Social Security trust fund in isolation. If an
individual pays $3,700 per year into the Social Security trust fund but
simultaneously draws a net $25,000 per year (benefits minus taxes) out of
general government revenue, the solvency of government has not improved.
Following amnesty, the fiscal costs of former unlawful
immigrant households will be roughly the same as those of lawful immigrant and
non-immigrant households with the same level of education. Because U.S.
government policy is highly redistributive, those costs are very large. Those
who claim that amnesty will not create a large fiscal burden are simply in a
state of denial concerning the underlying redistributional nature of government
policy in the 21st century.
Finally, some argue that it does not matter whether unlawful
immigrants create a fiscal deficit of $6.3 trillion because their children will
make up for these costs. This is not true. Even if all the children of unlawful
immigrants graduated from college, they would be hard-pressed to pay back
$6.3 trillion in costs over their lifetimes.
Of course, not all the children of unlawful immigrants will
graduate from college. Data on intergenerational social mobility show that,
although the children of unlawful immigrants will have substantially better
educational outcomes than their parents, these achievements will have limits.
Only 13
percent are likely to graduate from college, for example.
Because of this, the children, on average, are not likely to become net tax
contributors. The children of unlawful immigrants are likely to remain a net
fiscal burden on U.S. taxpayers, although a far smaller burden than their
parents.
A final problem is that unlawful immigration appears to
depress the wages of low-skill U.S.-born and lawful immigrant workers by 10
percent, or $2,300, per year. Unlawful immigration also probably drives many of
our most vulnerable U.S.-born workers out of the labor force entirely. Unlawful
immigration thus makes it harder for the least advantaged U.S. citizens to share
in the American dream. This is wrong; public policy should support the interests
of those who have a right to be here, not those who have broken our laws.
Source: Heritage.org, May 6, 2013, By Robert Rector
<http://www.heritage.org/about/staff/r/robert-rector> and Jason Richwine, Ph.D.
<http://www.heritage.org/about/staff/r/jason-richwine>
You can read the full report here
<http://thf_media.s3.amazonaws.com/2013/pdf/sr133.pdf>
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