Cost of Unlawful Immigrants to the U.S. Taxpayers
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The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer by Robert Rector and Jason Richwine, PhD SPECIAL REPORT No. 133 | MAY 6, 2013 from THE DOMESTIC POLICY STUDIES DEPARTMENT The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer Robert Rector and Jason Richwine, PhD SR-133 About the Authors Robert Rector is Senior Research Fellow in the Domestic Policy Studies Department at The Heritage Foundation. Jason Richwine, PhD is Senior Policy Analyst for Empirical Studies in the Domestic Policy Studies Department at The Heritage Foundation. This paper, in its entirety, can be found at: http://report.heritage.org/sr133 Produced by the Domestic Policy Studies Department The Heritage Foundation 214 Massachusetts Avenue, NE Washington, DC 20002 (202) 546-4400 | heritage.org Nothing written here is to be construed as necessarily reflecting the views of The Heritage Foundation or as an attempt to aid or hinder the passage of any bill before Congress. SPECIAL REPORT | NO. 133 MAY 6, 2013 Table of Contents Executive Summary .......................................................................................v The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer ...............................1 Appendix A .................................................................................................39 Appendix B .................................................................................................43 Appendix C. .45 Appendix D ................................................................................................47 Appendix E .................................................................................................53 Appendix F .................................................................................................59 Appendix G ................................................................................................61 Appendix Tables ...........................................................................................63 Endnotes. .87 iii SPECIAL REPORT | NO. 133 MAY 6, 2013 The Fiscal Cost of Unlawful Immigrants and Amnesty to the U.S. Taxpayer Robert Rector and Jason Richwine, PhD Executive Summary The cost of these governmental services is far larg- nlawful immigration and amnesty for cur- er than many people imagine. For example, in 2010, Urent unlawful immigrants can pose large fiscal the average U.S. household received $31,584 in gov- costs for U.S. taxpayers. Government provides four ernment benefits and services in these four categories. types of benefits and services that are relevant to The governmental system is highly redistributive. this issue: Well-educated households tend to be net tax contribu- tors: The taxes they pay exceed the direct and means- ■■ Direct benefits. These include Social Security, tested benefits, education, and population-based ser- Medicare, unemployment insurance, and workers’ vices they receive. For example, in 2010, in the whole compensation. U.S. population, households with college-educated heads, on average, received $24,839 in government ■■ Means-tested welfare benefits. There are over benefits while paying $54,089 in taxes. The average 80 of these programs which, at a cost of nearly college-educated household thus generated a fiscal $900 billion per year, provide cash, food, housing, surplus of $29,250 that government used to finance medical, and other services to roughly 100 million benefits for other households. low-income Americans. Major programs include Other households are net tax consumers: The ben- Medicaid, food stamps, the refundable Earned efits they receive exceed the taxes they pay. These Income Tax Credit, public housing, Supplemental households generate a “fiscal deficit” that must be Security Income, and Temporary Assistance for financed by taxes from other households or by gov- Needy Families. ernment borrowing. For example, in 2010, in the U.S. population as a whole, households headed by persons ■■ Public education. At a cost of $12,300 per pupil without a high school degree, on average, received per year, these services are largely free or heavily $46,582 in government benefits while paying only subsidized for low-income parents. $11,469 in taxes. This generated an average fiscal def- icit (benefits received minus taxes paid) of $35,113. ■■ Population-based services. Police, fire, high- The high deficits of poorly educated households ways, parks, and similar services, as the National are important in the amnesty debate because the Academy of Sciences determined in its study of typical unlawful immigrant has only a 10th-grade the fiscal costs of immigration, generally have to education. Half of unlawful immigrant households expand as new immigrants enter a community; are headed by an individual with less than a high someone has to bear the cost of that expansion. school degree, and another 25 percent of household heads have only a high school degree. v THE FISCAL COST OF UNLAWFUL IMMIGRANTS AND AMNESTY TO THE U.S. TAXPAYER Some argue that the deficit figures for poorly sought jobs in a more open environment. As a result, educated households in the general population during the interim period, tax payments would rise are not relevant for immigrants. Many believe, for and the average fiscal deficit among former unlawful example, that lawful immigrants use little welfare. immigrant households would fall. In reality, lawful immigrant households receive After 13 years, unlawful immigrants would significantly more welfare, on average, than U.S.- become eligible for means-tested welfare and born households. Overall, the fiscal deficits or sur- Obamacare. At that point or shortly thereafter, for- pluses for lawful immigrant households are the mer unlawful immigrant households would likely same as or higher than those for U.S.-born house- begin to receive government benefits at the same holds with the same education level. Poorly edu- rate as lawful immigrant households of the same cated households, whether immigrant or U.S.-born, education level. As a result, government spending receive far more in government benefits than they and fiscal deficits would increase dramatically. pay in taxes. The final phase of amnesty is retirement. In contrast to lawful immigrants, unlawful immi- Unlawful immigrants are not currently eligible for grants at present do not have access to means-tested Social Security and Medicare, but under amnesty welfare, Social Security, or Medicare. This does not they would become so. The cost of this change would mean, however, that they do not receive government be very large indeed. benefits and services. Children in unlawful immi- grant households receive heavily subsidized public ■■ As noted, at the current time (before amnesty), education. Many unlawful immigrants have U.S.- the average unlawful immigrant household has a born children; these children are currently eligible net deficit (benefits received minus taxes paid) of for the full range of government welfare and medical $14,387 per household. benefits.A nd, of course, when unlawful immigrants live in a community, they use roads, parks, sew- ■■ During the interim phase immediately after ers, police, and fire protection; these services must amnesty, tax payments would increase more than expand to cover the added population or there will government benefits, and the average fiscal defi- be “congestion” effects that lead to a decline in ser- cit for former unlawful immigrant households vice quality. would fall to $11,455. In 2010, the average unlawful immigrant house- hold received around $24,721 in government ben- ■■ At the end of the interim period, unlawful immi- efits and services while paying some $10,334 in grants would become eligible for means-tested taxes. This generated an average annual fiscal defi- welfare and medical subsidies under Obamacare. cit (benefits received minus taxes paid) of around Average benefits would rise to $43,900 per $14,387 per household. This cost had to be borne household; tax payments would remain around by U.S. taxpayers. Amnesty would provide unlaw- $16,000; the average fiscal deficit (benefits minus ful households with access to over 80 means-test- taxes) would be about $28,000 per household. ed welfare programs, Obamacare, Social Security, and Medicare. The fiscal deficit for each household ■■ Amnesty would also raise retirement costs by would soar. making unlawful immigrants eligible for Social If enacted, amnesty would be implemented in Security and Medicare, resulting in a net fiscal phases. During the first or interim phase (which is deficit of around $22,700 per retired amnesty likely to last 13 years), unlawful immigrants would recipient per year. be given lawful status but would be denied access to means-tested welfare and Obamacare. Most ana- In terms of public policy and government deficits, lysts assume that roughly half of unlawful immi- an important figure is the aggregate annual deficit grants work “off the books” and therefore do not pay for all unlawful immigrant households. This equals income or FICA taxes. During the interim phase, the total benefits and services received by all unlaw- these “off the books” workers would have a strong ful immigrant households minus the total taxes paid incentive to move to “on the books” employment. by those households. In addition, their wages would likely go up as they vi SPECIAL REPORT | NO. 133 MAY 6, 2013 ■■ Under current law, all unlawful immigrant house- year is a shock. The fact that a household headed by holds