As the Senate debates the Build Back Better Act (H.R. 5376), a little-noticed part of the Congressional Budget Office’s (CBO) cost estimates shows that the bill’s amnesty provisions will create enormous fiscal costs for taxpayers. Like its prior fiscal cost estimate for a larger-scale amnesty, or its estimates for smaller amnesties, CBO’s most recent fiscal estimate (new revenue minus new expenditures) for H.R. 5376 shows a large negative fiscal impact — $124 billion in the first 10 years.
But what is most striking about the CBO’s newest estimate is that the amnesty would create an additional $359 billion in net costs in the second decade after passage. The total net fiscal cost of the bill’s amnesty provisions over 20 years is $483 billion. Perhaps equally important, CBO states that the bill would increase the deficit “by larger amounts in the subsequent decade”.
As the Center has emphasized, the cost of any amnesty increases over time as illegal immigrants become eligible for more and more social programs, especially Social Security and Medicare. CBO’s extension of its normal 10-year time horizon is a welcome development that helps to capture more of these long-term costs.
The costs illegal immigrants create are not because they are lazy or because they all came to get welfare. Rather, illegal immigrants have modest levels of education on average and, as a result, tend to earn similarly modest wages and thus make modest tax payments. Their low incomes also mean that many more would qualify for public benefits if legalized, thereby dramatically increasing fiscal costs. The realities of the modern American economy and the existence of a well-developed welfare state mean that allowing illegal immigrants to remain in the country and giving them any kind of legal status is very costly to taxpayers.
Among the CBO’s findings:
- Section 60001 of H.R. 5376 (parole amnesty) would create $131.85 billion in new expenditures between 2022 and 2031, while generating just $7.49 billion in new revenue, for a net fiscal drain of $124.36 billion in the first 10 years.
- The amnesty would create an additional $357.82 billion in new expenditures between 2032 and 2041, and it would also reduce revenue by $1.24 billion, creating a net drain of $359.06 billion in the second 10 years.
- The total net fiscal drain from the amnesty provisions for the entire 20-year period (2022 to 2041) would be $483.42 billion.
- The primary reason a parole amnesty would result in large new expenditures according to the CBO is that amnesty recipients would be able to receive Affordable Care Act subsidies, Medicaid, the Earned Income and Child Tax Credits, the Supplemental Nutrition Assistance Program (SNAP, often called food stamps), Social Security, and Medicare to a much greater extent than they would without legal status.
- The primary reason the amnesty would have minimal effect on federal revenues is that immigrants’ increase in reporting of taxable income “would mostly be offset” because businesses “would report smaller taxable profits and pay less in income taxes”. In other words, with legalization employers would be able to deduct the wages and benefits they currently pay off the books to illegal immigrants, thereby lowering their tax payments in roughly equal proportion to the increase in taxes illegal aliens would pay once legalized.
Tabe 1. CBO Estimate of Number of Beneficaries of Amnesty in H.R. 5376 (Budget Reconciliation)
|Number who would receive parole under section 60001||6.5 million|
|Number of parolees under section 60001 who will gain LPR status as immediate relatives of U.S. citizens.*||3 million|
|Number who will gain LPR status through sections 60002 and 60003 or as immediate relatives of those who gain LPR status under the bill.||"A few million"|
*CBO estimates that about one million of the parolees would attain LPR status earlier than they would under current law. Of the remaining two million, CBO states that nearly all the rest would receive that status in the following two decades.
Tabe 2. CBO Estimate of Fiscal Impact of Amnesty in H.R. 5376 (Budget Reconciliation)
|Impact of Amnesty1||2022-2032||2032-2041||Total|
|Increase in Expenditures2||131,850||357,820||489,670|
|Increase in Revenue3||7,490||-1,240||6,250|
|Net Fiscal Impact||124,360||359,060||483,420|
All figures include on- and off-budget effects of parole provisions.
1 Section 60001, “Protections and Work Permits”.
2 Cells R24 and S24 from the Excel file linked above.
3 Cells R94 and S94 from the Excel file linked above.