Illegal Immigrants Get $10.5 Billion from Child Tax Credit in Reconciliation; More than Previously Estimated

Illegals with both U.S.-born & illegal immigrant children will benefit, as will recent border-crossers

By Steven A. Camarota on November 9, 2021

In an October analysis, we estimated that illegal immigrants would receive $8.2 billion in cash payments from the expanded Child Tax Credit (CTC), which is part of budget reconciliation bill, also referred to as the Build Back Better (BBB) Act. That analysis assumed cash payments would be limited to illegal immigrants with U.S.-born children, as is the case with the Additional Child Tax Credit (ACTC) it replaces. But the current version of the BBB Act repeals p. 1,452, line 14, the requirement that children claimed as dependents need Social Security numbers (SSNs). As a result, illegal immigrants whose children are illegal immigrants as well will receive an estimated $1.5 billion in payments from the new program. The elimination of the SSN requirement also allows the more than 600,000 illegal immigrants encountered at the border in family units or as unaccompanied minors and released in FY 2021 to receive cash payments from the new CTC. We roughly estimate these new arrivals will receive slightly less than $800 million from the program, for a total of $10.5 billion in cash payments to illegal immigrants here in 2020 or released into the country in FY 2021. Receipt of payments under the new CTC is made all the easier because the BBB eliminates the work requirement of the old ACTC.1

Like the ACTC, the new CTC pays cash to lower-income families who do not pay any federal income tax. The new program significantly increases the maximum cash payment, which is referred to as a “refundable credit”, from $1,400 per child under the old ACTC to $3,600 for children under six, and $3,000 for children six to 17. The new CTC is only extended for one year in the BBB, after which the maximum for all children would be $2,000. While the elimination of the Social Security requirement is permanent, the dropping of the work requirement is only extended through tax year 2022. The elimination of the work requirement seems designed to facilitate illegal aliens’ receipt of payments. Some illegal aliens who work off the books have trouble demonstrating employment income, so dropping the work requirement makes it easier for them to now receive cash payments. Proponents almost certainly hope that the fully expanded credit, presumably without a work requirement, will be made permanent if it proves popular.

For parents to receive cash payments from the old ACTC their child needed a valid SSN. As we explained in our earlier study, if the parents do not have an SSN themselves, they can still receive payments from the credit if get an Individual Taxpayer Identification Number, which is not difficult. In practice, this meant that only illegal immigrants with U.S.-born children could receive payments, as all children born in the United States are issued SSNs. By eliminating the SSN requirement, the new credit allows illegal immigrants whose children are also in the country illegally to receive payments.

The overwhelming majority of children in illegal immigrant families are U.S.-born and therefore have SSNs, but based on data through 2020, we estimate there are about 250,000 families with illegal immigrant children that have incomes low enough to receive cash payments from the new program. These families will receive about $6,100 a year on average for their children, totaling $1.5 billion. The average payment is somewhat larger than the roughly $5,100 we estimated for illegal immigrants with U.S.-born children in our prior analysis. This is partly because families in which the child(ren) are illegal immigrants tend to have arrived more recently and have lower incomes than those with U.S.-born children, giving them somewhat larger cash payments. It should be noted that there are families headed by illegal immigrants with both U.S.-born and illegal immigrant children who qualify for payments.

Turning to recent border-crossers, DHS reports that 469,728 individuals — children and adults — in family units (FMU) were encountered in FY 2021 at the border. Virtually every one of them was released into the United States, as children cannot be held for more than 20 days in detention. Very little demographic information has been released about those in family units. The family units discussed in the Wall Street Journal’s report on the Biden administration plan to pay $450,000 per illegal alien to family units “separated” during the Trump administration’s 2018 short-lived "Zero Tolerance" policy consist of an adult and one child for the most part. This implies that about half of those in family units are children. Assuming this is true of those encountered in the last fiscal year, it means there were 250,000 family units among FMUs. We estimate that 78 percent of all illegal immigrant families have incomes low enough to receive cash from the CTC, receiving an average payment of $5,300, or about $2,600 per child. This includes illegal immigrant families with U.S.-born or illegal immigrant children. Assuming FMUs have the same use rates and receive the same payment per child as illegal immigrants already here, they will receive about $480 million in payments from the CTC.

Like those in family units, unaccompanied children (UACs) must also be released, typically to a relative already in the country, within 20 days. DHS reports 146,925 UACs were encountered at the border in FY 2021. Assuming the families they joined in the United States have the same characteristics as illegal immigrant families already here, then 78 percent of these children will be in a family that is income-eligible for cash from the new credit. If we also assume that these families will receive the average payment per child of $2,600, then they will receive a total of roughly $300 million from the new CTC. Together, the recently released families and unaccompanied children will receive roughly $780 million in cash from the new CTC.

In addition to its direct costs, the elimination of the SSN requirement would seem to be an invitation to fraud, as tax filers now simply need to provide a name and date of birth for a child, and a 2011 report showed that illegal immigrants received more than $4 billion in payments from refundable tax credits. At that time, no Social Security number was required. Partly in response to a 2011 Inspector General for Tax Administration report showing that illegal immigrants made extensive use of tax credits, Congress included provisions in both the 2015 PATH Act and the 2017 Tax Cuts and Jobs Act designed to curtail in part illegal immigrant receipt of such programs. This included the requirement that the qualifying child have an SSN. The BBB effectively undoes those changes permanently. Fraud may be even worse under the BBB because, unlike the old ACTC, the new program also has no work requirements, which means recipients no longer need to show any record of employment.

The New York Times wrote that the new expanded CTC has “the makings of a policy revolution” because it creates a guaranteed income for parents, even if they do not work at all. This type of system has existed in European countries for decades and it has long been the dream of many progressives to have such a system in the United States. But in creating the new program, Congress explicitly chose to extend benefits to millions of illegal immigrants, even those whose children are not legal immigrants or American citizens. Putting aside the nearly $11 billion cost to taxpayers, the decision to reward illegal immigrants with cash payments is very likely to encourage more illegal migration into the country.

End Note

1 The work requirement in USC 26 § 24 dealing with the refundable portion of the old ACTC is in section (d)(1)(B)(i). The American Rescue Plan passed in March 2021 states in Section 9611 on p. 144 that “subsection (d) shall not apply,” referring to USC 26 § 24. This eliminates the work requirement for tax year 2021. USC 26 § 24 has a section labeled “(i)Special Rules for 2021”, which also states that subsection (d), which creates the work requirement, is dropped for tax year 2022. In the Build Back Better Act, Section 137102, “EXTENSIONS AND MODIFICATIONS APPLICABLE BEGINNING IN 2022” states on lines 21 to 25 that “(1) EXTENSION OF CHILD TAX CREDIT. — Section 24(i) is amended — (A) by striking ‘January 1, 2022’ in the matter preceding paragraph (1) and inserting ‘January 1, 2023.’” This has the effect of dropping the work requirement for tax year 2022.