When the Institute on Taxation and Economic Policy (ITEP) released its latest study of tax payments made by illegal immigrants, some advocates were notably excited, including a labor union and a former Labor Department secretary:
Undocumented immigrants contributed nearly $100 billion in taxes in 2022. These taxpayers are paying into public programs that many of us rely on, like Social Security and Medicare, yet are not eligible to access these programs themselves.
Full report: https://t.co/gfiPANu63i pic.twitter.com/cxEUnfr19T— SEIU (@SEIU) August 8, 2024
Undocumented immigrants paid $97B in taxes in 2022.
They paid a higher state/local tax rate than the top 1% in a majority of states.
They contributed $26B to Social Security, which they can't benefit from.
Remember this the next time the undocumented are called "freeloaders."— Robert Reich (@RBReich) August 5, 2024
Even leaving aside the labor movement’s self-defeating embrace of mass immigration, the enthusiasm for this study is difficult to understand. Since nearly all U.S. residents pay taxes in one form or another, it would be shocking if illegal immigrants did not also pay. The more interesting question is how the taxes that illegal immigrants contribute compare to the benefits they receive. Despite being half the fiscal ledger, however, benefits receive no valuation in the ITEP analysis.
Let’s help fill in the blanks. In congressional testimony earlier this year, my colleague Steven Camarota explained that households headed by illegal immigrants make extensive use of cash, food, housing, and medical programs. How is that possible? There are several ways. Adult illegal immigrants receive some of these benefits on behalf of their U.S.-born children, while illegal immigrant children can directly receive free school lunch and benefits from the Women, Infants, and Children nutrition program. Furthermore, a number of states now provide Medicaid to certain illegal immigrants, and a few even provide food stamps.
Despite being half the fiscal ledger, benefits received by immigrants receive no valuation in the ITEP analysis.
Based on our analysis of the Survey of Income and Program Participation, we estimated that 59 percent of households headed by illegal immigrants use one or more major welfare programs, costing roughly $42 billion. In addition to consuming welfare, illegal immigrants place significant burdens on public education. Given the average cost per student, the estimated four million children (mostly U.S.-born) of illegal immigrants in public schools cost $68 billion in 2019.
The combined cost of welfare and public education already exceeds ITEP’s $97 billion estimate of illegal immigrant taxes paid. Of course, illegal immigrants impose many other costs as well, including on “congestible” public goods, such as transportation, infrastructure, and law enforcement.
In a 2016 report, the National Academies developed comprehensive lifetime net fiscal impact estimates based on a new immigrant’s age and education. Adapting those estimates to the characteristics of today’s illegal immigrant population, we estimated that each illegal immigrant costs an average of $68,000 over his or her lifetime. The cost should not be surprising, since the U.S. government operates a progressive system of taxation and spending. Whether native or immigrant, legal or illegal, U.S. residents who have low levels of education (and therefore low earning power) tend to be net fiscal drains, while those with high levels of education tend to be net contributors. Illegal immigrants, whose average education level is below average, are no exception to this basic fiscal logic.
Before concluding, let’s talk briefly about amnesty. A theme of the ITEP study is that, although illegal immigrants are already paying taxes, legalizing their status would increase their tax contributions even further due to higher wages and greater compliance with IRS rules. Elsewhere in the report, however, ITEP notes that most illegal immigrants are not eligible to receive Social Security and Medicare — a point that Robert Reich also trumpeted in his above tweet.
Here again we see the problem of considering only one side of the ledger. Yes, amnesty would increase the taxes that recipients pay, but it would also create a huge new liability in the form of eligibility for Social Security and Medicare. When Congress last considered a major amnesty bill, we estimated that the net cost (benefits minus new taxes) to the Social Security and Medicare trust funds would be over $1 trillion in present value.
Amnesty is so unequivocally costly to our entitlement system that the White House Council of Economic Advisers avoided the subject in its brief supporting amnesty back in 2021. ITEP avoids it here as well.