Among the findings:
- Households headed by illegal aliens imposed more than $26.3 billion in costs on the federal government in 2002 and paid only $16 billion in taxes, creating a net fiscal deficit of almost $10.4 billion, or $2,700 per illegal household.
- Among the largest costs are Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); food assistance programs such as food stamps, WIC, and free school lunches ($1.9 billion); the federal prison and court systems ($1.6 billion); and federal aid to schools ($1.4 billion).
- With nearly two-thirds of illegal aliens lacking a high school degree, the primary reason they create a fiscal deficit is their low education levels and resulting low incomes and tax payments, not their legal status or heavy use of most social services.
- On average, the costs that illegal households impose on federal coffers are less than half that of other households, but their tax payments are only one-fourth that of other households.
- Many of the costs associated with illegals are due to their American-born children, who are awarded U.S. citizenship at birth. Thus, greater efforts at barring illegals from federal programs will not reduce costs because their citizen children can continue to access them.
- If illegal aliens were given amnesty and began to pay taxes and use services like households headed by legal immigrants with the same education levels, the estimated annual net fiscal deficit would increase from $2,700 per household to nearly $7,700, for a total net cost of $29 billion.
- Costs increase dramatically because unskilled immigrants with legal status — what most illegal aliens would become — can access government programs, but still tend to make very modest tax payments.
- Although legalization would increase average tax payments by 77 percent, average costs would rise by 118 percent.
- The fact that legal immigrants with few years of schooling are a large fiscal drain does not mean that legal immigrants overall are a net drain — many legal immigrants are highly skilled.
- The vast majority of illegals hold jobs. Thus the fiscal deficit they create for the federal government is not the result of an unwillingness to work.
- The results of this study are consistent with a 1997 study by the National Research Council, which also found that immigrants’ education level is a key determinant of their fiscal impact.
A Complex Fiscal Picture
Welfare use. Our findings show that many of the preconceived notions about the fiscal impact of illegal households turn out to be inaccurate. In terms of welfare use, receipt of cash assistance programs tends to be very low, while Medicaid use, though significant, is still less than for other households. Only use of food assistance programs is significantly higher than that of the rest of the population. Also, contrary to the perceptions that illegal aliens don’t pay payroll taxes, we estimate that more than half of illegals work “on the books.” On average, illegal households pay more than $4,200 a year in all forms of federal taxes. Unfortunately, they impose costs of $6,950 per household.
The Impact of Amnesty. Finally, our estimates show that amnesty would significantly increase tax revenue. Because both their income and tax compliance would rise, we estimate that under the most likely scenario the average illegal alien household would pay 77 percent ($3,200) more a year in federal taxes once legalized. While not enough to offset the 118 percent ($8,200) per household increase in costs that would come with legalization, amnesty would significantly increase both the average income and tax payments of illegal aliens.
What’s Different About Today’s Immigration. Many native-born Americans observe that their ancestors came to America and did not place great demands on government services. Perhaps this is true, but the size and scope of government were dramatically smaller during the last great wave of immigration. Not just means-tested programs, but expenditures on everything from public schools to roads were only a fraction of what they are today. Thus, the arrival of unskilled immigrants in the past did not have the negative fiscal implications that it does today. Moreover, the American economy has changed profoundly since the last great wave of immigration, with education now the key determinant of economic success. The costs that unskilled immigrants impose simply reflect the nature of the modern American economy and welfare state. It is doubtful that the fiscal costs can be avoided if our immigration policies remain unchanged.