Immigrants not a Burden on Country, but how Much do Immigrants really cost?

How Much do Immigrants really cost?

INTRODUCTION

In the past year, the fiscal impacts of immigrants have again become a matter of public and political debate. Attention has focused on specific programs and policies, as well as the broader question of whether the taxes immigrants pay cover the public services they use. Estimating the economic cost or benefit of immigrants -legal or illegal, recent or long-term- is extremely difficult. The data required to develop estimates for local areas, states, or the nation are generally unavailable. Consequently, researchers must fill in the gaps with assumptions. Researchers often base estimates on assumptions and the process is not inherently biased. However, in most of the current studies, the assumptions maximize the apparent costs of immigrants. Alternative assumptions-chosen because of their plausibility, not because they drive the apparent cost of immigrants up or down- often produce very different results.

Fiscal impacts of immigrants last received widespread attention from the research community about a decade ago. The major studies done through 1991 calculating the public sector impacts of immigrants did not produce a consistent picture across all levels of government. (See Rothman and Espenshade (1992) for an excellent review of these studies.)

Nonetheless, some generalizations can be made. Most national studies encompassing all levels of government suggest that immigrants do not fiscally burden the native population. At the state level, the picture is mixed partially because states assume varied degrees of responsibilities for social services. At the local level, analyses from the 1970s and 1980s invariably found immigrants to be a net fiscal burden at the local level.

Several recent studies were produced by government agencies interested in "recovering" the costs of immigrants and non-profit groups committed to reducing levels of immigration. The four principal new studies are:

Internal Services Department (ISD 1992) on recent immigrants to Los Angeles County
Rea and Parker (1992, 1993) on undocumented immigrants in San Diego County
Governor's Office of Immigration and Refugee Affairs (GOIRA 1993) on undocumented immigrants in Texas
Huddle (1993), sponsored by the Carrying Capacity Network, on post-1970 immigrants to the United States

All four studies find that immigrants impose fiscal burdens on governments and native-born taxpayers. The Urban Institute's review of the studies finds that they vary in quality, but the results invariably overstate the negative impacts of immigrants for the following reasons:

They systematically understate tax collections from immigrants;
They systematically overstate service costs for immigrants;
None credit immigrants for the impact of immigrant-owned businesses or the full economic benefits generated by consumer spending from immigrants;
Job displacement impacts and costs are overstated;
They omit that parallel computations for natives that, when done, show natives are use more in services than they pay in taxes, too; and
The size of the immigrant population-particularly the undocumented immigrant population-tends to be overstated. Huddle's (1993) findings are unusual, even in this group.

While all four studies find that immigrants are a net cost to the level of government studied, huddle's net cost estimates are substantially higher. Huddle focuses on legal immigrants who arrived in the United States between 1970 and 1992, undocumented immigrants, and immigrants who legalized under the Immigration Reform and Control Act of 1986 (IRCA), i.e., amnesty immigrants. Huddle estimates that the net cost of these immigrants is $42.5 billion-$50..9 billion in governmental service costs for immigrants plus $11.9 billion in costs for workers "displaced" by immigrants, minus $20.2 billion in taxes collected from immigrants. The study fails to take into account any positive economic impact of immigrant businesses or consumer spending. It also overstates costs and displacement effects. Huddle's most significant error, however, is a massive understatement of revenues collected from immigrants.

This paper carefully reviews Huddle's methodology for estimating revenues generated by immigrants, corrects the logical and conceptual errors in his methodology, and develops new estimates of revenues generated by immigrants. The correct calculations show that immigrants pay over $70 billion in taxes- or over $50 billion more than Huddle estimates. Balancing the corrected revenue estimates against Huddle's inflated estimates of costs and displacement shows that immigrants incur no overall net fiscal deficit.

Copyright by The Tomas Rivera Center .
All rights reserved. No part of this publication may be reproduced or transmitted in any form by any means, electronic or mechanical, without permission in writing from The Tomas Rivera Center .

How Much do Immigrants really cost?

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