The Fiscal Impact of Immigration
Small-government advocates should oppose amnesty and support selective immigration policies.

Illegal immigrants in Chicago attend a workshop on applying for legal work status, August, 2012.



I have worked on the issue of immigration’s fiscal impact for a long time, having presented my first academic paper on the subject at the annual meeting of the American Sociological Association almost two decades ago. I can thus say with confidence that the Heritage Foundation’s recent report on the fiscal cost of illegal immigrants is the most detailed and exhaustive ever done on this topic.

The report’s lead author is Robert Rector, intellectual godfather of welfare reform. Rector finds that illegal-immigrant households use about $55 billion more in services than they pay in taxes each year. Under the Schumer-Rubio bill, they would begin to get permanent legal status (green cards) in about ten years and would access more programs; then, the annual costs would balloon to $106 billion a year. The total fiscal costs over the lifetime of illegal immigrants, if they receive amnesty, would be $6.5 trillion. Some, even on the right, have criticized his analysis, but the basic findings are unassailable for reasons I will explain.

In the modern American economy, those with relatively little education (immigrant or native) earn modest wages on average and make modest tax contributions. Their low average incomes mean that they or their children can often access welfare and other means-tested programs. As a group, the less educated use more in services than they pay in taxes. Anyone who argues otherwise is either lying or grossly uninformed.

Education matters so much to the illegal-immigration debate because all researchers agree that about half of adult illegal immigrants have less than a high-school education, and another quarter have only a high-school education. The Heritage study identifies this as the key reason that letting illegal immigrants stay creates huge fiscal costs. As illegal immigrants are on average only 34 years old, the cost over the next five decades will be enormous.

As the Heritage study points out, the average household in America receives more than $31,000 in government benefits and services — federal, state, and local, minus pure public goods such as defense and interest on the debt. Very roughly, this is the median income of a household headed by an immigrant with a high-school education or less. There is no way for these households to pay enough in taxes to cover even the average consumption of public services.

What’s more, these households are relatively large and on average receive a good deal more in public services than $31,000. Until government is cut by at least half, the less educated will be a significant fiscal drain. This does not make the less educated bad people. It simply reflects the realities of the modern American economy and the existence of a huge administrative state.

The accompanying figure shows welfare use and income-tax liability for households headed by an immigrant who has lived here for 20 years, and who thus is not a new arrival.

The figure shows that 63 percent of households headed by immigrants who have not completed high school and have lived here for 20 years access one or more welfare programs, and 68 percent have zero federal income liability. Of households headed by an immigrant with only a high-school education (and who has lived here for 20 years), 49 percent use welfare and about half have no federal income-tax liability. While not a fully developed model like the Heritage study, the figure demonstrates why less educated immigrants are on average a net fiscal drain, even after they have been here for two decades.

It is worth pointing out that 86 percent of immigrant households accessing the welfare system have at least one worker. But working does not eliminate one’s ability to collect welfare, particularly non-cash welfare and other means-tested programs, if one’s income is low enough.