Today is Tax Day, a day that recurs in infamy. All of us who work for a living and (unlike a number of Obama appointees) pay our taxes dread this day,
Tax Day is the perfect time to examine less-familiar facets of the tax code, such as the Earned Income Tax Credit (EITC). Economics writer Ed Rubenstein’s new report, “The Earned Income Tax Credit and Illegal Immigration: A Study in Fraud, Abuse, and Liberal Activism,” exposes a cruel combination: The EITC functions as a wealth transfer to the poor, while today’s mass immigration imports poverty. The combination of these two factors makes a needless tax burden on native-born American families that much worse.
The EITC illustrates that tax cuts, deductions, and tax credits aren’t the same thing. Tax cuts refer to lowering the rate at which income is taxed. As we saw when Ronald Reagan cut tax rates in 1981 as part of his economic-recovery program, tax-rate reductions boost prosperity generally — and sometimes even produce more revenue for the government. Tax deductions, of course, reduce the amount of one’s income that is considered taxable.
By contrast, tax credits reduce one’s tax liability dollar-for-dollar — a $500 tax credit is worth $500 off one’s tax bill. And if a tax credit is “refundable,” as EITC is, the Treasury will actually pay the recipient if the credit is worth more than he or she owes in taxes. Therefore, through schemes such as the EITC, the government can “spread the wealth around,” to borrow a phrase from Barack Obama.
The EITC is exactly the kind of “tax relief” Obama talked about during the campaign and while promoting his economic-stimulus bill — welfare by other means. The stimulus package expands the EITC for two years, increasing the value of the credit, especially for households of three or more children.
Taxpayers suffer a one-two punch when the EITC pairs up with mass immigration: The EITC increasingly picks the pockets of native-born Americans and gives their tax dollars to low-income immigrants.
The Center for Immigration Studies [CIS] reports that nearly a third of immigrant households qualified for the EITC in 2006. Rubenstein says immigrants collected about $12 billion from the EITC last year — more than a quarter of all EITC payouts — and immigrants participate in the EITC at twice the rate of native-born Americans.
Moreover, increasing immigration will mean increased immigrant participation. The United States allots a million immigrant visas a year. By comparison, we accepted an average of 250,000 immigrants a year during our nation’s first two centuries.
Immigrants are eligible for the EITC so often because the United States allows “chain migration,” meaning that foreigners can migrate to the United States simply because an uncle or a third cousin came here several years ago. There’s no requirement that they be educated, literate, or skilled. More than half of all illegal aliens and a quarter of legal immigrants never completed high school; by contrast, less than 10 percent of native-born Americans dropped out of high school.
Research by scholars such as Rubenstein, the Center for Immigration Studies’s Steve Camarota, the Heritage Foundation’s Robert Rector, and Harvard’s George Borjas has shown the consequences of these numbers. Rector found high-school-dropout-headed households pay an average of $9,700 a year in taxes but collect an average of $32,138 a year in benefits.
There’s no good reason why hard-working Americans should import new mouths to feed every year. We have a rule on the books that those who sponsor immigrants who are relatives must shoulder financial responsibility for them. But it is riddled with loopholes, so new arrivals and their U.S.-born children often become lifelong public burdens.
We also have a public-charge doctrine — enabling these immigrants’ deportation — that dates to colonial times. But it, too, has been gutted by liberals eager to show their “compassion” with other people’s money.
How can we give Americans real tax relief? By reducing legal immigration to historic levels and adopting skill and educational requirements for all immigrants.
Some conservatives have argued that immigrants — Hispanics in particular — are “natural conservatives.” But that’s a hard conclusion to arrive at based on the facts. In addition to high immigrant participation in EITC, Rubenstein’s study shows the prevalence and ease of EITC fraud (more than a quarter of all EITC payouts), and reports that the EITC discourages marriage and encourages cohabitation and single parenthood.
Meanwhile, the Manhattan Institute’s Heather Mac Donald has chronicled Hispanic social trends. Half of all Latino children in the U.S. are now born out of wedlock. The birthrate among unmarried Hispanic women is higher than that among whites, Asians, or blacks. More than half the Hispanic children in this country now live in poor households headed by a single mom. Only 21 percent of Latino kids live with a pair of married parents. Unmarried Mexican-American parents who start out cohabitating are more likely than whites or blacks to split up.
People living with the consequences of this sort of conduct are drawn by pandering politicians and ethnic-advocacy groups into a cycle of dependency. That cycle involves sexual promiscuity, illegitimacy, gangs, crime, drugs, violence, fraud, dropping out of school, and reliance on government programs such as the EITC.
The EITC has become yet another means of depriving hard-working Americans of resources. Mass immigration feeds the fire burning up their money. This runs opposite to America’s immigration ideal, in which capable people come here to do for themselves, not to sign onto the public dole.
– James R. Edwards Jr. is coauthor of The Congressional Politics of Immigration Reform. This essay is adapted from remarks at a National Press Club briefing on April 14.