October 24, 1993
"What Immigrants Cost - Bottom Line: Figuring in the Taxes They Pay, It's
San Jose Mercury News
By Timothy Taylor
<< Back to 1993
SOME PEOPLE believe that the budgets of local, state and federal government
are staggering under the burden of illegal immigration. Others respond that while
illegal immigrants do impose costs, the taxes they pay more than compensate.
Both sides love to brandish studies that provide irrefutable, uncontestable
evidence for their position. (A list appears below.) Since most people don't keep
a tame statistician or economist on retainer to explain and criticize every study,
they tend to dismiss them all, or believe the ones that confirm their prejudices.
But it is possible, by employing some basic data and some common-sense judgments
about sources, for the average citizen to separate the credible from the hyperbolic.
Start with the basics. Any study of the fiscal impact of illegal immigration
must answer a few key questions. How many illegal immigrants are out there? What
costs does the average one impose on government? What taxes does the average illegal
immigrant pay? Knowing the reasonable answers to those questions allows an evaluation
of the commonly made claims about the immigration debate.
More than any other person, Gov. Pete Wilson has elevated the immigration issue
to center stage in California. Wilson recently estimated that California has half
of the 4 million illegal immigrants in the country, and that these 2 million people
cost state government $1.4 billion, and local governments an additional $1 billion.
When considering other estimates of the costs of illegal immigration, I apply
what I call the Wilson Ballpark Test. As a public official with deep concern about
illegal immigration, it's unlikely that Wilson wildly underestimated its costs.
So be suspicious of any study that makes Wilson look soft on illegal immigrants.
Wilson's estimates of the number of illegal immigrants are probably on the
high side. An August report from the non-partisan and highly respected General
Accounting Office, whose methods are summarized below, argued that a "likely
maximum" for the number of illegal aliens is 3.4 million.
In addition, both the California Department of Finance and the Immigration
and Naturalization Service have recently used estimates that 40 percent of the
national total, not half, lives in California. Together, these estimates imply
that the number of illegal immigrants in California is closer to 1.4 million than
Wilson's 2 million.
But even if Wilson's estimate is high, it is reasonable, given the uncertainties
involved. By contrast, Donald Huddle of Rice University estimates 4.8 million
illegal immigrants. A recent study of San Diego County by Richard Parker and Louis
Rea of San Diego State University loses credibility by arguing for 8 million.
Once the number of illegal immigrants is estimated, the next step is to estimate
the cost of government support for them.
Wilson calculates the cost of illegal immigrants in the public schools, the
prisons and the Medi-Cal program. The costs to local governments are primarily
those of running county jails, and of locally based spending on education.
Wilson's list may seem too brief. However, public education, medical programs
and prisons are 90 percent of the costs of major federal and state programs for
undocumented immigrants, according to the Center for Immigration Studies in Washington,
D.C. Because illegal immigrants are generally less skilled than legal ones, they
are more likely to need public assistance. However, eligibility rules and fear
of being caught and deported keep illegal immigrants away from welfare programs
like food stamps.
Overall, the government tends to spend less on illegal immigrants than on recent
legal immigrants, as shown in the recent Los Angeles County study, for example.
In figuring the cost of illegal immigrants, the Wilson Ballpark Test is again
useful. He estimates that the average illegal immigrant costs the government $1,200.
Huddle calculates $1,600; Parker and Rea estimate $1,380. Given the uncertainties
involved, and the fact that Wilson left many small programs out of his analysis,
these numbers are in the same ballpark.
Making the generous assumptions of, say, 4 million illegal immigrants and a
per person cost of $1,500, the total costs illegal immigrants impose on government
budgets nationwide would be $6 billion. Any amount measured in billions is real
money, and worthy of public debate. But in the context of the $2.4 trillion that
federal, state, and local governments will spend this year, $6 billion is hardly
Moreover, illegal immigrants pay taxes as well as using government services.
But calculating how much is tricky. After all, tax dollars don't arrive in government
coffers labeled "courtesy of an illegal resident."
Many studies tackle the tax revenue question by focusing only on the taxes
directly received by a county or a state. That's reasonable enough if the focus
is on the state or county coffers, but it's no way to discover the overall fiscal
impact of illegal immigration. After all, many illegal immigrants have Social
Security and income taxes withheld; essentially all pay sales taxes; some pay
property taxes or play the lottery.
Even harder to estimate is the amount illegal immigrants contribute to the
economy indirectly by generating business, which leads to corporate taxes and
In general, studies that find very low levels of tax per undocumented immigrant
(that is, only a few hundred dollars) are leaving out taxes to which we all contribute,
directly and indirectly.
A more sophisticated approach is to use an economic model to consider the ways
that immigrants might contribute both to taxes and to economic activity. A recent
study by Rebecca Clark and Jeffrey Passel at the Urban Institute takes this approach.
It estimates that recent adult immigrants in Los Angeles County contribute an
average of $3,066 per person in taxes.
Like every estimate, this one has its problems. It mixes recent illegal immigrants
with legal ones, and the average tax received from undocumented immigrants is
almost surely lower than the total in the table.
The table below showing the Clark and Passel estimates illustrates another
point. Of the taxes paid by immigrants, about 80 percent went to the federal government.
Every study that analyzes taxes across different levels of government finds that
most of the revenue goes to the feds, even though most of the costs for education,
health and corrections occur at the state or local level.
Yet another approach to calculating the taxes is to use some reasonable assumptions
about the income of illegal immigrants and the general level of taxation in the
For example, based on figures in many of these studies, it's reasonable to
postulate that 75 percent of 4 million undocumented immigrants hold jobs, and
earn an average salary of $12,000 per year. That multiplies to $36 billion in
When all federal, state and local taxes are added up, government collects about
$1 in taxes for every $3 in income, and that applies pretty uniformly to people
at all income levels. In addition, even though some taxes are withheld by employers
and sales taxes are tough to avoid, let's say that illegal immigrants pay only
75 percent of the taxes that are due, because many work in the underground economy.
In this rough-and-ready calculation, illegal immigrants would be paying $9
billion in taxes, or an average of $2,250 per year per person. Naturally, this
approach can be done in a more refined way, as in the studies by Julian Simon
or by Sidney Weintraub and Gilberto Cardenas, but the bottom line is generally
that the total taxes paid by undocumented immigrants equal or exceed their costs.
A pattern emerges from the studies of the fiscal effects of illegal immigration.
Studies that take a national perspective have tended to find that the costs to
government are offset either largely or completely by the taxes paid by illegal
immigrants. State and local level studies, on the other hand, find that the costs
imposed by undocumented immigrants exceed the tax revenues generated for those
levels of government. For states like California, and counties like San Diego
and Los Angeles, this imbalance can be significant.
The obvious remedy is for the federal government to recycle some of the tax
money paid by illegal immigrants to help the most sorely affected areas.
Analyzing the fiscal impact of illegal immigration addresses only one part
of society's concern over this issue -- and probably not the most important part.
Other central issues include how illegal immigration affects wages and jobs, culture
and lifestyle, and America's image of how it wishes to treat those seeking a better
life within our borders. Those subjects will be addressed on these pages in the
weeks to come.
|Taxes paid by recent immigrants, legal and illegal, per adult
|Federal income tax
|State income tax
Source: Rebecca L. Clark and Jeffrey S. Passell, "How Much Do Immigrants
Pay in Taxes?: Evidence from Los Angeles County." The Urban Institute, August
1993. Table 4.
|PAYING FOR ILLEGALS
|Chart shows the estimated public costs in several categories
for illegal immigrants.
||State plus local
Source: Office of Gov. Pete Wilson, August 9, 1993
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