The Cost of Immigration - The Fiscal Impact Of Immigrants

Analyses of the Role of Immigrants in Social Security
and Medicare

To illustrate the principal fiscal benefit of immigrants, Stephen Moore, an economist at the libertarian think tank called the Cato Institute, explained that through a "pay-as-you-go mechanism" current workers, through their taxes, funded the previous generation's Medicare and Social Security benefits (A Fiscal Portrait of the Newest Americans, Washington, DC: National Immigration Forum, 1998). Moore pointed out that while legal immigrants working in the United States paid into the Social Security and Medicare programs, their parents were not collecting benefits since they were, in most cases, not in the United States. According to Moore, "[t]hat creates a huge one-generation windfall to the Social Security system." In addition, he contended that

TABLE 6.7
Household welfare use by household head's immigration status, 2001
SOURCE: Adapted from Steven A. Camarota, "Table 1. Household Welfare Use by Household Head's Immigration Status: 1996 to 2001," in Back Where We Started: An Examination of Trends in Immigrant Welfare Use since Welfare Reform, Center for Immigration Studies, March 2003, http://www.cis.org/articles/2003/back503.pdf (accessed April 6, 2005)

immigrants would help ease the financial hardship that is projected to begin in 2011, when the first baby boomers (persons born between 1946 and 1964; about forty million people) start collecting retirement benefits.

David Simcox of the Center for Immigration Studies (CIS) predicted, however, that Mexico would be the source of new immigrants through 2050, adding 300,000 to 400,000 unskilled workers to the economy each year. Simcox opined that "[t]hese cohorts are hardly a promising tax base for rescuing the Social Security fund" (Another 50 Years of Mass Mexican Immigration: Mexican Government Report Projects Continued Flow Regardless of Economics or Birth Rates, Washington, DC: Center for Immigration Studies, March 2002).

Taxes Paid by Legal Immigrants

Some analysts believe that immigrants pay more than their share of taxes. In testimony on April 4, 2001, before the Senate Judiciary Committee Subcommittee on Immigration, the Cato Institute's Stephen Moore estimated that immigrants paid $133 billion in direct taxes to federal, state, and local governments in 1998. Moore cited a study by the National Research Council of the National Academy of Sciences that estimated that the typical immigrant and his or her children will pay $80,000 more in taxes than they will receive in local, state, and federal benefits over their lifetimes. Using calculations by Social Security Administration actuaries, Moore said, "I find that the total net benefit (taxes paid over benefits received) to the Social Security system in 1998 dollars from continuing current levels of immigration is nearly $500 billion from 1998–2022 and nearly $2.0 trillion through 2072. Continuing immigration is an essential component to solving the long term financing problem of the Social Security system" (Immigrants and the U.S. Economy, Washington, DC: Cato Institute, April 4, 2001).

Taxes Paid by Illegal Immigrants

Before the Internal Revenue Service (IRS) made changes in 2003 to tighten the application process, illegal aliens could apply for an Individual Taxpayer Identification Number (ITIN), which can be used in place of a Social Security number, allowing those who were earning an income in the United States to file tax returns. FOXNews.com reported that tax filers with ITINs paid $300 million in taxes in 2001 ("IRS Keeps Tabs on Illegal Immigrant Filers," April 22, 2003). The Washington Post reported that between 1990 and 1998, more than $20 billion was paid into the Social Security fund by "mystery workers," many of whom the government believes to be illegal immigrants who gave their employers false Social Security numbers (Mary Beth Sheridan, "Illegals Paying Millions in Taxes; Most Don't Seek Refunds for Fear of INS Action," April 15, 2001).

Noncitizen Recipients of Supplemental Security
Income (SSI)

Of 6.9 million persons receiving SSI benefits in 2003, 10.1% were noncitizens. This was a decrease from a peak of 12.1% in 1995. Those 696,772 noncitizen SSI beneficiaries represented 28.9% of all aged SSI recipients and 6% of all blind and disabled recipients in 2003. (See Table 6.8.)

A person's work history determines his or her eligibility for Social Security benefits, as well as SSI eligibility for some noncitizens. In 2004 one credit was added to a person's work record for each $900 of earnings, up to the maximum of four credits per year. Generally, noncitizens could be eligible for SSI if (1) they were lawfully living in the United States on August 22, 1996, and were blind or disabled on that date, or were receiving SSI on August 22, 1996; or (2) they

TABLE 6.8
Number of noncitizens receiving federally administered payments as a percentage of SSI recipients, by eligibility category, December
1982–2003, selected years
SOURCE: "Table 7. E6. Number of Noncitizens Receiving Federally Administered Payments as a Percentage of SSI Recipients, by Eligibility Category, December 1982–2003, Selected Years," in Annual Statistical Supplement, 2004, Social Security Online, http://www.socialsecurity.gov/policy/docs/statcomps/supplement/2004/7e.html#table7.e6 (accessed March 10, 2005)

were lawfully admitted for permanent residence under the Immigration and Nationality Act (INA) and had a total of forty credits of work in the United States (work credits from the spouse or parent might also count).

Some other noncitizens could be eligible for SSI payments, including:

• Active duty members of the U.S. armed forces
• American Indians born outside the United States
• Certain noncitizens admitted as Amerasian immigrants
• Cuban or Haitian entrants

Tax System Favors Federal Government over States

In their testimony before the House Subcommittee on Immigration and Claims at the hearing "The U.S. Population and Immigration" in August 2001, Michael E. Fix and Jeffrey S. Passel noted that in measuring taxes paid by immigrants against the costs of providing assistance, the federal government was the winner ("U.S. Immigration at the Beginning of the 21st Century," Washington, DC: The Urban Institute, August 2, 2001). More taxes were paid to the federal government, but the states assumed the highest costs associated with immigrants—the costs of educating children. Increasingly, the border states in particular complained of rising costs associated with illegal immigration.