National Data | Justice now! But not for native-born taxpayers


On April 10th one million illegal aliens marched for justice.” On that day, 122 million U.S.-born workers toiled away in offices, stores, and other places of business.

For them, freedom would not come for another 11 days.

Tax Freedom Day [PDF] falls on April 26th this year. That means that the average American will work 116 days to pay Federal, state, and local taxes.

We estimate that six and one half of these Tax Slavery days are required solely to cover the direct and indirect fiscal costs imposed by immigrants. We make this estimate with confidence, updating (to 2006 dollars) findings of earlier, carefully conducted studies on immigration`s fiscal impact.

Although immigrants pay more into Social Security and Medicare than they receive in benefits, they are heavy users of other Federal transfer programs and pay considerably less income tax than the native born.  On balance, immigrants receive more from Uncle Sam than they pay. A recent CIS paper quantifies their benefits and taxes, and concludes that the average illegal alien household: (Table 1)

  • Receives $7,769 in Federal spending
  • Pays $4,708 in Federal taxes
  • Generates $3,061 in Federal deficit

Multiplying the per-household deficit by the total number of immigrant households, the impact on the Federal deficit is estimated at $43.5 billion (14.2 million households X $3,061.) That`s more than one-tenth of the total deficit, currently estimated at $319 billion for 2006.

At the state and local government level, the most comprehensive study of immigration`s fiscal impact is still that contained in The New Americans, the National Research Council`s 1997 book. The NRC staff analyzed California`s state and local government expenditures on programs such as Medicaid, AFDC (now TANF), and SSI, as well as the cost of educating immigrants` foreign– and native-born children.  They also estimated the share of: police, fire, public works, general health, recreation, higher education, and municipal assistance spending attributable to immigrants. [ Do Immigrants Impose a Net Fiscal Burden? Annual Estimates]

The bottom line: the average immigrant household receives $3,463 (1996 dollars) more state and local spending than it pays in state and local taxes. In 2006 dollars, this household: (Table 2)

  • Receives $13,802 in state and local spending
  • Pays $9,526 in state and local taxes
  • Generates $4,276 in state and local deficit

Using California as a proxy for the national average, we estimate the total state and local government deficit attributable to immigrants to be approximately $60.7 billion (14.2 million immigrant households X $4,276).

Adding the two deficits, we can safely conclude that immigrants receive about $104 billion more in government benefits that they pay in taxes.

In other words, native born taxpayers are forced to pay about $104 billion in additional taxes to support immigrants.

And this isn`t the whole story: It ignores the enormous reduction in native income and tax payments triggered by immigration.

A study by Harvard University Professor George Borjas finds that each 10 percent increase in the U.S. labor force due to immigration reduces native wages by about 3.5 percent. Foreign-born workers account for approximately 15 percent of the U.S. labor force.  

If Borjas is right, immigrant workers reduce average native wages by 5.25% (15.0/10.0 X 3.5%). [The Labor Demand Curve is Downward Sloping: Reexamining the Impact of Immigration on the Labor Market]

This obviously will reduce revenues from personal income taxes, payroll taxes, sales, and excise taxes. A “quick and dirty” way to estimate this revenue loss is to assume that the taxes sensitive to personal income decline at the same rate as personal income. If U.S.-born workers suffer a 5.25% reduction in income, total personal income will fall by about 4.6%, the difference reflecting the fact that native-born workers receive 88% of personal income.

Using this model, we estimate that immigration reduces taxes paid by native workers by the following amounts: (Table 3)

  • Federal tax loss: $74.2 billion
  • State and local tax loss: $24.2 billion
  • Total tax loss: $98.4 billion

The fiscal burden of immigration on natives is therefore $202 billion—$104 billion in direct, and $98.4 billion in indirect costs.

This amount represents 5.6 percent of total tax collections– or 6 1/2 of the 116 days Americans must work to pay their taxes in 2006.

American society is being transformed by a policy that, at the end of the day, makes us slightly poorer.

Of course, not all of “us” lose. The relatively small loss suffered by millions of American workers, nationwide, adds up to a sizable sum—which goes to American owners of capital. Native elites gain at the expense of native workers.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.