September 11, 2003

National Data, By Edwin S. Rubenstein

Immigration Causes A Quarter Of California’s State Budget Deficit—Or Eight More Days Of Tax Slavery

Apparently no major gubernatorial candidate in California wants to criticize immigration. Amazing—because immigrants’ fiscal impact on California households is not only significant, but also unusually well-documented.

Let’s put it this way. Every year, the Tax Foundation computes “Tax Freedom Day”—the day on which Americans get to stop working for the government and start earning money for themselves. It’s an ingenious way of expressing the average tax burden.

National Tax Freedom Day is April 19. That means that, overall, Americans work an average of 109 days for government.

But there’s a lot of variation between the states. The earliest Tax Freedom Day is Alaska: (March 30—89 days). The latest: Connecticut (May 9th—129 days).

California is one of worst—it had the fourth-latest Tax Freedom Day among the 50 states in 2003. It falls on April 29^th—which means 119 days of tax slavery for Californians.

We estimate that almost eight (7.8) of those tax slavery days are worked solely to cover the combined Federal, state, and local deficits generated by the state’s immigrants.

We are able to make this estimate with confidence because of the microstudy of California made by the National Research Council (NRC), published in The New Americans (1997).

This was the technical appendix to the U.S. Commission on Immigration Reform—the “Jordan Commission,” headed by black former Democratic Congresswoman Barbara Jordan. Its recommendations for substantial immigration reduction were embodied in the celebrated Smith-Simpson bill, sabotaged by Republican immigration enthusiasts like Spencer Abraham, with the help of disinformation from Establishment Conservative media like the Wall Street Journal Editorial Page.

For example, the Wall Street Journal has never published the NRC findings. This suppression was easier because the NRC study was mendaciously spun by its immigration enthusiast chairman RAND Corporation economist James P. Smith.

Measuring the cost of immigration is complicated. Legal and illegal immigrants have an alarming propensity to consume social welfare benefits, as my last two columns described. But immigrants (not always the same ones) also pay taxes. So, in theory, they could defray some or all of their costs. Measuring the gap between payments made to immigrants and taxes extracted from immigrants is critical. This is why the NRC study is so valuable.

Here, rescued by VDARE.COM, are the NRC’s key findings (1996 dollars):

Native-born Californian households paid $1,174 annually in federal, state and local taxes in a net subsidy to the immigrant presence in their state.

Just in state taxes alone, excluding federal and local taxes, native-born California native-born households paid $895 annually in a net subsidy to the immigrant presence.

California immigrant households received a net subsidy from combined Federal, state, and local programs averaging $6,145 in 1996. Immigrant households received an average $24,507 in combined Federal, state, and local spending. They paid an average of $18,362 in taxes.

California immigrant households received a net subsidy of $2,632 from California state taxpayers. They received an average $4,973 in state spending and paid an average $2,341 in state taxes.

Adjusting for inflation and growth in the immigrant population since the NRC report, we estimate California immigrants now receive about $9.3 billion more in state expenditures than they pay in state taxes. (See table)

Conclusion: nearly one-quarter (24.5%) of California’s current $38 billion state budget deficit stems directly from immigration.

Including federal and local spending, after adjusting again for inflation and foreign population growth, the total net subsidy to California’s immigrants amounts to $21.7 billion per year.

Or, to put it another way, that $21.7 billion is equivalent to 6.6% of the combined Federal, state, and local taxes paid by California natives.

In effect, native-born Californians face a 6.6% surcharge on their Federal, state, and local taxes to pay for California’s immigrants.

California is in an extraordinarily deep fiscal hole. Its budget deficit of $38 billion was an astonishing one-third of the state’s annual spending.

There’s plenty of blame to go around. For example, as Peter Brimelow points out in his recent book The Worm In The Apple, the state’s $40+ billion-yearly public school industry has been captured by a money-sucking parasite, the California Teachers Association. It has tightened its grip by claiming various key legal privileges, such as mandatory agency fee laws.

But at least those are California teachers, and union bosses.

Those eight days of tax slavery are being imposed by foreigners—with, of course, the connivance of our politicians.

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