This paper focuses on the net fiscal effects of immigration with particular emphasis on the fiscal effects of low skill immigration. The fiscal effects of immigration are only one aspect of the impact of immigration. Immigration also has social, political, and economic effects. In particular, the economic effects of immigration have been heavily researched with differing results. These economic effects lie beyond the scope of this paper.
Overall, immigration is a net fiscal positive to the government’s budget in the long run: the taxes immigrants pay exceed the costs of the services they receive. However, the fiscal impact of immigrants varies strongly according to immigrants’ education level. College-educated immigrants are likely to be strong contributors to the government’s finances, with their taxes exceeding the government’s costs. By contrast, immigrants with low education levels are likely to be a fiscal drain on other taxpayers. This is important because half of all adult illegal immigrants in the U.S. have less than a high school education. In addition, recent immigrants have high levels of out-of-wedlock childbearing, which increases welfare costs and poverty.
An immigration plan proposed by Senators Mel Martinez (R-FL) and Chuck Hagel (R-NE) would provide amnesty to 9 to 10 million illegal immigrants and put them on a path to citizenship. Once these individuals become citizens, the net additional cost to the federal government of benefits for these individuals will be around $16 billion per year. Further, once an illegal immigrant becomes a citizen, he has the right to bring his parents to live in the U.S. The parents, in turn, may become citizens. The long-term cost of government benefits to the parents of 10 million recipients of amnesty could be $30 billion per year or more. In the long run, the Hagel/Martinez bill, if enacted, would be the largest expansion of the welfare state in 35 years.