Posted on February 24, 2021

Amnesty Would Cost the Social Security and Medicare Trust Funds Hundreds of Billions of Dollars

Jason Richwine, Center for Immigration Studies, February 22, 2021

Although illegal immigration flouts the rule of law and strains local communities, it does generate one unambiguous benefit — namely, free contributions to our Social Security and Medicare trust funds. Amnesty would transform those contributions into costs totaling hundreds of billions of dollars.

{snip} Under current law, most illegal immigrants cannot access Social Security or Medicare benefits even when they reach retirement age. Nevertheless, roughly half of illegal immigrants do have payroll taxes deducted from their wages while they are working. {snip} However, amnesty would qualify recipients for Social Security and Medicare, converting future contributions into large IOUs from the federal government.

{snip} Based on our analysis of the American Community Survey, the average working-age illegal immigrant is 39 years old and earns $28,500 annually. Let’s say that amnesty boosts his wages by 10 percent immediately; that he receives additional yearly increases of 1.2 percent based on official projections of wage growth minus inflation; and that he works until the full retirement age of 67. If so, he would collect about $18,640 in annual Social Security benefits. If his lifespan is statistically average, he will collect this annual benefit until he dies at the age of 80. To understand the magnitude of these future benefits, we need to “discount” the benefit stream, meaning consolidate it into a single upfront cost. Applying a discount rate of 2 percent, the present value of his total lifetime benefits comes to $140,330.

{snip} Applying the same assumptions listed above, the present value of his taxes paid after amnesty would be only $94,500, which by itself creates a deficit. {snip} In other words, the new taxes paid by the average amnesty recipient amount to only half of the $94,500 noted above. The net effect of amnesty is therefore $140,330 minus $47,250, which is about $93,000 per recipient. {snip}