Bloomberg BusinessWeek: Putting a Price Tag on Immigration Reform

U.S. Marine and newly naturalized American citizens take the Oath of Allegiance during a Naturalization Ceremony at the Jacob K. Javits Federal Building in New York, on April 19.

Immigrants

Putting a Price Tag on Immigration Reform

By Elizabeth Dwoskin

May 08, 2013

 

Very soon, Congress will assess the price of immigration reform. That is, lawmakers will come up with a tally, in dollars, of the sweeping immigration bill’s costs to taxpayers and the revenue it will bring in.

 

Even before the U.S. has officially scored the bill, the Heritage Foundation, a conservative think tank, has already calculated its own price tag for giving amnesty to unauthorized immigrants: $6.3 trillion over 50 years. Heritage comes up with its huge number by adding all the public services that naturalized immigrants could conceivably use. Politically, the number will accomplish what its authors likely intended: Garner press coverage and make many conservative lawmakers think twice about voting for the bill.

 

As a piece of research adding to the immigration debate, it makes some questionable assumptions. For one, the report projects that all 11 million undocumented immigrants living in the U.S. will choose eventually to become citizens—despite the fact that some will be disqualified or may not choose to endure the expensive, decade-long process the bill proposes they go through.

 

The dollar amount becomes inflated because the report factors in things that don’t normally go into scoring, says Douglas Holtz-Eakin, who was director of the Congressional Budget Office from 2003 to 2005. For example, the report factors in the cost of immigrants who become citizens using public roads ($476 per household, says Heritage). It also calculates the cost for the 4 million U.S. citizen children of immigrants attending public school, which Heritage deems “a direct and inevitable result of the unlawful immigration of the parents.” (The report doesn’t calculate the tax contribution of those children after they graduate and enter the workforce.)

 

Another reason Heritage thinks immigrants will be a tax drain is that the think tank assumes their incomes will rise only 5 percent after citizenship, though other economists predict they could rise between 10 percent and 15 percent. When Congress last enacted immigration reform, in 1986, incomes of immigrants who got amnesty rose 15 percent over three years. And when the Congressional Budget Office scored President George W. Bush’s failed immigration overhaul legislation six years ago, officials found that immigrants would contribute more in taxes than they collected in benefits: The 2006 bill would have boosted U.S. revenues by about $66 billion between 2007 and 2016 and would have increased direct spending by $54 billion.

 

“The assumption is that they’re poor and will always be poor,” says Benjamin Johnson, executive director of the American Immigration Council, a pro-immigration group in Washington, D.C., that has criticized the report. “The message is that these are the takers.”

 

“We are not picking and choosing numbers. On the contrary, ours is the only study that considers all government taxes and expenditures,” Heritage economist Robert Rector, who authored the study, said in an email. “The fact that unlawful immigrants will be a net drain on the tax base is common sense—you don’t even need a study for it. People with an average tenth grade education are not going to pay enough taxes to offset the benefits they receive.” (Rector’s co-author, Jason Richwine, the Washington Post reported today, also argued in his 2009 doctoral dissertation that immigrants with low IQs should be prohibited from entering the country. Heritage told the newspaper it had no association with Richwine’s earlier paper.)

 

When it’s the CBO’s turn to tally the official score, the numbers and assumptions—no surprise here—are likely to be quite different from Heritage’s. But that won’t make the task of coming up with a price tag any any easier. The big decision the CBO has to make is whether to look narrowly at the bill’s impact on the federal budget or examine the bill’s wider impact on the the economy as a whole. Of course, not all pieces of legislation need to be examined in this way, but one that potentially allows millions more people into the labor force kind of asks for it.

 

Then you get into some very difficult questions. To estimate something like naturalized immigrants’ tax payments, the CBO could take a stab at how many will start companies, how much money they will save, whether the balances of payment they send to family members back home will increase along with their rising incomes, and how soon they may be able to shift to higher-paying jobs they are excluded from now. One recent estimate by a left-leaning think tank, the Center for American Progress, takes into account a broader array of benefits and concludes that legalization with a path to citizenship could add $1.4 trillion to U.S. GDP over the next decade.

 

Between an approach that looks at immigrants as takers and one that maximizes all possible contributions immigrants could make to society, the latter is the one favored by economists, who tend to think that immigration will add jobs and wealth to the economy. Opponents of immigration reform will be disappointed to find that the CBO will likely adopt more of a macroeconomic approach. Which is why those opponents sought to get their numbers out first.

Dwoskin is a staff writer for Bloomberg Businessweek in Washington.