Immigration Bill Expected to Boost Tax Collections

A new study jointly conducted by the Congressional Budget Office and the Joint Committee on Taxation estimates that the bill currently under debate in the Senate would save nearly $1 trillion over the next two decades, largely because more than 10 million additional people would be paying taxes.

“The nonpartisan experts who estimate the financial impact of legislation for Congress concluded that because undocumented immigrants will start paying more in taxes for things like education and Social Security, the immigration proposal in the Senate will make the economy fairer for middle class families while cutting the U.S. deficit by almost $1,000,000,000,000 over the next two decades,” said Cecilia Muñoz, director of the White House’s Domestic Policy Council, in an email Thursday. “With every passing day, it’s becoming clear that we can’t afford not to act. Now we know exactly how much is at stake, and it's the kind of news that can help to change the policy conversation in Washington.”

The Border Security, Economic Opportunity, and Immigration Modernization Act, S. 744, would revise the laws governing immigration and the enforcement of those laws, allowing for a significant increase in the number of noncitizens who could lawfully enter the United States on both a permanent and temporary basis. In addition, the bill would create a process for many individuals who are present in the country now on an unauthorized basis to gain legal status, subject to requirements specified in the bill, including paying any back taxes they owe. The bill also would directly appropriate funds for tightening border security and enforcing immigration laws, and would authorize additional appropriations for those purposes.

The CBO estimated Tuesday that, by 2023, enacting S. 744 would lead to a net increase of 10.4 million in the number of people residing in the United States, compared with the number of people projected under current law. That net increase includes an increase of about 10.4 million permanent residents; an increase of about 1.6 million temporary workers and their dependents; and a decrease of about 1.6 million unauthorized residents. CBO estimates that about 8 million unauthorized residents would initially gain legal status under the bill, but that change in status would not affect the size of the U.S. population.

The increase in the number of legal residents stemming from the bill would boost direct spending for federal benefit programs. Direct spending for enforcement and other purposes also would rise. But, under the bill, federal revenues would be higher as well, mostly because of the larger size of the labor force. Implementing the bill would require an increase in discretionary funding for immigration-related activities.

The CBO and the staff of the Joint Committee on Taxation estimate that enacting S. 744 would generate changes in direct spending and revenues that would decrease federal budget deficits by $197 billion over the 2014–2023 period.

The bill is estimated to increase federal direct spending by $262 billion over the 2014–2023 period. Most of those outlays would be for increases in refundable tax credits, such as the Earned Income Tax Credit and the Child Tax Credit, stemming from the larger U.S. population under the bill and in spending on health care programs—particularly for the Medicaid program and for subsidies provided through insurance exchanges created under the Affordable Care Act.

However, the bill would also increase federal revenues by $459 billion over the 2014–2023 period. That increase would stem largely from additional collections of income and payroll taxes, reflecting both an increase in the size of the U.S. labor force and changes in the legal status of some current workers.

The Heritage Foundation, a conservative think tank, disputed those figures and issued a study Friday arguing that the bill would cost taxpayers more. “In addition to concerns of rule of law and fairness, amnesty will cost taxpayers trillions of dollars,” said the study. “This is because some taxpayers contribute more in taxes than they receive in government benefits, while others consume more than they contribute. Most unlawful immigrants fall into this second category of net tax consumers. Even now unlawful immigrant households consume $14,387 more in benefits than they pay in taxes on average. Current unlawful immigrants receive public education for their children and services at the state and local levels, such as policing, fire protection, road use, and sewer maintenance. Illegal immigrants on average do not pay enough in taxes to cover the cost of these services. In addition, roughly half of illegal immigrants have minor children who were born in the U.S. These children are eligible for nearly all federal means-tested welfare programs including food stamps, Medicaid, Temporary Assistance for Needy Families, and the Children’s Health Insurance Program. The total cost of means-tested welfare to these children comes to around $17 billion per year. Under current law, illegal immigrant households receive about $2.40 in government benefits for every $1.00 paid in taxes. The overall cost to taxpayers (total benefits minus total taxes) is $54 billion per year.”

The Heritage Foundation argued that the bill would provide millions of immigrants with amnesty, eventually entitling them to extensive new benefits. “Indeed, a recent Heritage study indicates that the net cost of amnesty for all unlawful immigrants would be at least $6.3 trillion. These costs must be paid by current taxpayers, either by increased taxes or reduced benefits. While S. 744 does not grant every unlawful immigrant amnesty, it would grant it to the vast majority, leading to trillions in new costs. Specifically, S. 744 would immediately provide RPIs [Registered Provisional Immigrants] with access to cash welfare benefits through the refundable Earned Income Tax Credit and related Additional Child Tax Credits. The cost of these welfare benefits to the taxpayer would be around $10 billion per year. While RPIs would pay more in taxes after amnesty as their wages increased and they began to work more on the books, these increased tax payments would be largely offset by the new EITC and ACTC welfare payments. Overall, Heritage estimates that amnesty would continue to cost taxpayers over $50 billion per year (total benefits minus taxes) for the first 10 to 13 years after the bill becomes law.”