budget.house.gov

Prepared Testimony of Steven A. Camarota Director of Research
Center for Immigration Studies

For Immigration Integrity, Security, and Enforcement Subcommittee of the House Judiciary Committee Hearing entitled “The Impact of Illegal Immigration on Social Services,”

Thursday, January 11, 2024

Summary

Illegal immigrants are a net fiscal drain, meaning they receive more in government services than they pay in taxes. This result is not due to laziness or fraud. Illegal immigrants actually have high rates of work, and they do pay some taxes, including income and payroll taxes. The fundamental reason that illegal immigrants are a net drain is that they have a low average education level, which results in low average earnings and tax payments. It also means a large share qualify for welfare programs, often receiving benefits on behalf of their U.S.-born children. Like their less-educated and low-income U.S.-born counterparts, the tax payments of illegal immigrants do not come close to covering the cost they create.

Key Points

* The current surge of illegal immigration is unprecedented. Some 2.7 million inadmissible aliens have been released into the country by the administration since January 2021. There have also been 1.5 million “got-aways” — individuals observed entering illegally but not stopped. Visa overstays also seem to have hit a record in FY 2022.

* We preliminarily estimate that the illegal immigrant population grew to 12.8 million by October of 2023, up 2.6 million since January 2021, when the president took office. This is the net increase in the illegal population based on monthly Census Bureau data, not the number of new arrivals.

* Illegal immigrants have a negative fiscal impact — taxes paid minus benefits received — primarily because a large share have modest levels of education, resulting in relatively low average incomes and tax payments, along with significant use of means-tested programs and other government services.

* Prior research indicates that 69 percent of adult illegal immigrants have no education beyond high school, compared to 35 percent of the U.S.-born.

* Using the National Academies’ estimate of immigrants’ net fiscal impact by education level, we estimate that the lifetime fiscal drain (taxes paid minus costs) for each illegal immigrant is about $68,000, although this estimate comes with some caveats.

* Illegal immigrants make extensive use of welfare. Based on government data, we estimate that 59 percent of households headed by illegal immigrants use one or more major welfare programs, compared to 39 percent of households headed by the U.S.-born.

* Based on their use rate of major welfare programs, we estimate that illegal immigrants receive $42 billion in benefits, or about 4 percent of the total cost of the cash, Medicaid, food and housing programs examined in our study. However, this is only a rough approximation due to limitations in the data.

* Illegal immigrants can receive welfare on behalf of U.S.-born children. Also, illegal immigrant children can receive school lunch/breakfast and WIC directly. A number of states provide Medicaid to some illegal immigrants, and a few provide SNAP. Several million illegal immigrants also have work authorization (e.g. DACA, TPS and some asylum applicants), allowing receipt of the EITC.

* The high welfare use of illegal immigrant households is not explained by an unwillingness to work. In fact, 94 percent of illegal immigrant households have at least one worker, compared to only 73 percent of U.S.-born households. However, the nation’s welfare system is designed to help low-wage workers with children, which describes a very large share of illegal immigrant households.

* In addition to consuming welfare, illegal immigration makes significant use of public education. Based on average costs per student, the estimated 4 million children of illegal immigrants in public schools created $68.1 billion in costs in 2019. The vast majority of these children are U.S.-born.

• Use of emergency medical services is another area in which illegal immigrants create significant fiscal costs. Prior research indicates that there are 5.8 million uninsured illegal immigrants in the country in 2019, accounting for a little over one-fifth of the total population without health insurance. The costs of providing care to them likely totals some $7 billion annually.

* Illegal immigrants do pay some taxes. We estimate that illegal immigrants in 2019 paid roughly $5.9 billion in federal income tax, $16.2 billion in Social Security tax and $3.8 billion in Medicaid taxes. However, as the net fiscal drain of $68,000 per person cited above indicates, these taxes are not nearly enough to cover the cost of the services they receive.

* Illegal immigrants do add perhaps $321 billion to the nation’s GDP, but this is not a measure of their tax contributions or the benefits they create for the U.S.-born. Almost all the increase in economic activity goes to the illegal immigrants themselves in the form of wages.

Introduction

Congress set limits on legal immigration and has allocated funds to enforce those limits for good reason. Allowing widespread illegal immigration raises profound concerns about a host of issues, from public safety and national security to the impact on American workers and the rule of law. While these impacts are all important, my testimony focuses only on the impact of illegal immigration on public coffers. The ongoing border crisis and the dramatic increase in the illegal immigrant population in the last three years will come at a significant cost to taxpayers. By consuming scarce public resources also will make it more difficult to assist low-income legal immigrants and U.S.-born Americans.

In my testimony, I will address five major issues that relate to illegal immigration’s impact on taxpayers. First, I will discuss what the ongoing border crisis means for the growth in the size of the illegal immigrant population. Second, I will touch on the enormous strain this influx is creating in many American cities. Third, I will report the estimated education level of illegal immigrants and then use this information to estimate the lifetime net fiscal impact — all taxes paid minus all benefits received — of the average illegal immigrant. Fourth, I will then report some of the costs illegal immigration creates for key public services. Fifth, I will estimate the tax contributions of illegal immigrants from federal income, Social Security, and Medicaid taxes, which are by far the most important taxes that they pay. Finally, I will warn against conflating GDP growth with fiscal impact.

The Current Surge

Border Encounters and Aliens Released. From January 2021 to November 2023 there were nearly 8 million “encounters” at all U.S. borders.1 There has never been this many encounters over such a short period of time, which in the past were referred to as “apprehensions,” though there are some differences between the two terms. Court records and other information on the Department of Homeland Security (DHS) websites indicate that about 2.7 million inadmissible aliens have been released into the country since the start of the Biden administration.2 The decision to release these aliens represents new additions to the illegal immigrant population. Many of those released have pending asylum applications or are parolees, but they are still illegal immigrants because they have not been formally admitted to the U.S. and are subject to deportation under the Immigration and Nationality Act.

Got-Aways. In addition to those released into the interior of the country, there are so-called “got-aways, which according to DHS are “the number of subjects who, after making an unlawful entry, are not turned back or apprehended”. Prior to Covid-19, the number averaged about 128,000, and was roughly 137,000 in 2020. In 2021, the number more than doubled to 391,000.3 DHS has not published any newer numbers. However, Fox News has reported that there were 599,000 got-aways in FY 2022.4 Further, at a May press conference, Secretary Mayorkas seemed to confirm a reporter’s question that there had already been more than 530,000 got-aways in FY 2023 at that time.5 All told, there have been roughly 1.5 million got-aways since the president took office.6 On an annual basis, the number of got-aways in FY 2022 and 2023 is 4.5 times the average in the Trump administration’s first three years before Covid-19, when immigration temporarily plummeted.

Visa Overstays. A significant number of new illegal immigrants, and perhaps a majority before the current border surge, were admitted legally on a temporary visa or under the visa waiver program and then did not leave the country when the time limit expired. DHS for FY 2022 showed 850,000 foreign visitors overstayed in that year. The total overstay rate for 2022 was 3.67 percent, which is more than double the rate of recent years. Of course, not all of these individuals stay long term, and there is always some number of people who leave the country but whose departure was not properly recorded.7 Still, the current level of overstays is much higher than in 2021 and in the years before Covid-19.8

What the Monthly Census Data Shows. The largest Census Bureau survey that captures the foreign-born population is the American Community Survey (ACS), which is released annually and reflects the population in July of each year. The most recent ACS available is for 2022, so it is a year and a half out of date. This means it only partly captures the current surge in illegal immigration. However, the monthly Current Population Survey (CPS), which the Census Bureau collects for the Bureau of Labor Statistics, is released shortly after it is collected each month. It therefore provides the most up-to-date data available, though it is smaller than the ACS.

Estimating the Illegal Population in 2023. In a recent report for the Center for Immigration Studies my colleague Karen Zeigler analyzed the CPS and found that there were 49.5 million immigrants (legal and illegal together) in the country in October of 2023, up from 45 million in January of 2021. This increase is unprecedented.9 In September, I testified before the House Education and Workforce Committee that we preliminarily estimated that the illegal population grew from 10.2 million in January 2021 to 12.6 million by May 2023. These figures are based on the monthly CPS, but are adjusted for those missed by the survey. Unfortunately, not all of the administrative data on legal immigration is available to properly estimate illegal immigration through October 2023. But given the ongoing border crisis we have no reason to believe that things have changed significantly since May. If that is correct, then about 2.5 million of the 4.5 million increase in the foreign-born in the CPS from January 2021 to October 2023 is due to illegal immigration, before adjusting for undercount. Adjusted for undercount, the illegal population has likely grown to 12.8 million in October of this year, up from 2.6 million from 10.2 million in January 2021 when the president took office.

Critically, all of these numbers represent a net increase. The number of new arrivals is larger but is always offset by outmigration (including deportations), natural mortality, and in the specific case of illegal immigrants, legalizations (e.g., successful asylum applicants and marriage to an American). It should also be noted that our January 2021 estimate of 10.2 million represented a low point after Covid. In 2019, we estimate the illegal population was 11.5 million. So relative to the number before Covid, the current total and growth is large but not dramatically so. Finally, it must be emphasized that our new estimates are all still only preliminary.10

The Fiscal Impact of Illegal Immigration

Unfortunately, there has not been enough time to estimate all the fiscal effects of the recent influx. But based on statements and publicly available information we know that many jurisdictions in the U.S. are struggling with the cost of providing services to new illegal immigrants.

Cost for New York City. At a town hall meeting in September last year, Mayor Eric Adams stated that the huge influx of illegal immigrants “will destroy New York City” due to the costs the city is incurring to provide for them.11 The city expects to spend $12 billion over the next three years on housing, food, health care and other services for recently arrived illegal immigrants.12 In order to come up with the money to cover these new costs, the city plans to cut the budget by 5 percent across a range of services, including sanitation, public education, and the police department.13 Obviously, the fiscal drain from illegal immigration must ultimately result in either fewer services or higher taxes for American citizens.

Cost Outside of New York. The estimated cost of accommodating recently arrived illegal immigrants in Chicago in 2023 alone will be $361 million.14 By the end of FY 2023, the District of Columbia expected to have spent $36.4 million on various services for illegal immigrants.15 Denver mayor Mike Johnston recently told city councilmembers that the city will likely spend $180 million on the illegal influx in the coming year – more than triple what it spends on the homeless.16 A report from the state of Massachusetts in December of last year shows that the state expects to spend $2 billion in the next two years fundings its emergency shelter system, with illegal immigrants accounting for half of those needing services.17 Other localities such as El Paso, Los Angeles, and Philadelphia are all struggling to provide services to newly-arrived illegal immigrants.

The Education Level of Illegal Immigrants. Educational attainment is a key factor when considering illegal immigrants’ effect on public coffers because it determines what type of jobs they typically do and their resulting income. Income matters enormously because it affects both tax payments and eligibility for means-test government programs. 

Averaging estimates from the Migration Policy Institute (MPI) and the Center for Migration Studies (CMS) indicates that 43 percent of illegal immigrants have less than a high school diploma, 25 percent have only a high school education, 13 percent have some college, and 18 percent have at least a bachelor’s.18 Based on the citizenship of individuals encountered at the border and Census Bureau data from 2023, the new illegal immigrants now settling in the U.S. as a result of the current border crisis also likely have similarly modest levels of education, though we cannot say this for certain.19

The Challenge of Estimating Fiscal Effects. Calculating the current fiscal impact of immigration requires numerous decisions about how to allocate various costs. Even more challenging are long-term fiscal estimates, which require making assumptions about the state of the economy and government finances well into the future. The results of any analysis will obviously vary depending on the assumptions.

The National Acadamies’ 2017 Fiscal Study. A 2017 study by the National Academies of Sciences, Engineering, and Medicine projected the lifetime fiscal impact (taxes paid minus services used) of immigrants by education. These estimates are expressed as a net present value (NPV).20 The Academies’ 2017 study does not report separate estimates for illegal and legal immigrants. Rather, it simply estimates tax payments and expenditures on immigrants based mainly on the CPS Annual Social and Economic Supplement, which includes both legal and illegal immigrants. The study’s fiscal projections include eight different scenarios, based on different assumptions about things like future spending and tax rates. The 2017 study does not identify which scenario is most likely.

Net Fiscal Impact of Illegal Immigrants. We can use the Academies’ estimates to get a reasonable idea of the likely fiscal impact of illegal immigrants. In a 2017 analysis, I averaged the results of the Academies’ eight fiscal scenarios to get one estimate for each educational category. I follow the same approach in the table below.21 Using these fiscal estimates and taking a weighted average of the education level of illegal immigrants reported by MPI and CMS, and adjusting the National Academies’ figures for inflation and legality, produces a lifetime NPV of the average illegal immigrant of negative $68,390 in 2023 dollars.22

The above estimate comes with caveats. First, the Academies’ estimates are for all immigrants; though we do include an adjustment to take this issue into account.23 Further, the long-term fiscal situation for the country has deteriorated significantly since 2012, the base year the Academies used for its estimate.24 This means the fiscal impact of those with lower levels of education, as well as the average taxpayer has become even more negative.

Welfare Programs. We can understand better why illegal immigrants create significant fiscal costs by looking at the welfare system. In a study published in December of 2023 my colleague Karen Zeigler and I examined welfare use using the 2022 Survey of Income and Program Participation (SIPP). The programs included in our analysis are: Earned Income Tax Credit (EITC); Supplement Security Income (SSI); Temporary Aid to Needy Families (TANF); free and reduced-price school lunch and breakfast (school meals); Women, Infants, and Children (WIC) nutrition program; Supplemental Nutrition Assistance Program (SNAP), also called food stamps; Medicaid; subsidized and public housing.

Use of these programs is an important indicator of fiscal impact because not only are the programs themselves costly, those receiving them generally pay little to no federal or state income tax. To identify illegal immigrants in the SIPP, we use the self-reported characteristics of immigrants to assign weighted probabilities to the foreign born that create a representative population of illegal immigrants.25

 

Welfare use by Illegal Immigrants.

We estimate that 59.4 percent of illegal immigrant households use one or more welfare programs. Compared to the

U.S.-born, illegal-headed households use every program at statistically higher rates, except for SSI, TANF an  housing. Illegal immigrants have especially high use of cash (mainly the EITC), food programs and Medicaid.

How Can Illegal Immigrant Welfare Use Be So High? The high use of welfare by illegal- immigrant-headed households is due to several factors. First, and most important, more than half of all illegal immigrant households have at least one U.S.-born child on behalf of whom they can receive benefits.26 Second, many states offer Medicaid directly to illegal immigrants.27 Third, six states also offer SNAP benefits to illegal immigrants under limited circumstances.28 Fourth, illegal immigrant children have the same eligibility as citizens for free and subsidized school lunch/breakfast and WIC under federal law.29 Fifth, several million illegal immigrants have work authorization that provides a Social Security Number and EITC eligibility along with it. This includes those with DACA, TPS, as well as many applicants for asylum, and those granted suspension of deportation, and withholding of removal.30 All of these factors, coupled with the large share of illegal immigrants with modest levels of education, and their resulting low income, means many qualify for welfare.31 Finally, there is a large welfare bureaucracy whose job it is to help those eligible for programs navigate the system.

For all of the reasons listed above, the ban on illegal immigrants directly using most welfare programs has only modest effects, and tweaking those restrictions is unlikely to make much difference. If we wish to reduce the cost associated with illegal immigrants’ use of means-tested programs, we need to enforce the law and reduce the number of illegal immigrants in the country. If they are allowed to remain, the welfare costs will remain too.

A Rough Estimate of Welfare Cost. The SIPP is much better at measuring the share of the population accessing programs rather than the dollar value of what they receive, and for some programs it does not even report the value of benefits. However, we can estimate the costs created by illegal immigrant households for the eight programs we examined in the welfare study discussed above. Federal expenditures on these programs total $817 billion.32 States spent an additional $226 billion on Medicaid.33 Looking at the share of recipients in illegal immigrant households indicates that they account for 4 percent of the cost of the programs listed above. This means illegal immigrants received about $42 billion from these programs in 2021. This is only a rough estimate because we do not have detailed costs for every program by household.34 Equally important, the SIPP has a significant undercount of illegal immigrants so the number of illegal immigrant households using welfare is under reported in the survey. This undercount is larger than the undercount in other Census Bureau surveys such as the CPS and ACS.

Public Education. Public schooling is one of the areas in which illegal immigration has its largest impact. Based on the 2014 ACS, Pew Research estimated that there are 725,000 illegal immigrants enrolled in public schools and an additional 3.2 million U.S.-born children of illegal immigrants in school.35 Using the 2019 ACS we attempt to update their estimate and find that there were again about 4 million children of illegal immigrants in the nation’s schools. The National Center for Education Statistics reports that in the 2019-20 school year the average expenditure per student was $17,013.36 Applying the above estimates would mean that illegal immigration cost schools $68.1 billion a year – before the current surge. Put another way, each additional 100,000 students added to schools by the border crisis will cost $1.7 billion each year. This estimate is conservative because it does not include the above-average costs for remedial learning and language services that many children of illegal immigrants require. It also does not take into account that a large share of illegal immigrants reside in states that spend significantly above the national average on education.

The Cost of the Uninsured. Another area where illegal immigrants create significant costs is the nation’s health care system, particularly its emergency rooms. As already discussed, illegal immigrant households make extensive use of Medicaid, typically due to their U.S.-born children. In addition to Medicaid, about one-fifth of all those without health insurance in the U.S., before the current border crisis, were illegal immigrants. MPI estimated that 53 percent of illegal immigrants in 2019 lacked health insurance – 5.83 million.37 This equals 22 percent of the total uninsured, though the Census Bureau estimate of the uninsured is not adjusted for undercount in the way that MPI’s estimate of illegal is adjusted.38 Public expenditures (federal, state and local) on the uninsured total $33.6 billion annually.39 If illegal immigrants account for about one-fifth of government expenditures on the uninsured, it would equal nearly $7.5 billion a year. However, we know from the Health Expenditure Survey that immigrants in general tend to consume somewhat less health care than the U.S.-born, primarily because they are relatively young. So, expenditures on the uninsured illegal immigrants by taxpayers likely total less than $7 billion each year. On the other hand, this estimate does not include the U.S.-born minor children of illegal immigrants, a significant percentage of whom are also uninsured.

Illegal Tax Payments and the Size of the Economy

Tax Payments by Illegal Immigrants. Like the misconception that illegal immigrants do not use welfare, the notion that they do not pay taxes is also mistaken. First, everyone pays some sales tax and user fees. Even renters pay some property taxes indirectly through their rent. More importantly, as already mentioned, a large share of illegals have valid Social Security numbers and work authorization.40 Others have stolen or otherwise acquired documents they provide to employers. We have previously estimated that more than half (55 percent) of illegal immigrant earnings are subject to taxation.41 We use this assumption to estimate their likely federal tax contributions from income and payroll taxes. Based on illegal immigrants in the CPS ASEC, we estimate that in 2019 before Covid, illegal immigrants paid $5.9 billion in federal income tax. We also estimate they paid $16.2 billion in Social Security tax and $3.8 billion in Medicaid taxes, which includes employer contributions to these programs.42 The total contribution by illegal immigrants to federal coffers from these three taxes was $25.9 billion in 2019.43 While these numbers are certainly large, they represent less than 1 percent of taxes collected from these sources.44

A Net Positive for Social Security and Medicaid. Almost all illegal immigrants are barred from receiving Social Security and Medicare, so the taxes they pay represent a clear net benefit to both these programs. However, the positive effect on these programs would become negative if they were legalized and allowed to receive benefits.45 This is because both programs have progressive benefit structures that give lower-earning and shorter-career workers a greater return on their contributions. Of course, the impact on these entitlements is only part of a larger fiscal impact, so it makes little sense to look at them in isolation. As discussed earlier in my testimony, when all taxes and all costs are considered, illegal immigrants are a net fiscal drain.

Is a Larger Economy a Benefit? There is no question that illegal immigration makes the U.S. economy hundreds of billions of dollars larger than it would otherwise be. More workers in the country means more economic activity. Based on the labor incomes of illegal immigrants and making a reasonable assumption about labor’s share of GDP, I estimate that illegal immigrants made the U.S. economy $321 billion dollars larger in 2019.46 While this is equal to only 1.5 percent of the nation’s $21.43 trillion GDP at that time, the dollar value is still enormous.47

However, the standard of living in a country is determined by per capita (i.e., per person) GDP, not the overall size of the economy. If all that mattered were the aggregate size of the economy, then a country like India would be considered vastly richer than a country like Sweden because India’s economy is larger. Some may think of the increase in the size of the economy that illegal immigrants create as a “contribution” that somehow offsets the fiscal costs of illegal immigrants. In reality, almost all of the increase in economic activity goes to the illegal immigrants themselves in the form of wages and benefits, as it should since they are the ones doing the work. Adding to the aggregate size of the economy is not a measure of their tax payments, nor is it a measure of the benefit to the rest of the U.S. populations.

Conclusion

Illegal immigrants are a significant net fiscal drain — paying less in taxes than they use in public services. The primary reason they create more in costs than they pay in taxes is their relative low levels of education. Based on prior research, 69 percent of adult illegal immigrants have no education beyond high school, compared to 35 percent of the U.S.-born. As a result, they tend to earn modest wages and make modest tax contributions even when income and payroll taxes are taken out of their pay. This fact, coupled with the relatively heavy demands they make on public coffers — especially for education, health care, and means-tested programs — is the reason they are a net fiscal drain.

We estimate that 59 percent of illegal immigrant households use one or more major welfare programs, costing roughly $42 billion a year. At the local level, the largest single cost is for public education. We estimate the cost of educating the children of illegal immigrants, most of whom are U.S.-born, totals $69 billion per year. While illegal immigrants often receive other services for their U.S.-born children, even when we estimate the net fiscal impact of just the illegal immigrants themselves, excluding their U.S.-born children, we still find they create a lifetime net fiscal drain of $68,000 on average (taxes paid minus benefits received).

Even though illegal immigrants are net fiscal drains, they do pay a significant amount in taxes. We estimate illegal immigrants pay $25.9 billion a year to the federal government. Unfortunately, their tax contributions do not cover their consumption of public services.

The net fiscal drain is not the result of illegal immigrants being unwilling to work. In fact, we find that illegal immigrant households are significantly more likely to have at least one worker than households headed by the U.S.-born, and there is little evidence that immigrants come specifically to get welfare.

Legal immigrants and U.S.-born Americans who have relatively few years of school are also a net fiscal drain on average because they too tend to earn modest wages, make modest tax contributions, and use social services extensively. None of this should be seen as a moral failing on the part of low-income people. Nonetheless, it is the reason why communities across the country worry so much about losing their middle-class tax base, as it is primarily middle- and upper-income people who keep public coffers full.

The fiscal situation today is very different from the situation more than 100 years ago during the last great wave of immigrants, when federal, state and local government was a much smaller share of GDP. Also, at that time industrial jobs for the less educated were plentiful and paid, by the standards of the day, relatively high wages. But none this is the case today. We need an immigration policy that reflects current realities, and we need to rigorously enforce it. Otherwise, the fiscal costs will be significant, as many communities across the country are currently finding out.