Thursday, February 9, 2012

Government Budgets: Immigration Policy #3

This is the third of five posts on immigration policy. For the first post and an overview, start here.

A common and plausible concern about immigration is that many immigrants don't pay much in taxes, but the government faces costs for education of the children of immigrants, health care of those with low incomes, and law enforcement. Thus, it is feared that immigrants contribute to the fiscal problems of government. To be clear, this concern over the effect on government budgets is really about immigrants with low skill levels and about illegal immigrants. Everyone accepts that legal high-skilled immigrants are on average a net plus for government in terms of the taxes they pay and the government benefits they receive. Daniel Griswold tackles this question head-on in "Immigration and the Welfare State."

Griswold points out that immigrants--even illegal immigrants--do typically have taxes withheld from paychecks, as well as paying sales and property taxes. Recent legal immigrants aren't eligible for welfare benefits, and many illegal immigrants don't dare try to claim such benefits. For the federal government, immigration is almost certainly a net plus. However, certain state and local governments with high levels of immigration do face high costs of education, health care, and law enforcement related to immigration. He notes the straightforward policy fix: "If Congress wants to more equitably share the fiscal benefits of immigration, it could distribute funds to states and localities based on the impact of immigration on health and education spending. This need not, and should not, require an overall increase in government spending and taxation, but merely a transfer of resources from the federal level, where immigration represents a net fiscal gain, to state and local governments, where it often imposes a net fiscal loss."

Griswold also makes the insightful point that low-skill immigrants are not choosing to locate primarily in high-benefit states--which strongly suggests that gaining access to such benefits is not their primary motivation. (Citations and references to tables omitted from the quotation.)

"If we consider changes in the foreign born populations in individual states, for example, we can see that the largest gains have generally been in states that are relatively stingy in offering public assistance. ... The 10 states with the largest percentage increase in foreign-born population between 2000 and 2009 spent far less on public assistance per capita in 2009 compared to the 10 states with the slowest-growing foreign-born populations—$35 vs. $166 .... In the 10 states with the lowest per capita spending on public assistance, the immigrant population grew 31 percent between 2000 and 2009; in the 10 states with the highest per capita spending on public assistance, the foreign-born population grew 13 percent. If immigrants were primarily concerned with collecting welfare, they would not be flocking to such states as Kentucky, Tennessee, North Carolina, South Carolina, and Georgia. Instead, they would be drawn to such states
as Michigan, Rhode Island, and Vermont, which in fact have seen very slow growth in their immigrant populations.

Undocumented immigrants are even more likely to self-select states with below-average social spending. Between 2000 and 2009, the number of unauthorized immigrants in the low-spending states grew by a net 855,000, or 35 percent. In the high-spending states, the population grew by 385,000, or 11 percent. One possible reason why unauthorized immigrants are even less drawn to high-welfare spending states is that, unlike immigrants who have been naturalized, they are not eligible for any of the standard welfare programs. A second reason is that illegal immigrants are less likely to be well-educated and thus are not as attracted as more highly skilled immigrants to higher-income urban centers in such states as New York, Illinois,
and California. The higher-skilled immigrants gravitate to those states, not because of the higher social spending, but because of the higher rewards for skilled labor."