families and individuals pay taxes to the government and receive
back a wide variety of services and benefits. When the benefits and
services received by one group exceed the taxes paid, a
distributional deficit occurs, and other groups must pay for the
services and benefits of the group in deficit. Each year,
government is involved in a large-scale transfer of resources
between different social groups.
provides a fiscal distribution analysis of households headed by
immigrants without a high school diploma. The report refers to
these households as "low-skill immigrant households." In fiscal
year (FY) 2004 there were around 4.5 million low-skill
immigrant households in the United States, containing 15.9 million
persons, roughly 5 percent of the U.S. population. About 60 percent
of these low-skill immigrant households were headed by legal
immigrants and 40 percent by illegal immigrants
measures the total benefits and services received by these
"low-skill immigrant households" compared to the total taxes
paid. The difference between benefits received and taxes paid
represents the total resources transferred by government on behalf
of this group from the rest of society.
In FY 2004,
federal, state, and local expenditures combined amounted to $3.75
trillion. Government expenditures can be divided into six
benefits, which include Social Security, Medicare, and a few
smaller transfer programs;
benefits, including cash, food, housing, social services, and
medical care for poor and near-poor individuals;
educational services, which include the governmental cost of
primary, secondary, vocational, and post-secondary education;
Population-based services, which are government services
made available to a general community, including police and fire
protection, highways, sewers, food safety inspection, and
These first four
categories can be termed "immediate benefits and services." Entry
of legal or illegal immigrants into the U.S. will generally cause
expenditures in these categories to rise. Two additional spending
other financial obligations resulting from prior government
activity, including interest payments on government debt and
other expenditures relating to the cost of government services
provided in earlier years; and
goods, which include national defense, international affairs
and scientific research, and some environmental expenditures.
immigrants into the U.S. will generally not cause expenditures in
these last two categories to increase, at least in the short term.
Therefore, these categories are not included in the calculations on
the fiscal burden imposed by low-skill immigrant households
presented in this paper.
In FY 2004,
low-skill immigrant households received $30,160 per household in
immediate benefits and services (direct benefits, means-tested
benefits, education, and population-based services). In general,
low-skill immigrant households received about $10,000 more in
government benefits than did the average U.S. household, largely
because of the higher level of means-tested welfare benefits
received by low-skill immigrant households.
low-skill immigrant households pay less in taxes than do other
households. On average, low-skill immigrant households paid only
$10,573 in taxes in FY 2004. Thus, low-skill immigrant households
received nearly three dollars in immediate benefits and services
for each dollar in taxes paid.
A household's net
fiscal deficit equals the cost of benefits and services received
minus taxes paid. When the costs of direct and means-tested
benefits, education, and population-based services are counted, the
average low-skill household had a fiscal deficit of $19,588
(expenditures of $30,160 minus $10,573 in taxes).
At $19,588, the
average annual fiscal deficit for low-skill immigrant households
was nearly twice the amount of taxes paid. In order for the average
low-skill household to be fiscally solvent (taxes paid equaling
immediate benefits received), it would be necessary to eliminate
Social Security and Medicare, all means-tested welfare, and to cut
expenditures on public education roughly in half.
often are net tax payers during working age and net tax takers
(benefits exceeding taxes) during retirement. This is not the
case for low-skill immigrant households; in these households
benefits substantially exceed taxes at every age level.
Consequently, low-skill immigrant households impose substantial
long-term costs on the U.S. taxpayer. Assuming an average adult
life span of 60 years for each head of household, the average
lifetime costs to the taxpayer will be nearly $1.2 million for each
low-skill household for immediate benefits received minus all taxes
As noted, in
2004, there were 4.5 million low-skill immigrant households. With
an average net fiscal deficit of $19,588 per household, the total
annual fiscal deficit for all of these households together equaled
$89.1 billion (the deficit of $19,588 per household times 4.54
million low-skill immigrant households). Over the next ten years,
the net cost (benefits minus taxes) to the taxpayer of low-skill
immigrant households will approach $1 trillion.
immigrants (both legal and illegal) have very low education levels
relative to the non-immigrant U.S. population. At least 50 percent
and perhaps 60 percent of illegal immigrant adults lack a high
school degree. Among legal immigrants the situation is
better, but a quarter still lack a high school diploma. Overall, a
third of immigrant households are headed by individuals without a
high school degree. By contrast, only 9 percent of non-immigrant
adults lack a high school degree. The current immigrant population
thus contains a disproportionate share of poorly educated
individuals. These individuals will tend to have low wages, pay
little in taxes, and receive above average levels of government
benefits and services.
Recent waves of
immigrants are disproportionately low skilled because of two
factors. For years, the U.S. has had a permissive policy concerning
illegal immigration: the 2,000-mile border with Mexico has remained
porous and the law prohibiting the hiring of illegal immigrants has
not been enforced. This encourages a disproportionate inflow of
low-skill immigrants because few college-educated workers are
likely to be willing to undertake the risks and hardships
associated with crossing the southwest U.S. deserts illegally.
Second, the legal immigration system gives priority to "family
reunification" and kinship ties rather than skills; this focus also
significantly contributes to the inflow of low-skill immigrants
into the U.S.
the fiscal consequences of low-skill immigration is impeded by a
lack of understanding of the scope of government financial
redistribution within U.S. society. It is a common misperception
that the only individuals who are fiscally dependent
(receiving more in benefits than they pay in taxes) are welfare
recipients who perform little or no work, and that as long as
an individual works regularly he must be a net tax producer (paying
more in taxes than his family receives in benefits).
In reality, the
present welfare system is designed primarily to provide financial
support to low-income working families. Moreover, welfare is only a
modest part of the overall system of financial redistribution
operated by the government. Current government policies
provide extensive free or heavily subsidized aid to low-skill
families (both immigrant and non-immigrant) through welfare, Social
Security, Medicare, public education, and many other services.
At the same time, government requires these families to pay little
in taxes. This very expensive assistance to the least advantaged
American families has become accepted as our mutual responsibility
for one another, but it is fiscally unsustainable to apply
this system of lavish income redistribution to an inflow of
millions of poorly educated immigrants.
Finally, it is
sometimes argued that since higher-skill immigrants are a net
fiscal plus for the U.S. taxpayers, while low-skill immigrants are
a net loss, the two cancel each other out and therefore no problem
exists. This is like a stockbroker advising a client to buy two
stocks, one that will make money and another that will lose money.
Obviously, it would be better to purchase only the stock that
will be profitable and avoid the money-losing stock entirely.
Similarly, low-skill immigrants increase poverty in the U.S. and
impose a burden on taxpayers that should be avoided.
policy should encourage high-skill immigration and strictly limit
low-skill immigration. In general, government policy should limit
immigration to those who will be net fiscal contributors, avoiding
those who will increase poverty and impose new costs on
overburdened U.S. taxpayers.
legislation in the Senate will do exactly the opposite. By
granting amnesty to illegal immigrants (who are overwhelmingly
low skilled) and creating massive new "guest worker" programs that
would bring millions of additional low-skill families into the
nation, such legislation, if enacted, would impose massive costs on
the U.S. taxpayer.
Robert Rector is Senior
Research Fellow in Domestic Policy Studies at The Heritage
 Jeffrey S. Passel,
The Size and Characteristics of the Unauthorized Migrant
Population in the U.S.: Estimates Based on the March 2005 Current
Population Survey, Pew Hispanic Center, March 7, 2006. See also
Jeffrey S. Passel, Unauthorized Migrants: Numbers and
Characteristics, Pew Hispanic Center, June 14, 2005. Steven S.
Camarota, The High Cost of Cheap Labor: The Impact of Illegal
Immigration on the Federal Budget, Center for Immigration
Studies, August 2004.
 The Comprehensive
Immigration Reform Act (S.2611), introduced May 2006.