User’s Guide to NAS Report, 3: Short-Run Fiscal Impact

The NAS panel calculated the short-run fiscal impact by comparing the cost of providing public services to immigrants with the taxes that those immigrants pay in a particular year. Both Chapter 8 and Chapter 9 give estimates of the short-run fiscal impact.  Chapter 8 includes federal expenditures and taxes when calculating the impact in 2013, while Chapter 9 focuses on the impact at the state and local level for the years 2011-2013.

Table 8-2 is the key short-run table in Chapter 8. The NAS panel used eight alternative scenarios to calculate the fiscal impact.

nas-table-8-2

I think Scenarios 1 and 5 are the most interesting ones, and roughly define the extremes. Scenario 1 assumes that the cost of providing public goods (such as national defense) is the same for an immigrant as it is for a native, while Scenario 5 assumes that immigrants do not increase the cost of public goods at all. There are 55.5 million persons who are either immigrants or the minor children of immigrants (that is, their dependents). And this is how the report describes the fiscal impact of this group under Scenario 1:

The total fiscal burden is $279 billion for the first generation group (average outlays of $15,908 minus average receipts of $10,887, multiplied by 55.5 million individuals).

It is equally easy to estimate the fiscal burden in Scenario 5, where immigrants are assumed not to increase the cost of public goods at all. The average outlay is then $11,669 and tax receipts remain at $10,887, creating a fiscal burden of $43.4 billion. The report tries to put these statistics in context by noting that the United States runs a fiscal deficit exceeding over a trillion dollars a year, so that everyone is a fiscal burden. Left unsaid is an equally important point: Some burdens are avoidable, and some burdens are not. We may not be able to do much about the fiscal burden of the native-born population. But there are many obvious policy options available to ensure that the already-large burden is not further increased by immigration.

Chapter 9 presents more detailed estimates of the short-run fiscal impact, focusing on expenditures and taxes at the state and local government level. The panel allocated expenditures on “local” public goods (such as public safety, hospitals, and libraries) on a per-capita basis to immigrants and natives. Table 9-6 is the key table that summarizes the evidence, and reports the taxes and expenditures for the first generation (the immigrants and their dependents). Here is the relevant table, where I cut out most of the state-specific rows to make it more readable (here is the full table):

nas-table-9-6

Nationwide, the typical immigrant generates a fiscal shortfall at the state-local level of $1,600 annually. There are 36.1 million such first-generation “households” (see Table 9-13 in the report), so that the total shortfall is over $57 billion (or $1,600 times 36.1 million). This is how the report describes that finding:

First generation independent person units (which include first and second generation children assigned to independent first generation persons) cost the states on net about $1,600 each…These estimates of the fiscal impact imply that the total annual aggregate impact of the first generation and their dependents, averaged across 2011-13, is a cost of $57.4 billion.

The data are so unambiguous that it is very easy to summarize what they say. On a year-to-year basis, the taxes that immigrant pay simply do not cover the public expenditures they trigger. And the shortfall seems to be at least $50 billion annually.

 

 

 

Author: George Borjas

I am a Professor of Economics and Social Policy at the Harvard Kennedy School.