The Real Lesson of the Heritage Immigration Study

May 9, 2013

Sometimes, researchers get so caught up in trying to prove their point that they lose sight of what their research actually tells them. Such is the case of the new study by Heritage Foundation researchers Robert Rector and Jason Richwine Ph.D. The Fiscal Cost of Unlawful Immigrants and Amnesty to U.S. Taxpayers.

The study purports to show the long-term cost of allowing 3.5 million non-legal immigrant households (totaling roughly 11 million people) to become citizens and, thus, eligible for the panoply of government benefits over their remaining lifetimes. What the study really shows is that the social cost of having millions of under-educated, non-immigrant households is many times greater than the cost of “unlawful” immigrants and that the people bearing that cost are those with a college education.

In recent days, there have been many valid critiques of the methodology that Rector and Richwine used to calculate the $6.3 trillion, 51 year cost of an amnesty plan. I agree with many of these criticisms and won’t pile on here. However, I will say that these critics were so quick to condemn Rector and Richwine, that they too missed the elephant in the room.

The value in the Heritage study is that it adds to a solid body of research on what we call “fiscal accounting.” That is, measuring how much people pay in total taxes compared to the amount of total spending benefits they get from government. This is the first step in measuring the total amount of redistribution that occurs from both taxes and spending policies. The Tax Foundation published one of the first of such studies in 1967, and updated this work in 2006 and 2009.

The Heritage study reconfirms what previous studies have found, that the majority of American households receive far more in total benefits from government than they pay in all types of taxes. Indeed, Heritage found that, on average, all American households received $31,584 in government benefits and services (excluding national defense and interest on the national debt) and paid $30,426 in total taxes (federal, state, and local). Thus, the “typical” U.S. household was a net recipient of $1,158 in government benefits and services.

However, unlike most fiscal accounting studies, Rector and Richwine present their results by educational attainment rather than by income bands. In the table below (drawn from page 12 in their report), we can see the fiscal accounting for non-immigrant households at various levels of educational attainment.

There are nearly three times as many non-immigrant households without a high school degree (10 million ) than non-legal households (3.5 million) and they receive an average of $36,053 more in government benefits and services than they pay in taxes. This amounts to $363.5 billion in total net fiscal subsidies to “under-educated” households. Over just the next 20 years, these households (presuming their status doesn’t change) will “cost” the government $7.2 trillion – more than the 51 year cost of Rector and Richwine’s non-legal immigrants.

The fiscal “cost” of high school educated non-immigrant households is even great because there are 31 million of them. These households get an average of $14,642 more each year in government spending than they pay in taxes. The total cost of these households each year is $455.4 billion, or $9.1 trillion if their status doesn’t change (an unlikely assumption, but the same one Heritage authors made).

The Fiscal Accounting of Educational Attainment

Non-Immigrant Households

Number of Households

Annual Fiscal Deficit/Payment Per Household

Annual Net Gain/Loss for All These Households ($Billions)

20 Year Gain/Loss ($Billions)

Without a High School Degree

10,083,618

$ (36,053)

$ (363.5)

$ (7,271)

With a High School Degree

31,099,306

$ (14,642)

$ (455.4)

$ (9,107)

With Some College

30,986,396

$ (5,722)

$ (177.3)

$ (3,546)

Total

$ (996.2)

$ (19,924)

College Degree or More

31,857,640

$ 30,255

$ 963.9

$ 19,277

Source: Rector & Richwine page 12

When we add in the fiscal subsidy to households with some college, we get a total annual cost of nearly $1 trillion ($996.2 billion) for all of these “under-educated” groups and a 20 year cost of nearly $20 trillion.

Who pays for all of these benefits and services? It appears that college educated households are the only Americans who, on average, pay more in total taxes than they get in total government benefits. Their net payment, $963.9 billion. Over 20 years, this would amount to $19.2 trillion.

Ironically, Rector and Richwine’s data shows that college educated immigrants also contribute more in taxes than they get back in government benefits and services.

So the real lesson from this study that was lost by both the authors and critics alike is that education matters more than immigration status. People with less than a college degree – be they native born or immigrants – will draw more in government benefits and services than they pay in taxes of all kinds. And the fiscal cost of those under-educated households is being borne by college educated workers – native and immigrant – to the tune of $1 trillion per year.

And I thought my student loans were expensive.


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