As immigration reform legislation makes its way through Congress in the coming months, one of the first questions on the minds of many observers will be how much it will cost. More precisely, will the bill yield a net increase in government revenue, or will it constitute a net drain on taxpayer dollars? While this is a straightforward question, calculating an answer is not simple. There are many variables at play. For instance, in a revamped immigration system, more immigrants will become eligible to draw upon publicly funded programs, but there will also be more immigrants paying taxes. Which will be greater? In the case of the 2006 immigration reform bill, the Congressional Budget Office (CBO) estimated that, over 10 years, the bill would have cost $54 billion, while raising $66 billion in new revenues. In other words, the bill would have generated a slight surplus for the federal treasury.

However, gauging the economic impact of an immigration reform bill involves more than a CBO-style fiscal accounting. As the wages of immigrant workers increase over time, not only do their tax contributions, but their consumer purchasing power as well. This represents dollars spent in U.S. businesses, which creates jobs and generates even more tax revenue in the process. In addition, some immigrants will use their increased wages to start their own businesses, which also creates jobs and tax payments. These are what is known as “multiplier” effects: ripples created throughout the U.S. economy by the incorporation of immigrant workers, taxpayers, consumers, and entrepreneurs. In judging whether an immigration reform bill amounts to a net economic cost or benefit, accounting for these multiplier effects is crucial. There have been a number of studies in recent years which have found immigration reform to be overwhelmingly positive for the U.S economy thanks to its multiplier effects.

Is this the case?

How will immigration reform impact the economy?

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  • Jose E. Latour

    Even before immigration reform, ONE SIMPLE POLICY CHANGE by USCIS can inject hundreds of milllions of job-creating EB-5 dollars into the U.S. economy in a matter of MONTHS: PRIORITIZE I-526 processing, get EB-5 money working, and make the Regional Center I-924 applicants — NOT the investors — wait. It’s the job-creating investment funds that matter to our economy.

  • Jefferson Netto

    There is no doubt that the revenue generated by a comprehensive immigration reform is far greater than what it might cost to the government (tax payers). 11 million people paying fines for being here illegally will surplus any expense that this reform might generate. The Gang-Of-Eight are suggesting a fine of two thousand dollars per application, which would generate immediately 22.000.000,00 (twenty two billion dollars) in revenue. Everyone who are willing to look at a comprehensive immigration reform without any prejudice, will easily find out that, even the US economy, will receive an immediate injection of resources from millions of people who will become investor, buyers, travelers, new business owners and etc. I’m a local pastor in Massachusetts and I personally know hundreds of people who are waiting for the opportunity to visit their home countries, as soon as possible. In the next 5 years, the crumbling air companies would receive a new injection of vitality, with thousands of new travelers buying international air tickets to fulfill their dream to meet their loved ones once again. With all this in mind, I’m not even mentioning the new cash flow that the market will receive, with new bank accounts being open all over the country, plus billions of dollars in tax revenue that IRS will receive and etc.
    So, yes, the United States of America needs a comprehensive immigration reform more than ever! We might not have had the perfect bill introduced in the Senate on Wednesday morning (I’m still reading it), but this is the spark that we needed to renew our faith that the time is now, and that we can do more when we are united as one, to preserve families values and support this nation that all of us love so much.

    Apostle Jefferson Netto
    Full Revival Church

    • Don Aldridge

      You are right on. Immigration reform should be looked at as an economic stimulus. For politicians that claim they want to reduce the deficit, they should embrace immigration reform. In general, these are very productive people. Give them a valid social security number and you will see how much money they contribute to the US government and to the economy. Also, most of them are young and they will contribute to our Social Security system for many years before they retire.

  • Walter Ewing

    Nativists often act as if wages and taxes are the only measure of immigrants’ economic worth. They overlook (purposefully or not) the role of immigrants as entrepreneurs and consumers. Yet those are areas within which their economic value is most apparent.

  • Sam Rock

    After the undocumented individuals they will obtain Social Security Numbers and will be eligible for the Earned Income Tax Credit (EITC). The EITC is not considered a “means tested” public benefit. Thus it is kind of a back door welfare payment. This credit would likely offset any taxes owed by the newly documented population and would likely result in a substantial outflow of money. I estimate that 5,000,000 families will be eligible for this credit. The maximum is approximately $6,000. If they fall in the middle, then the claims would be $3,000 per family. Under current law it is also possible to retroactively claim the benefit for 3 years. We currently make these retroactive claims for our clients. To understand how the credit works you might look in the AILA archives for a Webinar I did a couple years titled “Tax Benefits for Haitian Recipients of TPS.” But this is an easy fix. Congress just needs to turn if off. My concern is that our advocates do not pick this up on the radar and then it is used to ambush the proponents of reform as a basis that this credit could cost $10s or $100s of billions.

  • William Murillo

    You will also need to have in mind the “external” resources that are NOT into the equation, meaning, the potential income from millions of relatives who will be able to come to US to visit new legal immigrants.
    If 11 million migrants get legalized, then their families will be eligible to “visit” the US, this is easy over 30 million visitors and that means billions of dollars in air tickets, food, gifts, hotel rentals, visits to museums etc etc etc, will also means millions of dollars collected in taxes and this is just for being able to visit their family and relatives in USA.