The High Cost of Cheap Labor

Topics: Tax, Immigration to the United States, Taxation in the United States Pages: 29 (10265 words) Published: July 8, 2011
Center for Immigration Studies

The High Cost of Cheap Labor
Illegal Immigration and the Federal Budget
By Steven A. Camarota

August 2004 1-881290-43-3 Center for Immigration Studies 1522 K Street, N.W., Suite 820 Washington, DC 20005-1202 Phone (202) 466-8185 FAX (202) 466-8076


Center for Immigration Studies

About the Author
Steven A. Camarota is Director of Research at the Center for Immigration Studies in Washington, D.C. He holds a master’s degree in political science from the University of Pennsylvania and a Ph.D. in public policy analysis from the University of Virginia. Dr. Camarota often testifies before Congress and has published widely on the political and economic effects of immigration on the United States. His articles on the impact of immigration have appeared in both academic publications and the popular press including Social Science Quarterly, The Washington Post, The Chicago Tribune, Campaigns and Elections, and The Public Interest. His most recent work published by the Center for Immigration Studies includes: Immigration in a Time of Recession: An Examination of Trends Since 2000; Where Immigrants Live: An Examination of State Residency of the Foreign-Born; Back Where We Started: An Examination of Trends in Immigrant Welfare Use Since Welfare Reform; and The Open Door: How Militant Islamic Terrorists Entered and Remained in the United States, 1993-2001.

About the Center
The Center for Immigration Studies, founded in 1985, is a non-profit, non-partisan research organization in Washington, D.C., that examines and critiques the impact of immigration on the United States. It provides a variety of services for policymakers, journalists, and academics, including an e-mail news service, a Backgrounder series and other publications, congressional testimony, and public briefings.


Center for Immigration Studies

Table of Contents
5. Executive Summary
A Complex Fiscal Picture Policy Implications Summary Methodology

11. 13.

Why Study the Fiscal Impact of Illegals?

Data Source and General Principles Estimated Tax Payments Assigning Costs by Household Adjustment for Under-Reporting in the CPS


Demographic Overview Estimated Tax Payments Costs by Household Balance of Tax and Cost The Fiscal Implications of Amnesty Comparisons to Other Studies

37. 39. 45.

Conclusion Appendix Endnotes


Center for Immigration Studies


Center for Immigration Studies

Executive Summary
This study is one of the first to estimate the total impact of illegal immigration on the federal budget. Most previous studies have focused on the state and local level and have examined only costs or tax payments, but not both. Based on Census Bureau data, this study finds that, when all taxes paid (direct and indirect) and all costs are considered, illegal households created a net fiscal deficit at the federal level of more than $10 billion in 2002. We also estimate that, if there was an amnesty for illegal aliens, the net fiscal deficit would grow to nearly $29 billion. Among the findings: • Households headed by illegal aliens imposed more than $26.3 billion in costs on the federal government in 2002 and paid only $16 billion in taxes, creating a net fiscal deficit of almost $10.4 billion, or $2,700 per illegal household. Among the largest costs are Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); food assistance programs such as food stamps, WIC, and free school lunches ($1.9 billion); the federal prison and court systems ($1.6 billion); and federal aid to schools ($1.4 billion). With nearly two-thirds of illegal aliens lacking a high school degree, the primary reason they create a fiscal deficit is their low education levels and resulting low incomes and tax payments, not their legal status or heavy use of most social services. On average, the costs that illegal households impose on federal...
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