The Costs of Illegal Immigration to Virginians

In June 2009 the Federation for American Immigration Reform (“FAIR”) released a report that purports to present an estimate of the cost of illegal immigration to the state and local governments of the Commonwealth of Virginia. FAIR has put out these types of reports in the past, and I’ve never paid much attention to them.

FAIR is not an economic think tank, and it’s publications are not scrutinized by other economists. In contrast, college professors and professional think tank organizations produce serious economic papers which are subject to review and criticism by peers and other professionals. If these people produce reports that have blatant factual misstatements or outrageous assumptions, then they will lose their credibility in their profession. What FAIR produces will be embraced by the anti-immigrant community, and its validity won’t be scrutinized by any professional. For that reason I haven’t paid much attention to reports generated by FAIR.

But lately FAIR has been producing reports for various states claiming outrageous costs to the states as a result of illegal immigration. So for that reason I decided to look at one of the reports. As I expected, it’s outrageous. Some assumptions conflict with basic economic principles that have been proven centuries ago. Other assumptions show either blatant ignorance of Federal and State tax laws or outright deception (I don’t know which would be worse).

The report estimates that illegal immigrants cost the state $1.7 billion per year. Most of this ($1.56 billion) is a result of providing K-12 education for the children of illegal immigrants. The rest is for health care and incarceration.

What the calculation does not consider are the contributions made by illegal aliens in the form of goods and services produced and taxes paid. FAIR assumes that whatever work currently done by illegal immigrants would be done by legal workers if the illegal workers were not available. This is a false assumption that the number of jobs are stagnant, that adding new workers automatically creates unemployment. This was proven false centuries ago. The number of jobs is not a fixed number. The workforce in the United States has doubled in the past 50 years, yet the rate of unemployment has not increased as a result. Workers are also consumers. As the number of workers increases, the number of consumers also increases. The new workers added to an economy also purchase boots, clothes, food, housing, transportation, furniture and recreation. So FAIR’s assumption that there would be no change in economic output or tax revenue in the absence of illegal workers is false.

In calculating the cost of illegal immigration, the report makes some assumptions. First of all, it includes many legal immigrants in the illegal population. Northern Virginia includes a large population from Central America. Temporary Protected Status was extended to illegal aliens from several countries in Central America as a result of a hurricane and an earthquake. FAIR includes these individuals as “illegal” even though they are legally permitted to reside and work in the United States. FAIR also includes in the calculation children of illegal aliens who were born in the United States (i.e. United States citizens).

FAIR estimates that the cost of education as a result of illegal immigration is $1.56 billion per year. Of this figure $1.1 billion is for educating American citizens who have illegal immigrant parents. Only $456 million is with respect to actual illegal alien children.

Most children in school are members of young families. The parents are not in their peak earning years. Even those parents that do have higher incomes don’t pay enough in taxes to cover the costs of educating their children. The cost of education in the United States is spread out over a lifetime. A young family will have children in school meanwhile paying little in real estate taxes which fund most public schools. The cost to the school district almost always exceeds the amounts paid in taxes by the students’ families. However, the families and the students after graduation will be paying taxes will be paying taxes for decades. The end result is that the students’ families more than pay for the K-12 education of the children.

My neighbor is a flight attendant. She has two children in school. The estimated cost of their education is somewhere between $15,000 and $20,000 per year based on estimates of the local school district. My neighbor pays probably about $3,000 per year in real estate taxes. Five years from now both those children will have graduated. However, my neighbor and her children will continue paying taxes for decades to come.

FAIR’s calculation only includes the snapshot. It doesn’t include the fact that today’s illegal immigrants and their children will be working and paying taxes for decades after their children have graduated. Using FAIR’s methodology, one would conclude that all families with school age children are a drain on society. Over the long run, that’s not true.

Economists consider education as an investment. The children are educated, and as a result, have higher incomes that lead to them paying higher taxes in the future. The net result is increased tax revenues over the long term. Studies have found that merely obtaining a high school diploma can increase one’s earnings potential by 40%.

Taxes: FAIR also makes some false assumptions when calculating taxes paid by illegal immigrants. As noted above, FAIR assumes that any taxes paid by illegal immigrants would have otherwise been paid by legal workers because any jobs held by illegal immigrants would be held by legal workers in the absence of illegal workers. Centuries of studies have proven that this assumption is false.

FAIR also claims that illegal aliens are eligible for the Earned Income Tax Credit (EITC). The EITC is a credit for Federal tax purposes and does not affect state taxes. Furthermore, illegal aliens are NOT entitled to the EITC. IRS Publication 596 clearly states that in order to be eligible for the EITC, the filer must have a valid SSN and must be a U.S. citizen or resident alien for the entire year. If filing jointly, then the spouse must have a valid SSN. Publication 596 is clear that persons using the ITIN (“Individual Taxpayer Identification Number”) are not eligible to receive the EITC.

As a result of the false assumptions used by FAIR, the cost of illegal immigrants to Virginia is vastly overstated. In just a few minutes of review, I was able to identify several material errors in assumptions that, conveniently for FAIR, resulted in the estimate to be grossly overstated. It is my contention that FAIR intentionally used false assumptions to create the impression that the impact of illegal immigrants is greater than it actually is.