Edwin Rubenstein Still At It

In April, 2011, The Social Contract Press announced the release of a report by Edwin S. Rubenstein. In introducing the report, The Social Contract Press claims that millions of illegal aliens are prepared to celebrate a cash windfall from the Internal Revenue Service in the form of the Earned Income Tax Credit (“EITC”). It is claimed that illegal aliens are among the chief beneficiaries of the EITC, that illegal aliens receive the EITC at greater rates than legal immigrants.

“Defrauding the American Taxpayer – The Earned Income Tax Credit” (the “Report”) is purported to be an update. Rubenstein had previously released a report two years earlier as well as an article in 2004. Like the previous report and the 2004 article, this report falls short of substantiating the claims.

Rubenstein makes various claims about the EITC. He claims that the EITC contributes to overpopulation by providing a “strong incentive” for low income people to have children; it “destroy[s]” high-wages jobs; it exacerbates the “obscene gap” between the rich and poor in the United States; it erodes incentives for employees and may have even caused The Great Recession. But I am going to focus this analysis on the claims about illegal immigrants. The evidence he presents to support his claims will be analyzed below.

Billions in Improper EITC Payments: That some EITC payments are improper is true. According to a February, 2011, report released by the Treasury Inspector General for Tax Administration (TIGTA), “the IRS estimates that 23 to 28 percent of EITC payments are issued improperly each year, which equated to $11 billion to $13 billion in EITC improper payments in Fiscal Year (FY) 2009.”

Reading the TIGTA report reveals that the majority of improper payments seem to be a result of questionable child eligibility. A recommendation to ensure that individuals have a valid Social Security Number is estimated by the TIGTA report to save only $1.1 billion over five years (i.e. $220 million per year), a merely fraction (less than 2%) of the total $11 - $13 billion in estimated improper payments.

Outreach Groups: Rubenstein claims that outreach groups like the Center for Budget and Policy Priorities (“CBPP”) offers tips with respect to how immigrants can receive EITC payments for years when they didn’t have a valid Social Security Number. He offers this as proof that illegal aliens receive EITC. Unfortunately, Rubenstein provides no documentation. He could have so easily provided reference to a specific document or practice in which the CBPP practices this act. But he doesn’t.

Rise in EITC Claims: Another piece of evidence Rubenstein uses to substantiate his claim is that after 1997, when the law was changed rendering those without valid Social Security Numbers ineligible for the EITC, the total number of tax returns claiming the EITC rose. He concludes that the only reason for the rise was that illegal aliens using ITINs (Individual Tax Identification Numbers) continued to receive the EITC. But Rubenstein’s own chart on the first page of Part 2 of his report shows a sudden halt in the growth of EITC claims and payments in the late 90s. Between 1995 and 2001 the growth rate of EITC claims is totally flat despite having risen rapidly between 1985 and 1995.

But an increase in EITC claims would not have been a surprise in the late 1990s. The government passed welfare reform in 1996 which dramatically changed welfare. It was expected that many long time welfare recipients would enter the workforce, many with low paying jobs, thereby increasing the number of EITC claims.

2001 CIS Report: In a 2001 report, the Center for Immigration Studies (“CIS”), estimated that 49% of Mexican immigrants are eligible to receive the EITC (page 36). The CIS report admits that the figures “almost certainly over-state program use”. The estimate is taken from the 2000 Census. The Census estimated use of the program by income and number of dependents in the household. The Census does not ask for immigration status and the fact that many Mexican immigrants are illegal aliens and therefore not eligible for the EITC was not taken into consideration in calculating the estimate. In other words, it is just assumed that illegal aliens receive the EITC.

Nevertheless, Rubenstein embraces the admittedly overstated estimate as if it were a hard fact declaring that “households headed by illegal Mexican immigrants are more than three times as likely to receive EITC than households headed by a native-born American.”

Trend Among States: Another offer of proof comes from Rubenstein’s presentation that “states with large illegal alien populations have above average fractions of federal tax returns claiming the [EITC].” He shows a chart illustrating the estimated percent of population of illegal immigrants and the percent of federal tax returns claiming the EITC. His only problem is that his own chart doesn’t support his assertion. California, the state with the largest illegal immigrant population, had 16.54% of federal tax returns claim the EITC. The national average was 17.01%. Arizona with the largest per capita illegal alien population came in at 17.49%, barely above the national average.

States with the highest percent of federal tax returns claiming the EITC are located in the South. States like Mississippi, Georgia, Arkansas, Louisiana, Tennessee and the Carolinas have significantly higher rates of EITC claims than other states.

In sum, Rubenstein fails to prove the claim that millions of illegal aliens receive the EITC or that illegal aliens receive the EITC at greater rates than legal immigrants and native households. The previously mentioned TIGTA report seems to suggest that some illegal aliens may be benefitting from the EITC. The Social Contract Press’ claims that millions of illegal aliens receive the EITC and at greater rates than legal immigrants and native born Americans is patently false.