Why Immigration Reform Could Save the Government Billions
The nonpartisan Congressional Budget Office on Tuesday bolstered an argument proponents have been making for a while: the Senate immigration-reform package, they found, would save the government a lot of money. And demographics might explain why.
Factoring in the cost of implementation, immigration reform would yield about $175 billion in savings from 2014 through 2023 and an additional $700 billion over the following decade. The package would increase spending, of course, but it would also increase revenues by a much greater amount.
"That [revenue] increase would stem largely from additional collections of income and payroll taxes, reflecting both an increase in the size of the U.S. labor force and changes in the legal status of some current workers," CBO wrote in its report.
CBO isn't alone. In early May, Social Security's top mathematician estimated that the Senate bill would generate roughly $300 billion in net revenue over the next decade, all while adding millions to payrolls and boosting economic output by as much as 1.6 percent in 2024.
It might seem counterintuitive to some that by taking on a slew of new immigrants, some of them low-skilled, the government would save money, but there may be a simple reason—demographics. Between 2002 and 2009, citizen and noncitizen immigrants contributed $115 billion more to Medicare than they used, according to a recent study in Health Affairs, the reputable health policy journal. U.S.-born citizens meanwhile used $28 billion more than they contributed. Here's what we wrote when that report came out late last month:
As with any study, there are limitations. The authors—educators from Harvard University and the City University of New York—relied on census data, which may undercount undocumented immigrants. But, they note, Social Security's top mathematician estimated that the undocumented actually contributed a net $12 billion to that program's trust fund in 2007. Because the two programs share a funding source—the payroll tax, with one-fifth going to Medicare and the rest to Social Security—it's likely that undocumented immigrants contributed about $2.5 billion to Medicare that year, the authors conclude.
As with any study, there are limitations. The authors—educators from Harvard University and the City University of New York—relied on census data, which may undercount undocumented immigrants. But, they note, Social Security's top mathematician estimated that the undocumented actually contributed a net $12 billion to that program's trust fund in 2007. Because the two programs share a funding source—the payroll tax, with one-fifth going to Medicare and the rest to Social Security—it's likely that undocumented immigrants contributed about $2.5 billion to Medicare that year, the authors conclude.
But the question is why. Well, some of it may have to do with age:
The ratio of working-age to retirement-age adults is much higher for immigrants—6.5 to 1—than the U.S.-born—4.7 to 1. Immigrants also have lower unemployment rates. And even undocumented immigrants may pay into the program through taxes tied to Social Security numbers with fake or borrowed names. All that means there are plenty of immigrant workers to pay into Medicare through payroll taxes.
As baby boomers age, they will increasingly rely on government benefits. An influx of working-age immigrants could help offset the cost of that demand.
