government spending or revenues. Moving to an estimate of the long-term fiscal impacts requires making assumptions about future taxes and expenditures; the characteristics of new immigrants; how the differences between immigrants and natives in factors such as fertility rates and earnings change over time; and the discount rate used to combine costs and benefits in different years into a present value. The panel considered a variety of assumptions, which in turn generated a range of estimates. These illustrate how estimates of the fiscal impacts of immigration depend on future decisions about how many and which immigrants are admitted and about how the United States deals with the serious budget imbalances expected when the baby-boom generations retire.

The difference between immigrants and the native-born in program participation and program expenditures per capita varies greatly across types of government programs. For some programs, such as Social Security and Medicare, immigrants receive proportionately lower benefits than the native-born. For other programs, such as Supplemental Security Income (SSI), Aid to Families with Dependent Children (AFDC), and food stamps, they receive proportionately more. Combining the costs of benefits from all programs, there is little difference between immigrants and the native-born. Immigrants are more costly than natives during childhood because of the costs of bilingual education, and they are less expensive than natives in old age. Over a lifetime, these differences tend to balance out. Program participation is affected by policy changes such as those made by the 1996 Personal Responsibility and Work Opportunity Reconciliation Act, which denied means-tested benefits to noncitizen immigrants. If we assume that immigrants are naturalized after the required five-year waiting period, these restrictions turn out not to increase significantly the present dollar value of the long-run fiscal benefits of admitting a new immigrant.

On balance, the panel's estimates of the fiscal impact of immigration are affected more by differences in future earnings between immigrant families and the native-born than by differences in program participation. The lower earnings of immigrants mean that they pay lower taxes, and these tax differences are much more substantial than the differences in benefits.

Taking the difference between taxes paid and benefits received at each age, immigrants (like others) are costly in childhood and in old age, but are net payers of taxes during their working ages. For this reason, the long-term net fiscal impact of an immigrant (measured as a present dollar value) varies greatly with age at arrival. Immigrants arriving at ages 10 to 25 produce fiscal benefits for natives under most scenarios, whereas immigrants arriving in their late sixties generally impose a long-term fiscal burden. In fact, most immigrants tend to arrive at young working ages, which partly explains why the net fiscal impact of immigration is positive under most scenarios.

The long-term fiscal impact of an immigrant also depends on his or her education: immigrants with more education have more positive long-term fiscal impacts. For example, under one set of plausible assumptions, the net present value

The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement