The Economic and Fiscal Consequences of Immigration (2017) / Chapter Skim
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8 Past and Future Fiscal Impacts of Immigrants on the Nation
8 Past and Future Fiscal Impacts of Immigrants on the Nation
Pages 359-494
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From page 359... ...
In the sections that follow, the panel first documents the path of net annual fiscal impacts and the relevant characteristics among immigrants and natives during a recent historical period for which good coverage in 359
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From page 360... ...
Because the children of immigrants play an important role in the fiscal impact of immigration, we pay special attention to fertility rates and intergenerational patterns of educational attainment, and we factor in return-migration behavior. The forecast aims to answer the following question: In today's dollars, what is the predicted long-term net benefit to domestic governments of an additional immigrant and that immigrant's descendants?
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From page 361... ...
. While many studies of the fiscal impacts of immigration adopt immigrant-headed households as the unit of account, measuring benefits and taxes at the individual level facilitates longitudinal calculations of the type presented in Section 8.3, where the future fiscal impacts of immigration are explored.
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From page 362... ...
These age profiles are used in both the historical static and lifetime forecast analyses presented in this chapter.1 Single-year age profiles were constructed by averaging three adjacent years' worth of data for smoothness. These age profiles are then rescaled for each middle year so that -- when applied to population estimates by age, education, immigrant generation, and time-since-arrival in that middle year -- they capture the total flows for a given program in that year in an estimate that is consistent with administrative sources.2 Details 1 The main alternative to the CPS that could have been used is the Survey of Income and Program Participation (SIPP)
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From page 363... ...
The average undocumented immigrant is of younger working age than the average documented immigrant (there are very few undocumented immigrants of retirement age) ; thus, the net fiscal impact of the former is more positive at the federal level and overall.
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From page 364... ...
In scenarios 4 and 8, the panel explores 3 Interest payments, the vast majority of which go to servicing the debt, are not raised right away by an immigrant entering the country -- they represent the current cost of servicing past deficits to which new immigrants did not contribute. Over time, an additional immigrant may affect the level of debt and thus debt payments, depending on his or her net fiscal impact.
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From page 365... ...
The 1997 report attempted to estimate the effects of PRWORA on the fiscal impacts of immigrants, bearing in mind that the law denied certain means-tested benefits to noncitizens. Its authors assumed immigrants received no such transfers until after 5 years of residence.4 The changes in net fiscal impact of immigration associated with PRWORA, although modest, were found to make immigrants less costly to states and localities and more beneficial to federal finances (National Research Council, 1997)
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From page 366... ...
In the longitudinal forecast of the future fiscal impacts of immigrants (Section 8.3) , we model the effects of the ACA following the assumptions of the Congressional Budget Office (CBO)
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From page 367... ...
SOURCE: Data are from the 1994-1996 March Current Population Surveys. Figure 8-1 vector, editable
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NOTE: "Third-plus generation" includes third and higher generations since a ncestors arrived in the United States. SOURCE: Data are from the 2011-2013 March Current Population Surveys.
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From page 369... ...
Given the patterns evident in Figures 8-1 and 8-2, if tax payments are attributed to the first generation, many of whom are of working age, and the use of public expenditures on education are attributed to their second-generation children, one would expect the current net fiscal impact of the first generation to be positive and the impact of the second generation to be negative. The net fiscal impact of the third-plus generation could be positive or negative, but is likely to have become less positive with the aging of the Baby Boom cohorts.
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From page 370... ...
than in the past. Trends in Education, Employment, and Earnings by Immigrant Status In addition to age and number of dependents, an individual's education level and employment status are also important determinants of fiscal impact.
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From page 371... ...
residents as younger cohorts with more education have replaced older cohorts with less. Figure 8-5 depicts the same age patterns of educational attainment as Figure 8-4 but for immigrant generations in 2013.
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From page 372... ...
and third-plus generations has narrowed slightly during this interval from 1.5 to 1.25 years, while the second generation maintained the same 0.35 Figure 8-5 year advantage over the third-plus generation. Patterns in employment across age editable vector, also vary by immigrant status and have shifted somewhat over time.
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From page 373... ...
Figure 8-8 shows large differences by immigrant generation in wage and salary income in 1995, measured in 2012 dollars and including those with zero earnings. On average, immigrants ages 20 and older in 1995 earned about $5,500, or 23 percent, less than natives of comparable age.
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From page 374... ...
Figure 8-9, which shows earnings by age and immigrant status in 2012, visually suggests the second generation had pulled further away from the third, which is true. Note that these estimates are the average wage and salary income over people who are working and who are not.
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From page 375... ...
Figure 8-8 vector, editable Trends in Fiscal Flows by Age and Immigrant Generation Now that we have considered many of the relevant characteristics of each generational group, we put this all together to examine fiscal flows. In this section we continue to take the individual as the unit of analysis, attrib uting tax receipts and benefit cost flows -- which, when combined, yield net fiscal impacts -- to each individual across the full age spectrum.
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From page 376... ...
This is certainly true in the case of taxes paid to all levels of government, which is shown in Figure 8-11 for the year 1995 and in Figure 8-12 for the year 2012. In both years, tax con tributions strongly track the age profiles of wage and salary income shown in Figures 8-8 and 8-9 up to retirement ages.
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From page 377... ...
Between 1995 and 2012, per capita taxes paid rose 10 percent for immigrants, 13 percent for the second generation, and 11 percent for the third-plus generation. This is about half as fast as the growth in earnings during this period; if all taxes were levied on earnings, it would imply reductions in average tax rates of about 10 percent as well.
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From page 378... ...
vector, editable SOURCE: Data are from the March 2011-2013 Current Population Surveys. the increase in inflation-adjusted tax contributions came from increases at older ages.
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From page 379... ...
Figure 8-11 vector, editable cated9) show that little change has occurred in the shape of the age profiles of benefits over time, nor has there been much change in the distribution of benefits across groups defined by immigrant status.
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Another noteworthy aspect of these trends is that per capita benefits absorbed by the third-plus generation exceed those for the first and second
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The amount included here as state and local retirement benefits includes defined benefit plans but not defined contribution plans. The latter are typically not categorized as a public benefit and should be distinguished from payments out of tax revenues.
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After vector, editable age 50, the third-plus generation absorbs more old-age benefits, such as Social Security pensions and disability payments, federal retirement pay ments, and state and local retirement benefits. These patterns of program use are also revealed in Figure 8-15, which shows receipt of benefits associated with federal old-age support programs (Social Security, Medicare, Medicaid payments to nursing homes, federal worker retirement, and other programs)
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Figure 8-15 vector, editable due to federal disability insurance, whereas after age 62 it is attributable to federal retirement benefits (i.e., Social Security) , which rise steeply with age.
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From page 384... ...
But program eligibility cannot explain the differences between the second and third-plus generations dur ing working ages, so these differences are likely instead driven primarily by more favorable socioeconomic status among the second generation. Net fiscal impacts by age and immigrant status are depicted for 1995 and 2012 in Figures 8-17 and 8-18, respectively.
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From page 385... ...
Although the third-plus generation contributes more in taxes during working ages than does the first generation, and thus its net fiscal impact during working ages is more positive than immigrants, this pattern switches in retirement. In old age, the third-plus generation has consistently been more expensive to government on a per capita basis than either the first or second generation, despite the higher per capita utilization of means-tested benefits in old age by the first generation.
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From page 386... ...
The total net fiscal impact of a subpopulation depends on its age structure, depicted earlier in this chapter, and on the age profile of net fiscal impacts, as presented in the preceding
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From page 387... ...
can be estimated for a given year; without the presence of the independent persons to which they are linked, dependents could not factor into the fiscal picture. Later in this chapter, we analyze the impact of these same three generational groups on fiscal impact, adjusting for age, education, and other characteristics; this analytical framework allows for assessment of the net fiscal impacts, at the federal and state levels of government, of these first and second-generation groups separately, in comparison to the third-plus generation group, specified as the reference group.
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. As expected, and as shown quantitatively below, the fiscal costs associated with dependent children to some extent counterbalance the positive fiscal impact for the first generation (see Figures 8-17 and 8-18)
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Population counts are the sum of independents and dependents in each group. Data are from March Current Population Surveys.
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For 2013, the 55.5 million first generation independent persons and their dependents, 23.3 million second 15 We stress again that these are averages; the foreign-born are an extremely heterogeneous group along many of the dimensions being considered here, and consequently they are also heterogeneous in their per capita fiscal ratios. 16 The per-child cost of education in our estimates is the same for all groups.
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From page 391... ...
are not included in the panel's estimates. To elaborate on trends in net fiscal impacts since The New Americans (National Research Council, 1997) , Figure 8-19 plots the total fiscal ratio of receipts to outlays for the three generation groups, as defined for Table 8-1, across all years since 1994.
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From page 392... ...
As the Table 8-1 data show, the second generation group in particular becomes quite similar by 2014 to the third-plus generation group. While all part of the same story, the data representations in Figure 8-19 and in Table 8-1 reveal determinants of the fiscal impact of generational groups that are quite distinct from those previously captured in Figures 8-5 through 8-12.
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From page 393... ...
In these scenarios, the total net fiscal impact of the first generation group becomes much more favorable, as it must mathematically. In each of scenarios 5 through 8, the total fiscal ratio for the first generation group now exceeds that for the second and third-plus generation groups.
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From page 394... ...
Receipts/ 2013 Outlays Receipts Outlays Scenario 1 Immigrants pay Federal 9,767 7,117 0.729 average cost of State and Local 6,141 3,769 0.614 public goods Total 15,908 10,887 0.684 Scenario 2 Scenario 1, but Federal 8,466 7,117 0.841 interest costs are State and Local 5,517 3,769 0.683 excluded Total 13,983 10,887 0.779 Scenario 3 Scenario 1 but Federal 9,767 7,051 0.722 immigrants' sales State and Local 6,141 3,475 0.566 taxes are 80% Total 15,908 10,525 0.662 Scenario 4 Scenario 1, but new Federal 9,767 6,937 0.710 immigrants' corporate State and Local 6,141 3,769 0.614 taxes are zero Total 15,908 10,706 0.673 Scenario 5 Immigrants pay Federal 6,154 7,117 1.157 marginal cost of State and Local 5,515 3,769 0.683 public goods Total 11,669 10,887 0.933 Scenario 6 Scenario 5, but Federal 6,154 7,117 1.157 interest costs are State and Local 5,515 3,769 0.683 excluded Total 11,669 10,887 0.933 Scenario 7 Scenario 5, but Federal 6,154 7,051 1.146 immigrants' sales State and Local 5,515 3,475 0.630 taxes are 80% Total 11,669 10,525 0.902 Scenario 8 Scenario 5, but new Federal 6,154 6,937 1.127 immigrants' corporate State and Local 5,515 3,769 0.683 taxes are zero Total 11,669 10,706 0.917 NOTE: See note to Table 8-1. The eight estimation scenarios are described in Box 8-1 and accompanying text.
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From page 395... ...
Receipts/ Receipts/ Outlays Receipts Outlays Outlays Receipts Outlays 13,093 9,495 0.725 12,050 9,473 0.786 6,101 5,039 0.826 5,844 4,813 0.823 19,194 14,534 0.757 17,894 14,286 0.798 11,792 9,495 0.805 10,749 9,473 0.881 5,477 5,039 0.920 5,220 4,813 0.922 17,269 14,534 0.842 15,970 14,286 0.895 13,093 9,507 0.726 12,050 9,486 0.787 6,101 5,092 0.835 5,844 4,868 0.833 19,194 14,600 0.761 17,894 14,353 0.802 13,093 9,536 0.728 12,050 9,513 0.790 6,101 5,039 0.826 5,844 4,813 0.823 19,194 14,576 0.759 17,894 14,326 0.801 13,734 9,495 0.691 12,691 9,473 0.746 6,216 5,039 0.811 5,959 4,813 0.808 19,949 14,534 0.729 18,650 14,286 0.766 12,208 9,495 0.778 11,165 9,473 0.848 5,478 5,039 0.920 5,221 4,813 0.922 17,686 14,534 0.822 16,386 14,286 0.872 13,734 9,507 0.692 12,691 9,486 0.747 6,216 5,092 0.819 5,959 4,868 0.817 19,949 14,600 0.732 18,650 14,353 0.770 13,734 9,536 0.694 12,691 9,513 0.750 6,216 5,039 0.811 5,959 4,813 0.808 19,949 14,576 0.731 18,650 14,326 0.768
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From page 396... ...
Therefore, the average-cost versus marginal-cost assumption -- along with other assumptions having to do with how expenditures are allocated -- are quantitatively extremely important in driving estimates of the fiscal impact different generational groups. Thus, while for scenarios 1 through 4 the first generation group displays slightly lower but quite comparable fiscal ratios at the federal level, compared with the third-plus generation group,18 the ordering reverses 18 Here as elsewhere in the report, "third-plus generation" is a short-hand way of referring to everyone who is neither an immigrant nor a U.S-born child of at least one immigrant parent.
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in terms of their net fiscal impacts. 19 This calculation is meant mainly to serve as a sensitivity test and not to be realistic.
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Chief among the key factors are age and education, as well as the calendar year -- more specifically, the point in the business cycle, which clearly shifts the fiscal contributions of all population groups, as revealed by Figure 8-19 above. In Table 8-3, the panel explores how net fiscal impacts correlate with immigrant-native differences in characteristics in our pooled March CPS samples spanning 1994 to 2013.
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From page 399... ...
Each column presents coefficients and significance levels from a separate ordinary least squares regression of net fiscal impact at the given level of government (dependent variable) on indicators for generational group assignment (x variables)
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From page 400... ...
and the third-plus generation reference group contribute to group differences in per capita fiscal impact. In each model, the net fiscal impact in 2012 dollars is regressed on generational group status (i.e., first generation or second generation group, with the third-plus generation group constituting the reference category)
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From page 401... ...
The results control for differences in age profiles for the first generation and second generation groups relative to the third-plus generation group, as well as any differences in sex composition or in the year of the CPS source survey. Under Model 2, a negative coefficient on the generation group indicator means that, adjusted for age, sex of group members, and survey year, the net fiscal impact is more negative for a member of that group than for a 20 The Ns in Table 8-3 are the numbers of independent individuals present in each generational group; the flows of dependents are rolled into those of the independent individuals in the household to which they are linked.
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From page 402... ...
In contrast to the findings for the first generation group, the Model 2 results for the second generation show positive net fiscal impacts for this group at both the federal and state and local levels, totaling $2,665 per person. These results indicate that the large negative effect for this group at the federal level in Model 1 were entirely due to the group's age distribution (concentration at both younger and, especially, older ages)
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From page 403... ...
In short, this comparison of first generation and third-plus generation individuals of similar age and race/ethnicity, with similar education levels and in households with similar numbers of dependents, yields estimated net fiscal impacts that are quite similar. For the second generation, the net fiscal impacts in Models 3 through 5 continue to be more positive than the third-plus generation reference group across the board, as they were for Model 2.
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From page 404... ...
, cross-sectional data from 1994-2013 reveal that, at any given age, adult members of the second generation typically have had a more positive net fiscal impact for all government levels combined than either first or third-plus generation adults. Reflecting their slightly higher educational achievement, as well as their higher wages and salaries (at a given age)
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From page 405... ...
For these generational groups, the net fiscal costs of dependent children are included as part of the calculations of outlays, receipts, and net fiscal impacts for the group. For purposes of per capita comparisons, the population of each group is counted as the number of independent individuals of that generation plus the number of their dependent children.
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From page 406... ...
Because the federal government has typically run budget deficits during the analysis period, the three generational groups mostly have negative net fiscal impacts between 1994 and 2013. However, both federal and total fiscal ratios increased for both the first and second generation groups between 1994 and 2013, while they generally decreased for the third-plus generation group.
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From page 407... ...
When a marginal cost allocation of public goods is assumed, instead of the average cost allocation, the total net fiscal impact of the first generation group becomes much lower than that of the two nativeborn groups. In this case, the first generation group accounts for less than 4 percent of the total deficit (while still of course accounting for 17.6 percent of the sample population)
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From page 408... ...
Descendants of immigrants often only enter the debate as children, because this is often where they appear in cross-sectional data providing a point-in-time snapshot; currently the average immigrant household is a net fiscal burden in part because young children of immigrants, like the children of natives, receive public education. Following the descendants of immigrants further into the future, when they become workers and start paying taxes, provides a more complete measure of fiscal impact because it includes not just the cost of their education but also the delayed fiscal benefits of that education: larger tax payments made possible by the investment in human capital that education represents.
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. Age profiles are estimated for a comprehensive list of government tax and spending programs at federal and at state and local levels.
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Since 2003, the Social Security Trustees have also presented supplemental forecasts of actuarial balance over an infinite future, and The New Americans (National Research Council, 1997) projected net fiscal impacts of immigrants over an infinite horizon.
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To implement the CBO's long-term budget projections for this exercise, age profiles of the various taxes and benefit programs are adjusted to match aggregate program amounts as projected by the CBO. • CBO's Long-term Budget Outlook with Deficit Reduction that takes the previous scenario as its starting point but, beginning in 2015, narrows the gap between federal spending and revenue using a 50/50 split between tax increases and spending cuts.
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CBO Long-Term CBO with Budget Deficit No Budget Outlook Reduction Adjustments Federal Spending (excluding public goods) 2.1 2.0 1.5 OASDI 2.1 2.0 1.7 Medicare 2.9 2.8 1.9 Medicaid, SHIP, Exchanges 3.0 2.9 1.4 Other Discretionary 0.7 0.6 1.0 Federal Revenue 2.1 2.2 1.0 Income Tax 2.4 2.5 1.0 FICA 1.6 1.7 1.0 Corporate Taxes 1.8 1.9 1.0 Other Taxes 2.5 2.6 1.2 NOTES: CBO = Congressional Budget Office, OASDI = Old-Age, Survivors, and Disability Insurance Program, SHIP = Student Health Insurance Plan, and FICA = Federal Insurance Contributions Act.
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From page 413... ...
Because many fiscal impacts of immigration, such as the education of the children of immigrants, are more negative in the short run than they are in the long run, a rate that is too high would tend to understate the net fiscal benefit or overstate the net fiscal cost of an immigrant. The Future in Context As discussed earlier in this chapter, both immigrants and government budgets have changed since the mid-1990s, when a similar exercise was undertaken for The New Americans (National Research Council, 1997)
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From page 414... ...
In order to accurately portray how the fiscal impacts of today's immigrants might have changed since the research for The New Americans (National Research Council, 1997) was done in the 1990s, it is necessary to identify the characteristics of recent arrivals and of the overall population of immigrants in the country.
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From page 415... ...
Figures in the bottom rows of each panel show the weighted average of the fraction of individuals at each education level multiplied by the number assigned to the level, from 1 to 5. SOURCE: All data used in the analysis are from the 1994-1996 and 2011-2013 March Current Population Survey.
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From page 416... ...
This may have been a reasonable strategy given the distribution of education among immigrants at the time, but as Table 8-5 reveals, it has become increasingly insufficient for analysis. Changing educational attainment patterns means that, relative to the 1990s, a greater percentage of recent immigrants are found in higher earning and higher taxpaying groups.
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From page 417... ...
Thus, our forecast of that average new immigrant's lifetime net fiscal impact begins at a more advantageous age for government budgets now compared with when the estimates for The New Americans (National Research Council, 1997) were created.
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Net fiscal impacts by age across education and nativity are shown in Figure 8-21. Children and young adults under age 25 with incomplete education are coded as having the education level of a parent (or average if there are two)
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TABLE 8-6 Age Distribution by Generation, 1994-1996 and 2011-2013 Recent First Generation All First Generation All Native Born Age Group 1994-1996 2011-2013 Change 1994-1996 2011-2013 Change 1994-1996 2011-2013 Change 0-24 0.47 0.37 −0.10 0.22 0.14 −0.08 0.38 0.36 −0.01 25-64 0.50 0.59 0.09 0.66 0.73 0.07 0.50 0.50 0.00 65+ 0.03 0.04 0.01 0.12 0.13 0.01 0.12 0.14 0.01 Total 1.00 1.00 1.00 1.00 1.00 1.00 NOTE: "Recent First Generation" means individual arrived in the United States within 0-4 years of the analysis period SOURCE: All data used in the analysis are from the 1994-1996 and 2011-2013 March Current Population Survey.
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From page 420... ...
Second generaƟon Dollars C Third-plus generaƟon Figure 8-20 Dollars vector, editabl stacked, but capƟ needs to go on s FIGURE 8-20 Age profiles of wage and salary income by educational attainment and nativity, 2012.
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From page 421... ...
Second generaƟon Dollars Figure 8-21 vector, editable stacked, but capƟo needs to go on sid C Third-plus generaƟon Dollars FIGURE 8-21 Age profiles of net fiscal impact by educational attainment and nativity, 2012.
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From page 422... ...
Third-plus generation persons without a high school degree never contribute more than they receive, a striking result that is not true for either the first or second generation. Children of the third-plus generation also exhibit a wider educational gradient in their net fiscal impacts than either of the other two groups.
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6 5 4 3 2 Mean for EducaƟon Group, 1 RelaƟve to Less Than High School Mean 0 1995 2012 1995 2012 1995 2012 State/Local Federal Total |
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What Will an Additional Immigrant and Descendants Pay in Taxes and Receive in Benefits in the Future? In order to forecast taxes and benefits for an average immigrant and descendants, it is necessary to first forecast the ultimate educational attainment for young immigrants and the future educational attainment of the offspring of immigrants.
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educational level indicated in the column head, given the parent's educational attainment shown in the row stub. A strong pattern of upward educational mobility is apparent for the children of immigrants.
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If true, first generation parents may be relatively more focused on educational attainment for their children than native-born parents. This result carries through to the patterns of tax payments by generation: If second generation children go on to achieve higher levels of education, one would also expect that they will be higher earners and thus pay relatively more in taxes than other groups.
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, and of having descendants through fertility. Similar forecasts apply to the immigrant's descendants whose fiscal impacts
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The Fiscal Impacts of a New Immigrant -- Detailed Results Estimates of the present value of the net fiscal impact associated with a new immigrant vary widely, depending on a number of assumptions. Table 8-12 captures this variation.
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. SOURCE: Values in the rows labeled "Current" are the indicator values used in the calculations done for this report based on the 2011-2013 March Current Population Survey; values in the "Circa 1990s" rows are those used in The New Americans (National Research Council, 1997)
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0-24 25-64 65+ Avg. AVERAGES BASED ON RECENT IMMIGRANTS No Public Goods Included in Benefits |
From page 431... ...
AVERAGES BASED ON ALL IMMIGRANTS No Public Goods Included in Benefits |
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0-24 25-64 65+ Avg. AVERAGES BASED ON RECENT IMMIGRANTS No Public Goods Included in Benefits |
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–96 –107 –216 –119 20 –79 –216 –80 –117 –31 0 –39 NOTE: The "total' figures equal the fiscal impact of the individual, starting at age 25, plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference between scenarios without and with public goods included.
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From page 434... ...
Each cell in the table is the amount, in thousands of inflation-adjusted 2012 dollars, of the net fiscal impact associated with an immigrant's arrival today under the assumptions of that data-panel's scenario. For example, the highlighted statistic of "259" in the first set of data panels of the table means that, under the CBO Long-term Budget Outlook scenario, the total fiscal impact of a new immigrant who most resembles recent immigrants in terms of average age and education creates a positive fiscal balance flow to all levels of government with an NPV of $259,000.
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From page 435... ...
Additionally, assuming productivity growth of 1 percent, the effective discount rate becomes 2 percent and the adjustment is less extreme. By comparison, under the No Budget Adjustments scenario, smaller net fiscal impact estimates are produced, reflecting an assumed growth in the size of government that is more in line with historical precedent.
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From page 436... ...
As one might expect, the net fiscal impact is less positive (or more negative) when the immigrant arrives during youth or at retirement ages and becomes more positive with higher educational attainment.35 Note that there are no descendants for those arriving at age 65+ because fertility rates are zero after age 50 in the demographic projections.
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300 279 1,000's of 2012 Dollars Deficit Reduction Congestible only With non-interest public goods FIGURE 8-23 Net fiscal impacts of immigration, by budget scenario, treatment of public goods, and average characteristics of new immigrants.
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The average of the 12 estimates in Figure 8-23 is $77,000, and the standard deviation is $125,000.37 Shifting the pool from which one calculates characteristics of an average immigrant has a relatively large impact on the final estimate. Assuming that a new immigrant resembles recent immigrants yields a more positive net fiscal impact than does assuming the new immigrant is drawn from the entire stock of first generation immigrants currently in the country.
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From page 439... ...
The calculation is broken out to show the fiscal impact component attributed to the 25-year-old as an individual and the component attributed to that individual's descendants. As in Table 8-12, net fiscal impacts for the immigrant and the native-born individual are shown for each educational attainment category under two budget scenarios (CBO Long-term Budget Outlook and the No Budget Adjustments scenario)
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From page 440... ...
TABLE 8-13 75-year Net Present Value Flows Comparing an Immigrant Arriving at Age 25 with a Native-born 440 Person Followed from Age 25, for Consolidated Government Finances under Two Future Budget Scenarios, by Educational Attainment, Varying the Treatment of Public Goods (in thousands of 2012 dollars) CBO Long-term Budget Outlook No Budget Adjustments Total Individual Descendants Total Individual Descendants No Public Goods Included in Benefits |
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Benefits Include Defense, Subsidies, and Rest-of-World Payments |
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The discount rate used for the net present value calculations is 3 percent. SOURCE: Values are panel generated using 2011-2013 Current Population Survey data pools for the projections.
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From page 443... ...
Nonetheless, the lesson to draw from these projections is that the variability in fiscal impact is much greater across education categories than between immigrants and natives with the same educational attainment. Under the conditions of this projection, the major driver of fiscal impacts is educational attainment, not immigrant status.
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From page 444... ...
Tables 8-14, 8-15, and 8-16 do this for the accounting scenario in which an additional immigrant does not trigger additional spending on public goods, and therefore the cost of public goods is not added into the benefits received. Tables 8-17 and 8-18 present total and federal-only fiscal impacts when the alternative scenario is used, in which a new immigrant is assumed to increase spending on public goods by the per capita cost of those goods.
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0-24 25-64 65+ Avg. Total Net |
From page 446... ...
0-24 25-64 65+ Avg. Total Net |
From page 447... ...
598 442 246 491 292 307 246 299 306 135 0 192 NOTE: The "total" figures equal the fiscal impact of the individual immigrant plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference among scenarios without and with public goods included.
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From page 448... ...
388 205 –186 256 149 87 –186 99 239 118 0 157 Federal Taxes |
From page 449... ...
413 224 –186 277 162 100 –183 112 251 123 0 165 Federal Taxes |
From page 450... ...
278 300 208 288 173 251 208 221 105 49 0 68 NOTE: The "total" figures equal the fiscal impact of the individual immigrant plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference among scenarios without and with public goods included.
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From page 451... ...
TABLE 8-16 75-year Present Value Flows for State and Local Governments only, for Three Future Budget Scenarios, by Grouped Ages of Immigrant Arrival in the United States, with Public Goods Excluded from Incremental Benefit Costs to Immigrants and Descendants (flows in thousands of 2012 dollars) CBO Long-term Budget Outlook Total Impact Immigrant Descendants 0-24 25-64 65+ Avg.
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TABLE 8-16 Continued 452 CBO Long-term Budget Outlook with Deficit Reduction Total Impact Immigrant Descendants 0-24 25-64 65+ Avg.
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From page 453... ...
321 142 38 203 120 55 38 78 201 86 0 125 NOTE: The "total" figures equal the fiscal impact of the individual immigrant plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference among scenarios without and with public goods included.
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From page 454... ...
CBO Long-term Budget Outlook Total Impact Immigrant Descendants 0-24 25-64 65+ Avg.
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From page 455... ...
0-24 25-64 65+ Avg. Total Net |
From page 456... ...
746 539 273 604 365 370 273 365 381 169 0 240 NOTE: The "total" figures equal the fiscal impact of the individual immigrant plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference among scenarios without and with public goods included.
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From page 457... ...
CBO Long-term Budget Outlook Total Impact Immigrant Descendants 0-24 25-64 65+ Avg.
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From page 458... ...
304 151 –206 193 107 52 –206 62 197 99 0 131 Federal Taxes |
From page 459... ...
425 398 236 401 246 315 236 287 180 83 0 115 NOTE: The "total" figures equal the fiscal impact of the individual immigrant plus the fiscal impacts of that individual's descendants. See accompanying text for a discussion of the difference among scenarios without and with public goods included.
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From page 460... ...
, one can see why the higher levels of education among recent immigrants produce a more positive net fiscal impact than previous immigrants produced. The consolidated amounts in Tables 8-12, 8-13, and 8-14 are the sum of the corresponding federal amounts in Table 8-15 and the state/local amounts in Table 8-16.
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From page 461... ...
Equity issues between the federal government and across states should be given consideration in future iterations of immigration policy. Forward-looking projections of the net fiscal impact of an additional immigrant and descendants generate a relatively wide range of possible results.
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From page 462... ...
During the past 20 years, there has been considerable change in many characteristics of immigrants, chief among them -- for purposes of understanding fiscal impacts -- being age structure and educational attainment. If a future immigrant looks like recent new immigrants, rather than like an average immigrant of the entire first generation alive today, that immigrant will have a more positive net fiscal impact because of increased levels of education and concentration at working ages, the characteristics most lucrative to governments from the perspective of tax collections.
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From page 463... ...
Age profiles are estimated for five immigrant groups and five educational attainment groups. The immigrant groups are foreign born arriving within the last 0-4 years, foreign-born arriving within the last 5-9 years, foreignborn arriving more than 10 years ago, native-born children of foreign-born
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From page 464... ...
The tables in the chapter specify whether and which public goods were included in per capita costs. For the historical static calculations in Section 8.2, the same rolling 3-year pooled CPS samples are used, but at the individual level rather than collapsed into per capita age profiles.
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From page 465... ...
4. Project Survivorship, Emigration, and Number of Descendants To project fiscal impacts of an immigrant arrival into the future, one needs to know how likely the immigrant is to survive in each future year and to not emigrate from the United States (either back to the immigrant's country of origin or to another country)
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From page 466... ...
The age profiles specify that this immigrant will have a particular level of taxes paid and benefits received in 2012, and the difference between them is that person's net fiscal impact in 2012. For 2013, the calculation uses the projected taxes paid and benefits received of a now 33-year-old with less than high school education, weighted by the probability of having survived to age 33 and not emigrated, discounted by 3 percent.
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From page 467... ...
Age Profiles of Taxes and Benefits CPS Data and Definition of Immigrant Generations Most of the profiles used in The New Americans (National Research Council, 1997) were based on CPS data, pooling March samples for 1994 and 1995.
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From page 468... ...
This is appropriate for the forward-looking present value calculation because it credits an immigrant and nonimmigrant who have a child together as each having half of that child. Thus, higher or lower expected fertility for immigrant groups as compared to native groups will be accounted for in the calculation of net fiscal impacts of descendants.
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From page 469... ...
Variable List The following list defines the variables used in the datasets derived from the CPS data to generate the age profiles for taxes paid and benefits received. This information is provided for readers interested in working with the panel's datasets or with data extracts similar to those used by the panel for the forward-looking projections in Chapter 8.
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From page 470... ...
, federal mcaidnhom_f Medicaid payments to nursing homes, federal portion mcaidnoninst_f Medicaid payments to other than nursing homes, fed eral portion incunemp_f Unemployment benefit payments, federal retrr_f Railroad retirement, federal
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From page 471... ...
, federal refugee_f Refugee settlement programs, federal scholar_f Scholarships and student loan subsidies, federal rentsub_f Rent subsidies, federal pubhous_f Public housing benefits, federal heatsup_f Energy payment subsidies for low-income people, federal ret_f Retirement benefits, federal cong_f Congestible goods (transportation, public admin, etc.) , federal State/local benefits: mcaidnhom_s Medicaid payments to nursing homes, state portion mcaidnoninst_s Medicaid payments to other than nursing homes, state portion schip_s SCHIP benefits, state incssi_s Supplemental security income (to low-income old, blind, disabled)
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From page 472... ...
fedpoor Federal benefits based on low income (mcaidnhom_f, mcaidnoninst_f, incunemp__f, incssi_f, eitcred_f, fdstmp_f, schlunch_f, incwelfr_f, rentsub_f, pubhous_f, heatsup_f) fededu Federal education benefits (scholar_f)
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From page 473... ...
1 Less than HS 2 HS graduate or GED 3 Some college 4 Bachelor's degree 5 Any post bachelors Details on Each Flow The following documentation describes source data, aggregates to which totals are normalized, and assumptions underlying tax revenue and various benefit and public cost flow calculations used in the fiscal impact estimates. This section does not include description of flows assigned on a per capita basis.
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From page 474... ...
Aggregate: NIPA Table 3.2. Federal Government Current Receipts and Expenditures, Excise taxes.
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From page 475... ...
Aggregate: NIPA Table 3.6. Contributions for Government Social Insur ance, Unemployment Insurance.
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From page 476... ...
Excise taxes are predicted based on a regression equation estimated from data from the Consumer Expenditure Survey where household AGI and household structure predict total taxable consumption. This regression equation is then applied to the household sum of values in the individual-level CPS variable adjginc.
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From page 477... ...
, but weighted by total per capita personal health care expenditures by age from the 2011 National Health Accounts. Aggregate: Total Medicare costs come from Government Social Benefits (NIPA Table 3.12)
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From page 478... ...
, but weighted by total per cap ita personal health care expenditures by age from the 2011 National Health Accounts. Aggregate: Total Medicare costs come from Government Social Benefits (NIPA Table 3.12)
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From page 479... ...
This variable does contain some payments from private sources, but as long as those are not huge or radically different by age or immigrant generation, it is corrected for in the aggregate adjustment. Aggregate: Government Social Benefits (NIPA Table 3.12, unemployment insurance)
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From page 480... ...
Aggregate: Government Social Benefits (NIPA Table 3.12, line 25, Refundable Tax Credits)
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From page 481... ...
Allocation is made by summing all incwelfr in a family unit and dividing evenly among people in the family. Aggregate: Government Social Benefits (NIPA Table 3.12, family assis tance and general assistance)
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From page 482... ...
Source data: CPS individual-level variable incedu if CPS variable srcedu indicates that source of the funding is from government, for ages 18-24. Aggregate: Government Social Benefits (NIPA Table 3.12, for education)
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From page 483... ...
, and similarly increti2 and srcreti2 for the second source of income. For both age profiles, if the amount was to a person with a spouse in the household, the amount is allocated to both spouses equally.
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From page 484... ...
Aggregate: NIPA Table 3.12, Government Social Benefits, line for State/ local "other" which is WIC, but also includes some small amounts for foster care and adoption assistance that were not able to be separated out. NH assump: $0.
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From page 485... ...
For the projected age profiles, the 2013 proportions enrolled are used for ages 25-54, while the pooled sample of 2011, 2012, and 2013 is used to calculate proportion enrolled for ages 16-24. For the historical age profiles, the comparison between 1994 and 2013 suffers from this change in data collection, but the impact is minor because of the low levels of higher education enrollment for age 25+ and because of the adjustment of per capita age pro files to national-level aggregate flows.
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From page 486... ...
Source data: CPS individual-level variable incwkcom. Aggregate: Government Social Benefits (NIPA Table 3.12, federal and s/l worker's compensation combined, but this is mostly state/ local)
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From page 487... ...
Subsidies 60.2 59.7 0.5 [2] Amounts Included in Fiscal Impacts Analysis GIA are attributed in the analysis as federal expenditures and subtracted from s/l to avoid double counting.
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From page 488... ...
This gives a sufficient sample to estimate the average expected educational attainment of children based on the average educational attainment of parents. This was done separately by parental birth region, and a separate set of predictions was made for U.S.-born children versus non-U.S.-born children.
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From page 489... ...
Although the predictions for U.S.-born children of U.S.-born parents are not needed in estimating the 75-year discounted net fiscal impact of immigrants, the prediction equation for U.S.-born children of a U.S.-born parent was estimated as well for comparative purposes. The results are shown below.
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From page 490... ...
FIGURE 8-24 Predicted educational attainment for native-born children. Foreign-born Parent vs.
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From page 491... ...
More complex is the scenario that uses CBO's long-term budget projections and matches the growth of various fiscal flows to be consistent with that scenario. At the time the projection work was done, the most recent report was CBO's 2014 Long-Term Budget Outlook, published in July 2014 (Congressional Budget Office, 2014a, https://www.cbo.gov/publication/45471 [November 2016]
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From page 492... ...
It does not include any economic feedbacks from this no-policy-change scenario but simply looks at current government tax and spending policy and combines that with the Census Bureau's population projections and assumptions about the future of economic variables such as interest rates. In this scenario, then, there is no attempt to deal with any future fiscal imbalances that may arise, and thus the overall deficit and national debt rise sharply.
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From page 493... ...
Where the Pew Research Center rates vary by race/ethnic group, these have been combined by current race/ethnic composition to produce an overall population average. Five generations of descendants are counted in the demographic projections, to cover all potential births for the 75-year forward-looking observation period.
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Key Terms
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