The Immigration Debate Studies on the Economic, Demographic, and Fiscal Effects of Immigration (1998) / Chapter Skim
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3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study
3 Fiscal Impacts of Immigrant and Native Households: A New Jersey Case Study
Pages 66-119
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From page 66... ...
Considerably less effort has been expended by economists in estimating the fiscal impacts of immigrants or in evaluating how these effects compare with the governmental benefits received and taxes paid by the nativeborn population. Indeed, these issues are barely mentioned in two recent review papers by Friedberg and Hunt (1995a, 1995b)
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From page 67... ...
In recent years, knowledge of the fiscal impacts of immigrant households has taken on additional policy significance as numerous states have sued the federal government for the costs of services they are required by law to provide to resident illegal immigrants (Clark et al., 1994; U.S. General Accounting Office, 1994, 1995~.1 Some studies of immigrants' fiscal impacts have been conducted by university researchers, but most have been prepared by analysts working for state or local governments.2 Census data suggest that immigrants were slightly less likely than natives in 1970 to receive cash welfare payments (for example, Aid to Families with Dependent Children and Supplemental Security Income)
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From page 68... ...
First, they look selectively at particular expenditure or revenue items associated with immigrants, which means that it is impossible to draw conclusions about immigrants' net fiscal impacts.3 Second, only one previous study (Espenshade and King, 1994) makes use of available micro-level information about the demographic and economic circumstances of individual immigrant households that can be obtained routinely from decennial census data.
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From page 69... ...
Our results suggest that the typical New Jersey household, whether native or foreign born, uses more state and local government services than it pays for with taxes. Among nonelderly household heads, the negative fiscal impact of immigrant households exceeds that of native households by 46 percent at the state level and by 60 percent for county and municipal governments.
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From page 70... ...
Net of education expenditures that benefit a student population, most of the goods provided by New Jersey's local governments are relatively public in nature (for example, parks and recreation, public health departments, public libraries, and judicial and legislative functions)
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From page 71... ...
Most studies of immigrants' fiscal impacts have used a macro perspective (Rothman and Espenshade, 1992~. Recent exceptions include work reported by Borjas (1994)
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From page 72... ...
The proximate beneficiaries of public education expenditures are the students, but an important rationale for public funding of elementary and secondary schooling is that society as a whole is better off in the long run with a more educated population. Third, the household sector is not the sole beneficiary of state and local government expenditures.
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From page 73... ...
For example, information about municipal aid distributions came from State Aid Programs for Municipalities, 1989 and 1990 (Forsberg, 1995~. Data on the state's share of school district expenditures were derived from the 1990 New Jersey Legislative District Data Book (Rutgers, the State University of New Jersey, 1990~.
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From page 75... ...
This is partly a reflection of their greater size and youthfulness. Not only are households headed by Latin American immigrants significantly poorer than native households, they are also more likely to receive public assistance income than any other group of households.
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From page 76... ...
76 .~ o o o .~ ;^ ca ca o o .O o o Cq o a' Cq o a' Cq s~ a' 3 a' o a' o C)
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From page 77... ...
The table's first panel shows state expenditures on households in FY 1989-1990. General state services and state aid along with costs for public elementary and secondary school education are the largest items in dollar terms.
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From page 78... ...
fForeign-born household heads 65 and older from Europe and Canada have significantly smaller mean deficits than those from Latin America. "Both b and d, see above.
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From page 79... ...
GARVEY AND THOMAS J ESPENSHADE 79 Foreign-born Households by Region of Origin Europe/CanadaAsia Latin AmericaOther <6565+ <65 65+<6565+ <6565+ 1,1191,119 1,119 1,1191,1191,119 1,1191,119 1,46646 1,808 2951,971416 1,76778 41088 622 200481180 50490 180365 245 7334681453 291723 4257 66 138125255 88113 17167 21 16621243 16174 8786 80 110229239 163134 2710 10 261919 1816 1576 6 69749 770 106123 90 1078591 88110 5272 48 764589 4177 3,5202,208 4,115 3,0374,5694,153 4,1022,705 1,419396 1,620 792934417 1,145517 512296 549 403412296 449323 261133 244 183185114 198141 12999 137 143139128 123105 4673 14 422248 1759 83 8 452 54 458 77 35286 5118 2,4191,008 2,648 1,6021,7251,011 1,9881,166 -1,101-1,199 -1,467e -1,435-2,844e-3,142f -2,114e-1,539
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From page 80... ...
Much of the gap between younger Asians and Latinos is explained by differences in income taxes, which in turn reflect underlying differences in household income that were described in Table 3-2. Households' net fiscal impacts are shown in the last row of Table 3-3.
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From page 81... ...
Latin American and other immigrants, who are younger and have more children (and therefore incur greater state costs for elementary and secondary schooling) , exert a larger fiscal imposition 7Using household-level information on the nativity status of children enrolled in public school, we can disaggregate state expenditures on public elementary and secondary school for immigrant-headed households into those for native- and foreign-born children (see the second row in the top panel of Table 3-3)
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From page 82... ...
The relative gap between the sexes is especially pronounced for younger households. TABLE 3-4 Net Fiscal Impact of Households on State of New Jersey, by Age, Sex, and Nativity Status of Household Head, FY 1989-1990 (all figures in dollars)
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From page 83... ...
General county and municipal expenditures consist of such items as general government, judiciary, public safety, public works, health and welfare (excluding expenses for county welfare boards and for welfare/public assistance) , recreation and conservation, nonschool education (for example, public libraries)
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From page 84... ...
The one exception is Latin American households. Elderly Latino immigrant households incurred a local deficit of almost $1,400 per household in FY 1989-1990, principally because they paid below-average amounts in property taxes and lived in urban areas in the northeastern part of New Jersey that spent relatively large sums on general municipal functions.
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From page 85... ...
But the fiscal impacts associated with younger immigrants from outside Europe and Canada are between 72 and 93 percent greater than those for their native counterparts. Given our findings at the state level, budget gaps this large might be expected for Latin American and other immigrants.
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From page 86... ...
On the other hand, with the exception of Latinos, male-headed senior citizen households are net fiscal assets at the local level and might be expected to provide a small subsidy to other taxpayers. CONCLUSIONS This chapter uses data from 1990 census 5 percent PUMS files, supplemented extensively with information from state and municipal budgets, to estimate the state and local fiscal impacts of immigrant and native-born households in New Jersey.
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From page 87... ...
Differences by age and sex of household head and by region of origin for the foreign-born population are also featured in the analysis. Third, we view government expenditures on households and revenues provided by the household sector to the state and to municipalities in the broadest terms possible, which means that we are able to draw conclusions about the net fiscal impacts of different kinds of households.
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From page 88... ...
Finally, estimating the fiscal impacts of immigrants is frequently a task assigned to in-house researchers working for state and local governments. These analysts are often laboring under tight budgetary and time constraints and may face incentives to reach a predetermined conclusion.
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From page 89... ...
eFound by first calculating the net fiscal impact per capita for each household and then averaging over all households in the category. program to produce the fiscal estimates described above.
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From page 90... ...
We also exclude these expenditures on behalf of institutionalized populations, because we focus the analysis on the household sector. We are left with $10.38 billion in state expenditures to allocate to households.
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From page 91... ...
12Taxes paid by households constituted approximately 75 percent of total state tax revenue in FY 1990. The principal taxes included the gross income tax, sales and use tax, motor vehicle fees and the motor fuels tax, cigarette tax, the inheritance/estate transfer tax, business personal property tax, and the realty transfer tax.
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From page 92... ...
Differences in local fiscal impacts between native and immigrant households may arise after aggregation to the state level to the extent that these populations exhibit dissimilar spatial distributions across New Jersey communities. State expenditures that are distributed using an average cost approach include general state services/state aid and municipal aid.
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From page 93... ...
Detailed Calculations State Expenditures Our discussion of the calculation of benefits received by New Jersey households from state government follows the order of their presentation in the tables accompanying this chapter. We first consider expenditures on general state services made on behalf of households and subsequently turn to expenditures on elementary, secondary, and higher education; Medicaid; means-tested income transfer programs; municipal aid; employment and training programs; programs for the aged and disabled; property tax reimbursements, and other allocable expenditures.
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From page 94... ...
16General state services and state aid programs are funded under numerous subheadings and fund categories of the state budget. They may fall under the auspices of the Direct State Services, Grantsin-Aid, State Aid, or Debt Service subheadings of the General Fund, or they may be incurred as earmarked special expenditures or subsidies under the Property Tax Relief Fund, the Casino Control Fund, the Casino Revenue Fund, or the Gubernatorial Elections Fund.
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From page 95... ...
Economic Planning, Development and Security include expenditures under Program Classifications of the Department of Commerce and Economic Development: (51) Economic Planning and Development-promoting business and tourism in the state, under the Direct State Services, Grants-in-Aid, and State Aid sections of the budget.
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From page 96... ...
This dollar figure is then allocated to every child who lives in the PUMA, is 6 to 17 years old, and for whom the variable ENROLL22 indicates "in public school." The state incurs additional costs for general education administration and management that are not part of a school district's per pupil expenditures.23 Because there is no prior belief that immigrant- and native-born pupils consume 19In FY 1989-1990, the state contributed 39.8 percent, the federal government 3.8 percent, and local governments 56.4 percent on average to the per pupil cost of elementary and secondary education. The percentage breakdown is given in Evaluation Data of the Department of Education, (30)
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From page 97... ...
Finally, general education expenditures are also found in (34) Educational Support Services teacher's pension assistance under the Property Tax Relief Fund State Aid section of the state budget (State of New Jersey, l991b)
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From page 98... ...
On the other hand, a downward bias is imparted to estimates of average state expenditures on higher education insofar as students enrolled in New Jersey's institutions of higher learning are not residents of the state but temporarily form noninstitutional households within the state. A partial resolution of the third problem is reasonably straightforward.
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From page 99... ...
Office of the Chancellor costs of educational grants, administration of student financial aid programs, in the Direct State Services and Grants-in-Aid sections of the state budget. They also include expenditures on (36)
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From page 100... ...
A person is coded as attending a community college if ENROLL indicates he or she is "enrolled in public school" and YEARS CH indicates the person "is a high school graduate or holds a GED or diploma" and who has attained no more than "an associate degree in college in an academic program.''31 One-twentieth of total state expenditure on community colleges32 is divided by the number of students potentially enrolled in community colleges to arrive at the average per student cost of state aid to county colleges. Each student in the household who is potentially enrolled in a community college is then allocated the average state expenditure on assistance to community colleges.
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From page 101... ...
, which includes SSI, AFDC, and GA payments (Bureau of the Census, 1993:B-17~. We divide one-twentieth of total state expenditures on Medicaid payments and program costs by the number of households for which the variable INCOME6 is nonzero to arrive at the average state Medicaid cost per eligible household.35 We then allocate this average state cost figure to households who received public assistance in 1989.
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From page 102... ...
Economic Planning, Development and security: (53) Economic Assistance, Division of Economic Assistance and security income maintenance program administration in the Direct state services and Grants-in-Aid sections of the state budget (state of New Jersey, 199lb)
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From page 103... ...
Division of Medical Assistance and Health services of the Direct state services and Grantsin-Aid sections of General Fund, as well as in the casino Revenue Fund (Grants-in-Aid) section of the state budget (state of New Jersey, 199lb)
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From page 104... ...
We allocate state expenditures on pharmaceutical assistance to the eligible disabled population in the same manner as the eligible elderly. We divide one-twentieth of total state expenditure on pharmaceutical assistance for the disabled by the number of potentially eligible persons in the state, which gives average state expenditure per person on pharmaceutical assistance for the disabled.
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From page 105... ...
Economic Planning, Development and security: (53) Economic Assistance and security in the Direct state services section of the state budget (state of New Jersey, 1 99lb)
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From page 106... ...
Total state expenditure on vocational rehabilitation services is divided by the number of potentially eligible beneficiaries. This average state cost figure is then allocated equally to each eligible person in a household.52 State expenditures on manpower and employment services include expenditures on labor exchange services, employment development, and public- and private-sector labor relations.53 These services are assumed to be enjoyed by all workers on an equal basis.
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From page 107... ...
Special Government services: (83) services to veterans in the Direct state services and Grants-in-Aid sections of the state budget (state of New Jersey, 199lb)
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From page 108... ...
Economic Planning and Developmentmarketing for New Jersey farm products and (52) Economic Regulation market orders for dairy products, also in the Direct State Services section of the state budget (state of New Jersey, 1991b)
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From page 109... ...
GARVEY AND THOMAS J ESPENSHADE State Revenues 109 Revenues collected by the state that are paid directly by households include those from the gross income tax, sales and use tax, motor vehicle fees, motor vehicle taxes, alcoholic beverage tax, cigarette tax, inheritance/estate transfer tax, business personal property tax, and the realty transfer tax.62 These sources accounted for nearly threequarters of total state tax revenue in the fiscal year ending June 30, 1990 (State of New Jersey l991a:4-5~.
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From page 110... ...
by the sum of the two motor vehicle taxes to arrive at the estimate of motor vehicle taxes paid by the household. The motor fuels tax is levied on all motor vehicles in the state.
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From page 111... ...
We take onetwentieth of total state revenue from the transfer inheritance and estate tax73 and divide it by the number of potentially eligible households to arrive at a per eligible household figure. We then attribute this average contribution to households that potentially received an inheritance in 1989 to arrive at our estimate of inheritance taxes paid by each household.
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From page 112... ...
Multiplying this average figure by the number of self-employed persons in the household gives our estimate of the business personal property tax paid by each household. Realty Transfer Tax.
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From page 113... ...
82Municipal government expenditures are given in the Municipal Fiscal Data section of the FiftySecond Annual Report of the Division of Local Government Services, 1989: Statements of Financial Condition of Counties and Municipalities (State of New Jersey, l990c)
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From page 114... ...
As in the case of state expenditures on elementary and secondary education, we count all children enrolled in public school in the household. We aggregate this figure across all households in the county.
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From page 115... ...
Counties contribute to the support of their local community colleges. As described above under state expenditures, a person is coded as attending a community college if ENROLL indicates "enrolled in public school" and YEARSCH indicates "is a high school graduate or holds a GED or diploma" and if the person has attained no more than "an associate degree in college in an academic program." One-twentieth of the county's total expenditure on community colleges is divided by the number of students potentially enrolled in the county's community college to arrive at the per student cost.
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From page 116... ...
If we conceptualize rent as payment for a stream of housing services, property taxes paid are equal to annual contract rent87 multiplied by [t/(t+i)
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From page 117... ...
Espenshade, Thomas J 1996 "Fiscal Impacts of Immigrants and the Shrinking Welfare State." Working Paper No.
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From page 118... ...
Espenshade 1992 "Fiscal Impacts of Immigration to the United States." Population Index 58(3)
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From page 119... ...
Trenton, N.J.: Department of Community Affairs, Division of Local Government Services. State of New Jersey 1990d Owner Occupied Housing: Statistics from Homestead Rebate and Income Tax Data Match for 1988.
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