Immigrants are essential to the U.S. economy because they pay more in taxes than they use in benefits, according to a new study by the Cato Institute.
The report undermined President Donald Trump’s claim that the “average illegal alien costs American taxpayers an estimated $70,000.”
“For years, nativists in Congress and the administration have wrongly claimed that immigrants are behind the growth in debt and that the U.S. immigration system allows foreigners to take advantage of Americans’ generosity. Our data completely repudiates this view. Immigrants are subsidizing the U.S. government,” the report states.
The report covers local, state and federal government budgets over a 30-year span to examine the effect of immigrants on the United States’ debt and deficit.
The study finds working immigrants accounted for 7% of government spending while generating 14% of tax revenue from 1994 to 2023. As a result, both legal and undocumented immigrants are “fiscally positive” contributors to the economy and helped avert financial crises for the nation.
“Without the contributions of immigrants, public debt at all levels would already be above 200% of U.S. GDP — nearly twice the 2023 level and a threshold some analysts believe would trigger a debt crisis,” the report says.
Immigrants are more effective at generating government revenue than the average person because they typically are ineligible for certain benefits and because they are less of a burden on public schools, according to Cato. And immigrants are less expensive as retirees in part because they are less likely to have government jobs that come with government pensions.
“The main reason, though, is that they were simply barred from applying for Social Security and Medicare because they either arrived too late in life to earn the necessary qualifying work history, or they are here illegally or in a temporary status and ineligible for that reason.”
Social Security spending on immigrants was 31% below the national average, Medicaid spending was 20% below average and Medicare spending was 20% less. Their draw on retirement and pensions was 64% below average.
Overall, immigrants are less of a drag on public education because their average age upon entering the U.S. is 25, the Cato report notes.
“Even though they are more costly when in school — due to bilingual education needs — they are much less costly overall because they are so much less likely to be in school. The result is that immigrants cost the U.S. education system about half as much as the U.S.-born population.”
Immigrants also are less of a drain on “needs-based” spending because they suffer poverty at above-average levels while using average levels of food assistance, unemployment insurance and welfare, the study found.
The sole factor for the “disconnect” between poverty level and public assistance is that illegal immigrants are ineligible to apply for welfare and other programs in most states, the study reports.
“‘Welfare’ or needs-based assistance for immigrants, including all refundable tax credits and unemployment benefits, was just 12% of the deficit. Governments can easily increase the value of immigration by cutting these expenses without losing the upside from immigrants’ tax revenues.”
Another disconnect exists between the view of immigrants as economic deadweights and the reality that they are absolute benefits to the nation’s fiscal health, Cato researchers said.
“Immigrants are not to blame for government deficits. Indeed, they reduced the deficit by about $14.5 trillion.”
“Even if the government had not spent a dollar on immigrants, while somehow still getting all their tax revenue, the U.S. government at all levels would still have run a $20 trillion deficit. Immigrants are not to blame for government deficits. Indeed, they reduced the deficit by about $14.5 trillion.”
Nor would totally eliminating expenditures on immigrants, also while retaining their tax revenues, reduce the deficit by half: “Their primary contribution is the goods and services they directly produce. However, they also reduce the burden of government spending for the U.S.-born population.”
And the idea that deporting immigrants will benefit the economy misses the fact that the U.S. is reaping the benefits of immigrant labor without many of the costs associated with training new native-born workers, the study notes. In fact, low-skilled immigrant workers reduced the deficit by $2.8 trillion and undocumented workers reduced it by $1.7 trillion over 30 years.
“Combined with the fact that immigrants face more legal and practical barriers to using transfer benefits such as Social Security, Medicare, Medicaid and means-tested income, food and shelter assistance, the result — that immigrants provide a net fiscal benefit to the U.S. economy — is virtually guaranteed.”
