Immigrants, Taxes, and Welfare in the United States

This paper investigates the balance of transfer payments between immigrants and natives in the US. Data were drawn from a Bureau of Census survey of 1975 incomes and use of social services by 15000 immigrant families and 11000 native-born families. During the 1st 12 years after entry into the US immigrant families use substantially fewer public services than native families largely due to their negligible use of Social Security; thereafter use is roughly equal. Moreover after 3-5 years immigrant families contribute as much as native families in taxes; subsequently they pay considerably more. Since immigrants contribute more to the public coffers than they take out immigration can be regarded as an excellent investment. The economic benefits derive mainly from the young age composition of the immigrant population rather than from behavior characteristics of immigrants. At a 3% discount rate each immigrant family is worth about US20600 to natives (1975 figure) compared with the mean yearly native family income of US11307. This value is US15800 at a 6% discount and 12400 at a 9% discount. Although the benefits of immigration outweigh its costs at the aggregate level it is recognized that both benefits and costs are unequally distributed by geographic locale. Finally it is noted that public policies aimed at increasing the educational level and lowering the age of immigrants will produce even greater economic benefits to the US.