The Cost of Amnesty
President Obama touts the economic benefits of immigration, but the rising price of the Earned Income Tax Credit and Additional Child Tax Credit alone could be dizzying.
In a statement announcing his executive amnesty, President Obama reassured doubters that formerly illegal aliens would not qualify for “the same benefits that citizens receive.” As federal agencies begin issuing Social Security numbers to millions of new residents, however, it’s becoming clear that the president’s words were seriously misleading.
Formerly illegal aliens may not qualify for “the same benefits that citizens receive,” but they will very likely qualify for tens of billions of dollars worth of many of the most generous benefits available to citizens. How much, precisely, will become clearer in the coming weeks.
Start, for example, with the Earned Income Tax Credit and the Additional Child Tax Credit. These two means-tested benefits “top up” the wages of low-paid workers. Both are first applied to offset any federal tax liability a worker may have. The remainder of the credit is then refundable in cash to the worker. In the 2011 tax year, the average EITC payment to a family with children was $2,905, according to the Center for Budget and Policy Priorities. The Additional Child Tax Credit works in much the same way, paying an average of $1,800 to qualifying households.
The key fact about these two programs is that they are administered by the Internal Revenue Service as part of the tax code, not as social-welfare programs. The IRS asks only one question as it processes an EITC: Does the credit-seeker have a Social Security number? For the ACTC, the standard is even laxer: Does the credit-seeker have a Social Security number or an Individual Taxpayer Identification Number? (The ITIN is the substitute for a Social Security number widely used by illegal aliens.)
The law and regulations governing whether immigrants qualify for tax credits have already ramified into baffling complexity. Courts, Congress, and the administration will soon be wrangling over the technical legal status of the people who have received deferred action. As a practical matter, however, they will almost certainly collect cash. The IRS has neither the means nor the resources to deny EITC and ACTC to anyone with a valid nine-digit Social Security number. ACTC already pays huge amounts to illegal aliens holding only ITINs—$4.2 billion in 2010, according to the Treasury Department’s own inspector general. Once those ITIN holders gain Social Security numbers, it will become even less feasible to distinguish between presidentially and congressionally authorized resident aliens, even supposing the administration wished to do so—which of course it does not. So both the EITC and the ACTC are destined to grow hugely.
Here’s one indicator, courtesy of the Center for Immigration Studies. About 14.5 percent of the native-born population of the United States earns little enough to qualify for the EITC. Almost twice as great a portion of the total immigrant population, 29.7 percent, qualifies. But the specific immigrant groups most likely to benefit from the president’s action earn even less. Fifty-three percent of Mexican-born immigrants, 55 percent of Honduran-born immigrants, and 57 percent of Guatemalan-born immigrants earn little enough to qualify for the EITC. About half the migrants from these communities in the United States are present illegally, and they dominate the numbers among the newly legalized. Almost 87 percent of those who have received deferred action under the president’s 2012 action come either from Mexico or Central America. Everything points to a huge surge in EITC eligibility following this year’s executive action.
The ACTC may grow less, since illegal aliens can already make use of it. On the other hand, people present illegally may hesitate to apply for benefits, lest they be identified and penalized in some way. If those anxieties are overcome, more than 40 percent of Mexican- and Guatemalan-born immigrants will qualify for the ACTC, and about one-third of immigrants from El Salvador and Honduras.
Remember, the EITC and ACTC have already grown into very big problems. The EITC will cost a shade over $70 billion in fiscal 2015. The refundable portion of the child tax credit will cost about $33 billion. That’s $100 billion in total. Together, they cost 10 times as much as traditional cash welfare. Soon they will cost much, much more.
So when liberal columnists express amazement that Republicans in Congress are suddenly expressing qualms about EITC and ACTC growth … well, this is why. EITC and ACTC are not hostages seized by anti-poor Republicans to send a message of intimidation to the president. They are the first and most obvious costs of the president’s amnesty.
Many more such costs will come, and they will be even larger still, as pressure grows to enroll formerly illegal aliens in Medicaid.
Quaintly enough, U.S. immigration law still forbids the president to grant residency to aliens likely to become “a public charge.” The list of exceptions, however, overwhelms the rule. Here are the benefits that are “not intended for income maintenance” and therefore exempt, according to Citizenship and Immigration Services:
- Medicaid and other health insurance and health services (including public assistance for immunizations and for testing and treatment of symptoms of communicable diseases, use of health clinics, short-term rehabilitation services, prenatal care and emergency medical services) other than support for long-term institutional care
- Children's Health Insurance Program (CHIP)
- Nutrition programs, including the Supplemental Nutrition Assistance Program (SNAP)- commonly referred to as Food Stamps, the Special Supplemental Nutrition Program for Women, Infants and Children (WIC), the National School Lunch and School Breakfast Program, and other supplementary and emergency food assistance programs
- Housing benefits
- Child care services
- Energy assistance, such as the Low Income Home Energy Assistance Program (LIHEAP)
- Emergency disaster relief
- Foster care and adoption assistance
- Educational assistance (such as attending public school), including benefits under the Head Start Act and aid for elementary, secondary or higher education
- Job training programs
- In-kind, community-based programs, services or assistance (such as soup kitchens, crisis counseling and intervention, and short-term shelter)
- Non-cash benefits under TANF such as subsidized child care or transit subsidies
- Cash payments that have been earned, such as Title II Social Security benefits, government pensions, and veterans' benefits, and other forms of earned benefits
- Unemployment compensation
Those interpretations have allowed the evolution of an immigration policy that has become one of the most important drivers of the growth in federal and—even more—state spending. Immigration cost the typical California household an extra $1,178 in state taxes when the question was last thoroughly examined, in the mid-1990s. With Medicaid costs doubling approximately every decade, that figure should be considerably higher by now. And while immigration may boost the underlying economy a little, the effects are very, very small: The White House’s own paper in support of the president’s executive action calculates that it will add about $90 billion to the economy by the year 2024—in other words, less than the EITC and ACTC cost right now. The president’s latest immigration actions will drive government spending on immigrant households higher still. When he leads voters to think his actions will not cost taxpayers much or anything, that’s just not true.