The Tax Ledger Will Never Balance

	               Los Angeles Times Op-Ed
		           August 9, 1994

		            Ira Mehlman

There is a commonly held myth in the debate about whether immigrants contribute more in taxes than they use in public services. Many immigration advocates concede that immigrants use more in services at the state and local levels than they pay for with their tax dollars. However, they argue, the scales are more than balanced by the immigrants' contributions to federal coffers. The problem, they say, is the federal government's failure to equitably return those revenues to the states and communities where the immigrants live.

It's a nice theory, but it doesn't hold up under close scrutiny. The so-called immigrant tax boon to the federal government accrues largely to the Social Security system. Immigrants are paying far more into Social Security than they are currently taking out in benefits. But so does almost everyone else in this country under the age of 65.

With the huge cohort of baby-boomers now in their prime working years, the system is accumulating surpluses on the order of $100 million a day. Nevertheless, the long-term solvency of Social Security is very much in question. Nearly all contributors will live long enough to collect as much or more than they paid into the system. Unless immigrants all happen to be Peter Pan and manage never to grow old, the Social Security surpluses will only be short-term.

Those who contend that immigration is a net surplus for the federal ledgers are looking at only a very small piece of the puzzle. Immigrants do indeed pay more in federal taxes than they get back in direct federal assistance--but, again, that's true of almost everyone.

Only eight cents out of every federal dollar is spent on means- tested welfare programs, such as Aid to Families With Dependent Children. Measuring the taxes that immigrants pay against the welfare they receive is a distortion; just because an immigrant (or anyone else, for that matter) doesn't receive a federal check does not mean that Uncle Sam is making a profit on him.

The myth of a federal tax boon neglects to account for the general costs of keeping the government afloat--everything from the national defense to paying the utility bills at the local federal building. The vast majority of what any of us pays in taxes to Washington does not come back to us in the form of a measurable personal benefit. Yet all of us benefit in some way from programs as important to our quality of life as the interstate highway and national park systems.

Immigrants, when they settle here, become immediate beneficiaries of an elaborate national infrastructure. It is estimated that there is $40,000 in physical infrastructure for every person in the United States. This infrastructure--roads, bridges, airports, water treatment plants and the like--is the result of long-term investment made over many generations. There is undeniably a benefit to the immigrant who gains immediate access to an infrastructure that neither he nor his parents or grandparents contributed to.

At the state and local level, where most direct public services are paid for, most experts agree that immigration is a net cost. States and local governments pick up most of the tab for such costly programs as education, public health care and law enforcement. In California, where more than one-third of legal immigrants and nearly half of all illegal immigrants settle, the costs are enormous. The state estimates that net cost of providing services just to illegal immigrants in California is about $3 billion annually. New York, which is the second most popular destination for immigrants, reported in January that the net cost of all immigration to that state, legal and illegal, was $5.6 billion last year.

Because money flows into government coffers through so many different channels--income taxes, sales taxes, property taxes, user and licensing fees--and goes back out in even more ways, it may be impossible to ever fix a cost figure that everyone will agree on. However, when one considers the steady decline in earnings among recent immigrants and the mounting costs of basic entitlements like public education, the conclusion that immigration is becoming an enormous financial burden on state and local governments is inescapable. Sen. Paul Coverdell (R-Ga.) has called immigration the single largest unfunded federal mandate that Washington foists on the states.

When it comes to fiscal policy, Americans have become masters of self-deception. Policy-makers consistently overestimate revenues, underestimate costs and employ all kinds of accounting tricks to mask the true size of our deficits because fiscal responsibility requires difficult political choices. Rather making those choices, many in our federal government would prefer to believe that what we have is a problem of revenue distribution, not a dysfunctional immigration policy. As usual, we are only fooling ourselves.