Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/265813 
Year of Publication: 
2022
Series/Report no.: 
IZA Discussion Papers No. 15592
Publisher: 
Institute of Labor Economics (IZA), Bonn
Abstract: 
Immigration policy can have important net fiscal effects that vary by immigrants' skill level. But mainstream methods to estimate these effects are problematic. Methods based on cashflow accounting offer precision at the cost of bias; methods based on general equilibrium modeling address bias with limited precision and transparency. A simple adjustment greatly reduces bias in the most influential and precise estimates: conservatively accounting for capital taxes paid by the employers of immigrant labor. The adjustment is required by firms' profit-maximizing behavior, unconnected to general equilibrium effects. Adjusted estimates of the positive net fiscal impact of average recent U.S. immigrants rise by a factor of 3.2, with a much shallower education gradient. They are positive even for an average recent immigrant with less than high school education, whose presence causes a present-value subsidy of at least $128,000 to all other taxpayers collectively.
Subjects: 
immigration
fiscal
tax
revenue
budget
deficit
surplus
capital
cost
benefit
dividend
subsidy
burden
social security
welfare
outlays
balance
foreign
skill
government
public
JEL: 
F22
H68
J61
Document Type: 
Working Paper

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