The Impact of Immigrants on Taxation in the United States - Paper Example

Published: 2021-08-11 22:51:42
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Sewanee University of the South
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Research paper
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Since the first immigration of European settlers into North America some 600 years ago, the area has been receiving thousands of new entrants every decade. The phenomenon has created a significant topic that has received massive attention over the last few years. Also, it has caused a significant problem that is currently affecting the social, economic, and cultural aspects of the US. Immigration to the US is a highly complex but crucial demographic feature that has led to a steady increase in the US population and cultural dynamism since the discovery of the New World. Although there is a reverse migration that sees several Americans immigration to the rest of the world, the net effect usually is an increase in the number of people in the country. Among the social, cultural and political impacts of the phenomenon are profound. In particular, immigration into the US occurs in two primary forms- illegal and legal migration. Today, the USA is the most significant home to immigrants in the world and might continue in this position owing to a large number of immigrants living and willing to join the country. Currently, it is estimated that the population of immigrants, both documented and undocumented, residing in the US is about 40 million, which accounts for about 13% of the total population. Of these 40 million people, slightly less than half are naturalized US citizens (about 45%). Statistics indicate that the US is home to 12 million unauthorized (illegal or undocumented) immigrants who account for about 3% of the total population. Moreover, it is worth noting that the immigrants, both unlawful and documented, take a large labor force. According to Borjas, the illegal immigrants alone account for about 5% of the total labor force, which means that they have a more significant share of the labor force than the other people because the majority of them are working-age adults rather than children (66). Consequently, it is clear that almost every illegal immigrant has at least some form of employment in the country.

Also known as undocumented immigration, illegal immigration in the US is the violation of immigration laws by individuals entering the country from foreign nations. It involves foreign immigrants entering by violating the rules or staying in the country beyond their terminations dates of the Visa provided by the US government. About half of the more than 12 million illegal immigrants in the US is composed of immigrants from Mexico, while 24% are from Latin America. Besides, Asia, Europe, Canada, and Africa have significant numbers of illegal immigrants living in the US (Rowthorn 561). Also, statistics indicate that more than 8% of the children born in the US every year are offspring of illegal immigrants, with the number likely to increase in the coming decade. Statistics further indicate that more than 6 million immigrants came to the US between 2000 and 2010, while the annual numbers of illegal immigrants entering the country are estimated to be about 500,000 (Rowthorn 562).

With a massive population of illegal immigrants, the US faces some social, cultural, economic, and political problems. First, it is worth noting that most of the immigrants are from low-income nations. In fact, very few illegal immigrants are from first world countries, including Canada, Western Europe, Japan and Australia. This means that the majority are from Mexico, Latina America, Asia and Africa (Rowthorn 562). Noteworthy, most immigrants are in search of jobs and better lives that their nations can hardly provide. The feature further means that they are ready to uptake almost any position offered in the US to maintain their lives. The long-term impact of this problem is the decrease in wage rate and an increase in the rate of unemployment among the American citizens. Also, studies indicate that crime is high in areas dominated by foreign immigrants. In particular, crimes associated with illegal firearms, drugs and other forms of fraud are prominent in these areas. Also, almost every case involves least immigrants, mostly illegal, from these nations. Moreover, the voting patterns in the US are primarily influenced by immigrants, both legal and illegal. For example, children born in the US by illegal immigrants are eligible voters after reaching the minimum required age. They are mostly aligned with a given political side both at local, state and national level. Therefore, their voting patterns affect the political aspects of the US (Rowthorn 565).

Apart from the increasing crime rate, perhaps the financial impact is the most significant and debatable effect they have on the US economy. Currently, there is a relatively broad agreement that immigration reduces the overall budget deficits in the US, given that the present value of the long-term net fiscal impact at all levels of the government combined. According to Saiz and Wachter, the long-term budgetary implications at the federal level is positive, but at the state and local levels, it is harmful (173). Moreover, researchers agree that while the negative impacts on the state and local levels are concentrated within the states and localities that continuously receive new immigrants such as New York and the southern states, the national impact is distributed equitably across the country (Saiz 348).

According to Borjas, the immigrants, especially the undocumented group, have a net positive impact on the budgets because they contribute more to the national coffers than they take away (129). For instance, research shows that the unauthorized immigrants are almost left out of the government program benefits because of their statuses and the fact that they try as much as possible to avoid being noticed. With the exception of a few cases such as when the unauthorized immigrant children are given public education and health in individual states, it is almost impossible for an immigrant to receive state benefits. Consequently, they are not a burden to the national tax system. On the contrary, most of the working immigrants contribute to the federal, state and local taxes. The vast majority of the illegal immigrants pay sales taxes in those states that have this kind of taxation. Also, almost all illegal immigrants must pay property taxes through rent or properties that they own. Moreover, most of those who have jobs usually pay payroll taxes. In fact, according to the Social Security Administration estimates, more than 755 of the unauthorized immigrants are on formal payrolls through such means as fraudulent Social Security numbers or using the SS numbers of other people such as the dead Americans. Moreover, in 2005 alone, the estimates indicated that the unauthorized immigrants paid more than $7 billion per annum in social security taxes, yet they will never be able to reclaim owing to their statuses. It has also been shown that unauthorized immigrants are not likely to receive income credits through the tax code or tax refunds when they overpay their regular withholdings in the payrolls. According to Aydemir and Borjas, about 78% of households in the country that earn less than $33,000 have no federal income taxes, with many low income earners paying limited amounts if they did. Since the majority of the unauthorized immigrants under the low-income category, they make a significant chunk of those who spend this amount (103). They do not file taxes using the Individual Taxpayer Identification Numbers (ITINs) because they usually are afraid of deportation. As such, they have never refunded the money automatically withheld from their payments, which means that this sum of money remains in the hands of the US government. Consequently, it is evident that the illegal immigrants typically have a positive impact on the US tax system compared to other people.

Nevertheless, there are various researchers, experts, and other interested groups that have presented different views and pieces of evidence to show that illegal immigrants have positive or negative impacts depending on many factors. Researchers such as Borjas argue based on a systematic review of the existing literature developed over the last few decades to determine the economic and financial impacts of the immigration in the US. According to this view, both illegal and legal immigrants increase the national labor market, contributing about $1.6 trillion to the federal coffers every year. Such arguments are based on the view that the fiscal implications of the immigrants on the national economy are significantly positive. If the value of the costs the government undergoes in providing service to the illegal immigrants is subtracted from the total amount of tax paid by the immigrants, then a large sum is left in the hands of the government at all levels. This is so because most of the illegal immigrants are working-age adults who remain in their small-scale jobs and do not like making claims for government program benefits, which means that their contribution to the tax system is mostly positive.

An important argument that comes from studies on the fiscal impact of immigration on the economy of the host nation is the concept of earnings assimilation. In this case, the issue of the amount of time spent by an immigrant working in the host country is believed to determine whether that person will have made a positive impact on the taxation system. Conceptually, studies show that the more time spent working in a foreign country, the more positive the effect on the host countrys fiscal policy. The assimilation of the immigrants in the host nation labor market is usually studied by comparing the wages and employment rates of the immigrants versus that of the natives at the time of entry to the time of exit. The duration of stay is the critical determinant of the nature of impact an immigrant has on the host nation. If the cross-sectional study, repeated cross-sections, or panel data approaches are used, then it is possible to observe that immigrants earn less than the citizens when entering the country but converge to the native wage standard within 10 to 15 years. After 30 years of staying in the host country, immigrants are said to be earning equal or more than the natives of similar age as well as education level. Since the immigrants are likely to improve their language and get assimilated in the host society, they are also expected to be in a better position to find well-paying jobs, even in cases when they are unauthorized. In this case, their salaries and wages increase with time and their contribution to the national budget increases, yet as long as they are still illegal, they are not able to reclaim excessive tax or enjoy the benefits of government programs. This further implies that the more the illegal immigrants live in the host country, the more they continue to accumulate money in the hands of the government, yet they are less likely to reclaim that money.

Based on this view, it is clear that the US tax system is a significant beneficiary of the efforts made by the illegal immigrants while living in the country. In this case, come to stay for a long time, unless they are deported, which is quite rare because only a few are returned to their countries every year. Every third or fourth immigrant to the US considers leaving the country permanently at a later date. In fact, it has been shown that most people seeking to reside in the US that is approximately 85% prefer leaving the country after at least being there for about five years and the majority end up staying permanently or going after more than a decade. Consequently, it is evident that the American tax system ends benefiting from the presence of the immigrants, particularly the undocumented group because, as shown above, it has more benefits to the financial system than the authorized group. It mea...

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