Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/249009 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 9464
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
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 cash-flow 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
budget
budgetary
tax revenue
benefits
taxes
deficit
surplus
gain
contribution
welfare
social security
JEL: 
F22
H68
J61
Document Type: 
Working Paper
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