Stumble it!Immigrants Don’t Pay Taxes
posted in Politics by themaiden |Immigrants– illegal ones– don’t pay taxes. They work off the books, freeload off our health care system, take from welfare, benefit from our legal system and infrastructure, and don’t pay for any of it.
Right?
Let’s think about taxes.
I go to work. Twice a month, let’s say, I get paid. My check doesn’t match the number of hours I worked times my pay per hour. Taxes calculated by my employer and are withheld. No surprise there, at least not to anyone working in the United States. Of course, I work legally. I’m a citizen. Obviously, this wouldn’t be the case if a person were working illegally. Someone working illegally would be paid ‘under the table’ and so would effectively cheat the tax system. Right?
Well… what happens to that ‘under the table’ money? What happens if I hire illegal workers, keep no records, and pay them cash? They pay no taxes, true, but I do. If I pay someone legally, I don’t have to pay taxes on that income. What I pay out is an expense (leaving aside that employers do share some of the tax load with employees). If I have no records, if I pay under the table I can’t claim that payout and I consequently have to pay taxes on that income. In other words, while the illegal workers aren’t paying taxes, taxes are being paid on the labor they perform. In fact, there is a good chance that higher taxes are being paid on that labor than would be paid to a legal worker of the same economic status as the illegal immigrants typically hired. Why? An employer is likely to be in a higher tax bracket than those illegal workers and thus taxes on their labor, paid indirectly as part of the employers income, will be paid at the employer’s tax level.
What this means is that arguments based upon the costs of illegal immigration and calling for a hard line against it are inane, much as a report from Texas indicates.
The Center for Immigration Studies argues differently. In an often cited report from 2004 titled “The High Costs of Cheap Labor”, Steven A. Camarota purports that “when all taxes paid (direct and indirect) and all costs are considered, illegal households created a net fiscal deficit at the federal level of more than $10 billion in 2002“.
Despite the explicit claim to adjust for “all taxes paid (direct and indirect)” nowhere in the 48 page report can I find evidence that the simple point above has been addressed. Taxes get paid on any income that runs through the system even if the final endpoint is an illegal and off the books payment. Really, the only way to avoid this effect is with money that moves entirely within illegal channels or with money that is intentionally hidden.
Consider: I run a business and working alone gross $2,000 per month performing some service. I pay taxes on $2,000. I hire an illegal laborer and with that help gross $3,500. I pay this laborer $800, meaning that I net $2700. However, as I pay off the books, I pay taxes on $3,500, not on $2,700. In other words, by choosing to pay off the books, I also choose to pay my laborer’s taxes. And I pay at my tax rate, not the laborer’s, meaning that I likely pay more taxes would the laborer if paid on the books.
Camarota calculates, in ‘The High Costs of Cheap Labor‘, a 10.4 billion dollar net fiscal deficit– a loss– due to illegal immigrants. Camarota comes by his numbers by arguing a weird double standard. Ignoring the indirect taxation just described, he admits that of the immigrant households (more than half) that do pay taxes they pay at the same rates as any other household in the same socio-economic category and use fewer services. Yet he calculates a loss on the grounds that immigrants make less money than average and so pay less in taxes. That difference is the ‘net loss’. It may be true, but it is hardly fair. One could cite a ‘net loss’ to the US economy simply by referencing poor people and running the same calculation. But I am not interested in digging deeply into that point.
Returning to the example above and assuming that I, the employer, pay taxes on that $800 dollars at a rate of 15% then approximately 7 million immigrants paid under the table would make up this difference. The CIS gives a figure of “at least” 8 million illegal immigrants in the US in 2003, just prior to the publication of ‘The High Costs of Cheap Labor‘. Another source gives 10.3 million for 2005, the year just after the report’s publication. Tancredo apparently claims that there are 12 to 20 million illegal immigrants in the United States today.
But there are some problems with the numbers.
According to the CIS, about 55% of illegal immigrants work on the books and so pay, or don’t pay, taxes like anyone else. This, as noted, is the source of Camarota’s ‘loss’. Taking 8 million as a base figure, this implies that about 3.5 million or so illegal immigrants work off the books. Of course, not all of these immigrants would be working. Assuming about 3 million do work at the rates above, then these 3 million should generate about 4.3 billion dollars– 6 billion or so short of the 10.4 billion needed to break even.
There is still something wrong with the numbers.
Eight hundred per month represents less than 40 hours a week at $6 dollars per hour. The six dollar per hour figure may be close, but the hours are low. At 60 hours per week at $6 per hour, 3 million workers working off the books should generate around 7.8 billion, about 2.6 billion short of Camarota’s 10.4 billion.
Taking another number, drawn from one particular ‘Slave Labor’ example, 3 million workers working off the books at $65 per day, six days a week, should generate about 8.4 billion in taxes.
All of these numbers are below 10.4 billion, meaning there is still a net loss. But there is still something wrong with the numbers.
Camarota states explicitly that a significant portion of the net loss caused by immigrants results from expenses incurred by their children, who receive citizenship and hence benefits at birth. Children are a net loss across the board in the sense that they make no financial contributions to the economy, but do receive benefits paid for only in part by their parents. It seems that if one is to include children in the calculation their contributions after reaching adulthood needs to be calculated, not just their costs as children. Taking the adult contributions of these immigrant children into account ought to finish balancing the equation, at least.
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