The Fiscal Impact of Undocumented Immigration in California: A Balanced Financial Analysis

September 3, 2024

Illegal Immigrants in California

Financial Data on the Impact of Illegal Immigration in California

The fiscal impact of undocumented immigrants in California is presented through two key reports in this post, each offering different perspectives on the tax revenue contributions and the overall fiscal deficit. This summary consolidates the key data, provides a brief analysis of the validity of indirect and unaccounted taxes, and concludes with the overall fiscal deficit.

Sources and Scope

1. California Budget and Policy Center Report:

  • Click Here To Review CBPC Report
  • Tax Revenue Estimate: $8.5 billion.
  • Scope: This report likely includes a broader range of taxes, such as state, local, and federal contributions, and considers indirect taxes like payroll, consumption, and various fees. It might also factor in undocumented immigrants' contributions through everyday economic activities like buying goods (sales tax) or paying rent (property tax through landlords).
  • Validity of Indirect Taxes: The inclusion of indirect taxes adds complexity to the calculation. While undocumented immigrants undoubtedly contribute through consumption and housing, the precision of these estimates can be difficult to verify. For instance, indirect tax estimates are often based on broader assumptions about spending patterns rather than direct measurement. This makes it challenging to assess the exact amount contributed, though it provides a valid indication that undocumented immigrants contribute economically in various ways.

2. Federation for American Immigration Reform (FAIR) Report:

  • Click Here To Review The FAIR Report
  • Tax Revenue Estimate: $3.5 billion.
  • Scope: The FAIR report is narrower in focus, covering only state and local taxes, including income, sales, property, and "sin" taxes. It excludes federal taxes and indirect contributions such as fees or payroll taxes.
  • Unaccounted Taxes (Devil’s Advocate): While the FAIR report takes a conservative approach to estimating taxes, it may understate contributions by leaving out certain hard-to-quantify revenues. For instance, taxes paid under false Social Security numbers or undocumented immigrants' participation in the underground economy are difficult to measure but can represent significant tax revenue that remains unclaimed. Furthermore, undocumented immigrants often contribute through employment taxes that they will never benefit from, which creates an invisible revenue stream not easily captured by reports focusing strictly on state and local tax payments.

Costs (Spending)

The total annual expenditure on services for undocumented immigrants in California is estimated at $25.3 billion, according to the FAIR report. This includes:

  • Education: $14.4 billion (57.1%), which covers K-12 schooling and supplemental English instruction.
  • Healthcare: $4 billion (15.9%), encompassing emergency medical services and Medicaid-related expenses.
  • Law Enforcement: $4.4 billion (17.6%), covering policing, judicial costs, and incarceration.# Summary of Financial Data on the Impact of Illegal Immigration in California

The fiscal impact of undocumented immigrants in California is presented through two key reports, each offering different perspectives on the tax revenue contributions and the overall fiscal deficit. This summary consolidates the key data, provides a brief analysis of the validity of indirect and unaccounted taxes, and concludes with the overall fiscal deficit.

Revenue (Income)

The revenue collected from undocumented immigrants varies significantly between the two reports:

  • California Budget and Policy Center Report: Estimates that undocumented immigrants contribute $8.5 billion in state and local taxes.
  • FAIR Report: Provides a more conservative estimate of $3.5 billion in annual tax revenue from state and local taxes, including:
    • Income Tax: $382.2 million.
    • Sales Tax: $1.83 billion.
    • Property Tax: $1.22 billion.
    • “Sin” Taxes: $110.2 million.

Deficit

Both reports point to a significant fiscal deficit when comparing the costs and revenues. The FAIR report calculates a net fiscal deficit of approximately $21.8 billion ($25.3 billion in costs minus $3.5 billion in revenues). Even with the higher tax revenue estimate from the California Budget and Policy Center report ($8.5 billion), the deficit would still be substantial, at around $16.8 billion.

Conclusion

The two reports offer differing estimates of tax contributions due to variations in scope and methodology. The California Budget and Policy Center report includes broader indirect taxes, though the accuracy of such estimates can be difficult to verify due to reliance on assumptions. The FAIR report, while more conservative, may omit unaccounted taxes paid by undocumented immigrants, particularly in sectors like the underground economy or through payroll taxes paid under false identities. Both reports highlight a substantial fiscal deficit, with the FAIR report presenting a more significant shortfall of $21.8 billion, while even with the higher estimate from the California Budget and Policy Center, the deficit would still be notable at $16.8 billion. This summary remains strictly financial, focusing on the fiscal implications alone.