Beyond wage and employment considerations, policymakers and the general public are interested in the impact that immigration has on public finances and the sustainability of government programs. All parts of the U.S. population contribute to government finances by paying taxes and add to expenditures by consuming public services – but the levels differ. The panel conducted several analyses estimating the fiscal contributions and costs of first-generation immigrants, the second generation (native-born individuals with at least one parent who is an immigrant), and the rest of the native-born U.S. population (referred to in the report as the third-plus generation).
Over the period 1994-2013, the net fiscal contribution (federal, state, and local combined) of first-generation immigrants was, on average, consistently less favorable than that of native-born generations. Annual cross-sectional data reveal that, compared with the native-born, first-generation immigrants contributed less in taxes during working ages because they were, on average, less educated and earned less. However, this pattern reverses at around age 60, when the native-born (except for the children of immigrants) were consistently more expensive to government on a per-capita basis because of their greater use of social security benefits.
During the same 1994-2013 time period, second-generation adults — the children of immigrants — had, on average, a more favorable net fiscal impact for all government levels combined than either first-generation immigrants or the rest of the native-born population. Reflecting their slightly higher educational achievement, as well as their higher wages and salaries, the second generation contributed more in taxes on a per capita basis during working ages than did their parents or other native-born Americans.
–Excerpts from News from the National Academies of Sciences, Engineering, and Medicine, September 21, 2016.