11/20/2014 @ 9:46PM 3,845 views

'Fair Share?' The Typical Beneficiary Of Obama's Illegal Immigration Plan Won't Pay Net Income Taxes

Avik Roy , Forbes Staff


On Thursday evening, President Obama unveiled his plan to offer legal status to approximately 5 million undocumented aliens. “If you’re willing to pay your fair share of taxes,” said Obama, “you’ll be able to apply to stay in this country.” But the President neglected to mention that the income of the typical illegal immigrant is so low that he would pay no net income taxes, and become eligible for welfare benefits like Obamacare. According to a 2006 report from the left-leaning Century Foundation, “it is likely that the undocumented workers will end up receiving rather than paying the Treasury money.”

Legalized undocumented immigrants could become eligible for significant transfer payments

Income statistics for illegals are, as you might imagine, not so easy to discern. But the Century Foundation analysis, published in Mother Jones, estimates that in 2005, “we can be virtually certain that illegal immigrants earned less than $24,000 per year, on average, probably much less.” That’s about $29,177 in 2014 dollars. According to the Congressional Budget Office, a person making that kind of money would pay negligible federal taxes, and receive around $10,000 in government benefits.



That $10,000 doesn’t include Obamacare, and probably understates the actual amount of government transfers that these individuals would receive. Obama’s executive order is primarily aimed at undocumented parents of U.S. citizens, which may mean that they are older than average. If so, they will gain access not only to Obamacare, but also to Social Security and especially Medicare.

These individuals pay almost nothing in federal taxes. “Households in the lowest income quintile,” writes the CBO, “paid less than 1 percent of all federal taxes,” but are eligible for substantial tax credits under the Earned Income Tax Credit program.

Amnesty will yield little in additional payroll taxes

“Aha,” you might argue, “but while the newly legalized population pays no net income taxes, it does pay payroll taxes for Social Security and Medicare.” That’s true, but the government already receives much of that money. “In fact,” says the Century Foundation, “about $6 billion in annual payroll taxes are allocated to non-existent Social Security accounts. Experts attribute these payments to the forged documents that illegal immigrants purchase in order to find work.

This $6 billion is collected each year with no future benefit-rights assigned. This sum is certainly more than any income taxes that would be owed on the earnings involved.”

Again, the Century Foundation is one of the nation’s leading left-wing think tanks, so you might wonder why they would be calling attention to this problem. Their argument in 2006 was designed to rebut those who sought to deport illegal immigrants because they were fiscal drains on the U.S. Treasury. Because illegals pay payroll taxes but aren’t eligible for most federal benefits, “illegal immigration is likely to be a crime that delivers net economic benefits to its average ‘victim,’ even in tax revenue.”

Are beneficiaries of amnesty eligible for Obamacare?

One of the big unanswered questions is whether or not the newly legalized will be eligible for Obamacare’s subsidized health coverage.

The Washington Post and others have reported that the executive order “apparently won’t bestow health care benefits on millions of undocumented immigrants, according to an individual familiar with the decision.” However, as of Thursday night, we don’t have details of how that restriction would be achieved.

In 2014, two-member households with incomes below $62,920—400 percent of the Federal Poverty Level—are eligible for subsidized coverage on Obamacare’s insurance exchanges. Those with incomes below 138 percent of FPL, in states that expanded Medicaid, are eligible for that program.

One key point is that Obamacare’s employer mandate, combined with the President’s executive order, incentivizes companies to hire amnestied illegal immigrants over low-income U.S. citizens. The employer mandate’s fines are only levied on companies that don’t offer health coverage to workers eligible for Obamacare exchange subsidies; if the amnestied population is not eligible for those subsidies, employers are better off higher those individuals over legal immigrants and citizens.

Amnesty will make Obamacare’s Medicaid expansion less likely

If the amnestied population is eligible for Obamacare, or if the President’s restrictions aren’t sufficiently rigorous, the President’s action gives state governments an important new reason not to expand their Medicaid programs as Obamacare encourages them to do. Conservative states that are already skeptical of expanding Medicaid are unlikely to be interested in offering subsidized benefits to amnesty-eligible individuals, because that will introduce an extra fiscal liability to those states.

Furthermore, many conservatives lack confidence that Obamacare’s existingrestrictions against benefits for illegal immigrants are being adequately enforced.

Republicans are now free to pass border-strengthening bills

While much of the talk on Capitol Hill has been about shutting down the government in response to the Obama executive order, what Republicans ought to do is pass the border security bill they’ve always wanted to pass. They no longer need to trade border security for amnesty, because the President has already granted amnesty. “With the family-visa issue out of the way, the new GOP majority would be free to pass immigration policies it prefers,” observes former George W. Bush staffer Juleanna Glover.

Precedent is set for a Republican President to defy Obamacare regulations

While progressives are celebrating today, they won’t be so happy if a Republican President uses executive orders to ignore Congressional statutes. Imagine if a Republican President were to simply declare that he wouldn’t enforce the broad swath of Obamacare’s insurance regulations and mandates. Instead of having to pass a law repealing Obamacare, a President Cruz or Romney could simply decline to enforce it.

The unintended consequences of President Obama’s actions will be far-reaching. We’ll see what happens. What we know for sure is that those Americans who’ve worked hard and played by the rules will be asked to pay more and receive less.

http://www.forbes.com/sites/theapoth...-income-taxes/