Thursday, August 26, 2010

America’s Brand New Police State: The Effects of a New Immigration Law on Arizona’s Struggling Economy « The Stanford Progressive

America’s Brand New Police State: The Effects of a New Immigration Law on Arizona’s Struggling Economy « The Stanford Progressive

The first and perhaps most obvious effect of the law is an exodus of undocumented immigrants. Is this a bad thing for the Arizonan economy? Some will say “no”: less undocumented immigrants means less competition for jobs and higher wages for unskilled labor. This is absolutely true in the short-run. George Borias and Lawrence Katz of Harvard University estimate that “illegal immigration caused a 3.6 percent reduction in the wages of non-high school graduates in the U.S. during 1980-2000″ . However, the influx of workers into these low-skilled jobs via illegal immigration greatly benefits the middle and upper classes in the U.S., who get cheaper goods without the drawback on increased job competition. According to the New York Times, the study originally cited a wage decrease of 8.2%, but shaved that number down as other factors were taken into account.

The second major economic argument of those who support SB1070 is that removing illegal immigrants frees the state of liabilities in health, education, and other social services. Again, this is a valid argument in the short-run. In their first years of work, undocumented immigrants do not pay as much into taxes as they use in services, not because of their undocumented status but because they are low wage and thus fit into a low tax bracket. It is a common misconception that illegal immigrants use more social services than citizens. In fact, studies have shown that the average immigrant costs the government less than half of the money spent on full citizens in social services. Another major misconception is that these immigrants do not pay taxes. Aside from sales taxes, two-thirds of undocumented immigrants pay payroll taxes, Social Security taxes, and Medicare taxes. Yet, without a social security number, undocumented immigrants are not eligible to receive Social Security nor Medicare benefits, and thus add a subsidy of about $1.5 billion to Medicare and about $7 billion to Social Security every year (that’s about 10% of Social Security’s current surplus). These workers can file taxes with the IRS using an Individual Tax Identification Number rather than a Social Security number. The mechanism was invented in 1996 to allow foreigners who need to file U.S. taxes the ability to do so, although most individuals with ITIN numbers are probably undocumented immigrants. The IRS does not share this information with other government agencies, and issued 1.5 million ITINs in 2006. Between 1996 and 2003, the IRS received $50 billion in tax payments through this method. Thus, as workers gain skills and their children become educated in the U.S., their family begins to pay positive dividends to the U.S. government.

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