World Immigration News

The Fiscal Impact of Immigration: An Update

Release Date
2025-09-05
Media
American Enterprise Institute
Summary
This report provides an updated assessment of the fiscal impact of immigration in the United States. Overall, immigrants contribute positively to public finances, with highly educated immigrants driving most of the gains. Low-skilled immigrants, while initially associated with net fiscal costs, are shown in newer research to have more favorable impacts once indirect effects—such as higher capital tax revenues, productivity gains, and wage complementarities—are taken into account. In some cases, these effects even turn their fiscal balance from negative to positive.

At the federal level, immigration strengthens revenues and does not add to the national debt. The main fiscal burden falls on state and local governments, particularly through education spending for immigrants’ children. However, these investments are expected to pay off over time as the children enter the labor force and contribute to future tax revenues. Moreover, immigration helps dilute the nation’s massive long-term “fiscal gap” (estimated at around $150 trillion) by spreading the burden of necessary future tax hikes and spending cuts across a larger population.

The post-pandemic immigration surge significantly boosted federal revenues, though it imposed costs on states and localities. In response, the One Big Beautiful Bill Act (OBBBA) restricted immigrants’ access to safety-net programs while raising revenues through new visa fees, penalties, and taxes on remittances. Critics argue that these measures, along with stricter enforcement and deportations, risk discouraging work, reducing tax compliance, and slowing economic growth.

In conclusion, the evidence shows that immigrants are, on average, a net fiscal positive for the U.S. The policy debate largely revolves around the fiscal role of less-educated immigrants, but recent studies suggest their impact may be less negative—or even positive—than previously thought. Expanding high-skilled immigration, in particular, is seen as a potential path to long-run fiscal stability and economic growth. Immigration policy, therefore, plays a crucial role not only in shaping the economy but also in addressing the country’s fiscal challenges.
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