WASHINGTON — Immigrants in the United States generated more in taxes than they received in government benefits every year between 1994 and 2023, producing a massive fiscal surplus that strengthened public finances, according to a new white paper from the Cato Institute.
“For each year from 1994 to 2023, the US immigrant population generated more in taxes than they received in benefits from all levels of government,” according to the report, which examines the fiscal effects of immigration over the last three decades.
The report is an update on a 2017 National Academies of Sciences, Engineering, and Medicine model. It concludes that immigrants created a fiscal surplus of $14.5 trillion between 1994 and 2023, including $3.9 trillion in interest savings on government debt.
The authors describe their findings as conservative, noting that the model “represents the lower bound of the positive fiscal effects” because it does not account for indirect economic growth generated by immigration.
The report argues that many Americans misunderstand how immigration affects government budgets.
“For each year from 1994 to 2023, the US immigrant population generated more in taxes than they received in benefits from all levels of government,” the authors write.
Still, a significant portion of that spending consists of what they call “pure public goods,” such as national defense spending and previous debt obligations—costs that “do not causally increase or decrease with population.”
Immigrants, the report explains, help alleviate the pressure these expenditures place on the budget without increasing them.
At the same time, immigrants were “over 12 percentage points more likely to be employed than the US-born population,” largely because they were “20 percentage points more likely to be of working age.”
That higher employment rate translated into higher aggregate income and, therefore, higher tax contributions.
The paper emphasizes that even noncitizens were financially beneficial, with about half of them in the country illegally during the period studied.
“Noncitizens accounted for $6.3 trillion of the $14.5 trillion debt savings,” the authors report.
Unlike immigrants overall, noncitizens had lower-than-average incomes.
The report attributes their positive fiscal contribution to “lower-than-average benefits receipt” rather than higher earnings.
Eligibility restrictions to many federal needs-based benefits and programs limit noncitizens’ access to public expenditures, contributing to their net fiscal surplus.
The report further examines whether immigrants remain fiscally positive over time.
Looking at cohorts entering between 1990 and 1993, the authors found that they were “still positive after 30 years,” generating $1.7 trillion in net fiscal contributions.
This finding challenges the assumption that immigrants are only fiscally positive when young and working.
Instead, the report suggests that their long-term fiscal contributions remain strong even as they age.
Addressing the second generation, the report acknowledges that many U.S.-born children of immigrants currently appear costly because they are still in school.
However, it emphasizes that “the fiscal effect of immigration was positive every year,” even when the second generation is included.
The authors argue that once these children enter the workforce, they will become high contributors to the tax base, further strengthening long-term fiscal outcomes.
The paper concludes that without immigration, “public debt at all levels would already be above 200 percent of US GDP—nearly twice the 2023 level.”
Immigrants’ $14.5 trillion in cumulative savings, the authors write, reduced U.S. budget deficits by roughly one-third over the studied period.
“Migrants saved the US government $14.5 trillion,” the report states, while the US-born population without immigrants cost the government $44.4 trillion on net during the same timeframe.
The authors frame their findings as a rebuttal to the common belief that immigrants burden public budgets.
They argue instead that immigration has served as a stabilizer during a period marked by rising deficits and expanding public debt.
While debates over immigration policy continue, the report’s authors maintain that historical fiscal data from 1994 to 2023 indicate that immigrants have strengthened government finances rather than weakened them.
Follow the Vanguard on Social Media – X, Instagram and Facebook. Subscribe the Vanguard News letters. To make a tax-deductible donation, please visit davisvanguard.org/donate or give directly through ActBlue. Your support will ensure that the vital work of the Vanguard continues.
