TAXES, SOCIAL SECURITY, SPENDING

How undocumented immigrants contribute to New York’s Economy

 

By Shanel Dawson

The debate over whether or not undocumented immigrants are a net help to the economy has been a longstanding one. But there is no dispute that the financial contribution of undocumented workers is significant.

The Fiscal Policy Institute, a non-profit research organization, estimated in a 2017 report that undocumented immigrants contribute an estimated $40 billion to New York State’s economic output – or 3 percent of the state’s Gross Domestic Product.

Two Queens College professors, using a different methodology in 2016, arrived at the same number – a $40 billion loss in GDP – when they computed the impact of removing New York’s estimated 817,000 undocumented residents.

On top of the contribution undocumented workers make to the state’s GDP, they pay $1.1 billion in state and local taxes annually, the Fiscal Policy Institute reported. That breaks down to: $565 million in sales taxes and related excise taxes, $183 million in personal income tax, and $355 million in property tax. That tax rate, the report noted, amounts to 8.9 percent of earnings, topping the 8 percent rate paid by the state’s top 1 percent of earners.

Some undocumented workers also pay into Social Security and Medicare, which most will never be able to benefit from. In 2013, the Social Security Administration calculated that undocumented workers had paid $13 billion into Social Security that year and only claimed $1 billion in benefits. Many payments are made on behalf of bogus Social Security numbers that undocumented workers submit to their employers to be hired.

When undocumented workers spend the dollars they earn, they add further to the city and state’s economic health. Because many are not high earners, they spend an estimated 90 percent of what they do make on housing, transportation, groceries, clothing and other necessities, priming the pump for New York retailers, landlords, and others. The remaining 10 percent typically is sent back as remittances to their country of origin, to help family members still there.

The Fiscal Policy Institute has said that for all these reasons, President Trump’s threat of mass deportations of undocumented workers would hurt New York City’s economy.

“There are 817,000 unauthorized immigrants in New York—more than the total populations of Buffalo, Rochester, Syracuse, and Yonkers combined,” the Policy Institute’s April 2017 report said. “It is staggering to imagine the scale of panic and resistance that would be involved in removing more than three quarters of a million people from our state.”

Percent Share of Goods & Services’ Total Values Produced in NYS Economy – Attributable to Unauthorized Immigrants – by Industry

  • Leisure and hospitality 11%
  • Agriculture, forestry, fishing, hunting 9%
  • Construction 9%
  • Other services 9%
  • Manufacturing 5%
  • Wholesale and retail trade 5%
  • Transportation and utilities 4%
  • Financial activities 2%
  • Educational and health services 2%
  • Professional and business services 2%
  • Information 1%

Source: Fiscal Policy Institute analysis of Center for Migration Studies estimates of unauthorized population. CMS estimates are based on the augmented 2014 American Community Survey.

With New York’s economy now deemed to be close to full employment – the city’s February 2017 unemployment rate was 4.3 percent — many economists worry that removal of all undocumented workers in New York State (575,000 of them in New York City) would slam the brakes on growth.

The Wall Street Journal reported in early May 2017 that construction firms were already having trouble finding electricians, carpenters and other subcontractors.

The Associated Builders and Contractors Association estimated the nationwide shortage at 500,000 workers and said if a large infrastructure plan were launched, another 600,000 would likely be needed.

read more
The city’s Independent Budget Office cautioned in an April 2017 report that proposed changes in immigration policy pose a threat to the economic growth in New York City and the nation as well. The report said that in 2015, “45.4 percent of New York City’s labor force was foreign-born, and both the labor force participation rate and employment-population ratio were higher in the foreign than in the native-born population.”

The American Action Forum, a self-described center-right policy institute, cautioned in 2015
about the same brake on growth: “Removing all undocumented immigrants would cause the labor force to shrink by 6.4 percent, which translates to a loss of 11 million workers. As a result, 20 years from now, the economy would be nearly 6 percent of $1.6 trillion smaller than it would be if the government did not remove undocumented immigrants.”

Conversely, if undocumented citizens were granted legal status, the economic contribution numbers would increase significantly, the Institute on Taxation and Economic Policy, another research group, predicted.

If, instead of deporting unauthorized immigrants, the U.S granted them legal status, state and local tax contributions in New York alone would increase by $247 million per year, to $1.3 billion, the institute said in 2017.

GETTING DOWN TO BUSINESS

Undocumented immigrants can’t work legally, but they can own a business

 

By Vicki Adame

When he arrived in the United States from his native Guatemala 10 years ago, Nick, 38, dreamed of owning his own business.

Two years ago, that dream became a reality. But unlike many business owners, Nick is undocumented. And that is why he asked that only his first name be used.

Nick was able to start his business with an Individual Taxpayer Identification Number or ITIN. And it’s perfectly legal. What many don’t know is that undocumented immigrants can and do own businesses — even though they cannot legally work in the country — simply by having an ITIN.

The ITIN was created in July 1996, bringing in an estimated $9 billion in payroll taxes annually. According to the American Immigration Council, the ITIN program allows “foreign nationals and other individuals who are not eligible for a Social Security number (SSN) to pay the taxes they are legally required to pay.” The ITIN has allowed the IRS to bring in billions of dollars the federal government might otherwise not have been able to collect.

The IRS has a special form for people to apply for this taxpayer identification number. On its website, the IRS defines an ITIN as: “a nine-digit number issued by the U.S. Internal Revenue Service (IRS) to individuals who are required for U.S. tax purposes to have a U.S. taxpayer identification number but who do not have and are not eligible to get a Social Security number.”

By having an ITIN and paying taxes, undocumented immigrants can also establish they have good moral character in the event that some day they can adjust their status.

A report by the New American Economy from 2014 showed that businesses owned by undocumented immigrants brought in $1.6 billion in income to the state of New York, making it third among states for total income brought in by undocumented business owners. California and Texas were first and second, respectively.

read more
Nationally, in 2010, more than three million people paid more than $870 million in income taxes by using an ITIN, according to the American Immigration Council. More recent data was not available.

 

ITIN holders, however, aren’t eligible for Social Security benefits or the Earned Income Tax Credit. But they are eligible for the Child Tax Credit when they file their income tax.

While the IRS is a governmental agency, privacy laws don’t allow its database to be shared with immigration enforcement or the Social Security Administration. The only instances when this information is shared would be to the Treasury Department for investigations pertaining to tax administration or under a court order relating to a non-tax criminal investigation.

As for Nick, when he arrived here a decade ago, he applied for an ITIN so he could pay taxes. For the next eight years he worked for companies doing different types of construction work.

Currently, he employs four workers and pays all associated taxes. But he plans to expand his tile and wood flooring business in the future. Last year, he grossed $300,000. After deductions for supplies, labor and other business related expenses, he paid $14,000 in taxes to the IRS.

JOINING TOGETHER

Major unions now welcome undocumented immigrants

 

By Vicki Adame

There was a time when unions opposed immigrant labor, not to mention undocumented workers. But that began changing at the turn of the 21st century. The Teamsters, along with hundreds of other unions, stopped excluding workers based on immigration status.

Alex Moore, the spokesman for the Teamsters Joint Council 16, said he doesn’t even ask about a worker’s legal status. “I’m not aware of any union that would deny membership based on status,” Moore said. “Undocumented immigrants are often taken advantage of, so it’s best that they are protected by a union contract.”

Many employers underpay undocumented workers, don’t compensate them for overtime labor, deprive them of breaks, expose them to unsafe conditions and use their illegal work status to pressure them to stay quiet, according to union organizers. In the past decade, labor unions began endorsing the need for immigration reform and as a result, embraced its undocumented members.

In 2009, the AFL-CIO issued a resolution on labor’s commitment to immigration reform as well as a guide for its undocumented members entitled, “Know Your Rights.” The AFL-CIO resolution said, “The only way to stop the race to the bottom in wages and standards is for working people of all races, religions and immigration status to stand together and demand an end to policies that put profit over people.”

COMPETING FOR JOBS

Do undocumented immigrants take work from citizens?

 

By Sharif Hassan and Tabia Robinson

Throughout the election campaign, Donald Trump said many times he did not want undocumented immigrants in the country because they were taking Americans’ jobs.

Many who voted for Trump agreed with his stance. Thirty-five percent of them think that undocumented immigrants take jobs that American citizens should have, according to the Pew Research Center.

But economic experts and researchers say otherwise.

“There are some jobs immigrants are doing that would be done by Americans if there were fewer immigrants,” said Art Carden, associate professor of economics at the Brock School of Business at Samford University in Alabama. “But there are a lot of other jobs that wouldn’t exist if immigrants weren’t there to do them.” Undocumented immigrants, he added, are not taking American jobs “on net.”

According to the Fiscal Policy Institute, there are at least 575,000 undocumented immigrants in New York City, amounting to roughly 8 percent of its workforce.

New York City’s economy would shrink if all or most undocumented immigrants were deported, because the deportations would “mean a smaller labor force and fewer opportunities to specialize” in the job market.

If undocumented immigrants were allowed to work legally, the state would gain $247 million in taxes, thus fueling the growth of the economy, according to the Fiscal Policy Institute.

Trump’s supporters disagree.

“They come here and take our jobs and they make money,” said Colleen Naught, 59, a real-estate agent in Brooklyn. “Then they send the money back to their families in their home countries.”

Another Trump supporter, Chris Henley, a 42-year-old truck driver from Brooklyn, feels that many of the undocumented immigrants are using resources, such as housing and schools, that they shouldn’t have access to because they are not citizens.

“It’s like they come here for their American dream and they get it before we do,” he said.

Henley complained that he is not making enough money – $35,000 a year –  to support his wife and three young kids, and he believes the undocumented immigrants are earning much more than he does.

“I remember one time I saw a Mexican family and all of the kids had the latest sneakers,” he added. “I work hard and I can’t afford that for my children, but the illegals can.”

read more
A 2016 report by the National Academy of Sciences, “The Economic and Fiscal Consequences of Immigration,” found little evidence that immigration “significantly” affects Americans’ overall employment level or the wages of native-born workers. Instead, new immigrants often affect the employment and wages of prior immigrants first. Native-born Americans who are unskilled and who have not completed high school are the only ones whose employment prospects and wages might be negatively affected, the report concluded.

There is general agreement that low-skilled American-born workers are the most vulnerable in today’s job market. But even the U.S. Chamber of Commerce – not known for its liberal views – has concluded that on balance, the impact on this group is relatively small and the gains to the society as a whole are large.

“Even among less-educated workers, immigrants and native-born workers tend to work in different occupations and industries,” a 2016 Chamber research report found. “If they do work in the same occupation or industry—or even the same business—they usually specialize in different tasks, with native-born workers taking higher-paid jobs that require better English-language skills than many immigrant workers possess.”

“In other words, immigrants and native-born workers usually complement each other rather than compete,” the report said, reflecting the view of most economists.

AN UNCERTAIN PRICE

What do undocumented immigrants cost American citizens?

 

By Tabia Robinson

As the debate over legalization of undocumented immigrants fires up, one of the chief arguments raised by those who support deportation is the cost that newcomers impose on American taxpayers.

While it is a myth that undocumented immigrants can land on welfare once they make it to this country – in fact, they are ineligible – they do impose some costs that must be covered, usually by the states and localities in which they make their new homes.

Those costs can range from interpretation services in the healthcare, education and judicial systems, to prosecution of criminal activity. But the vast bulk of tax support is focused on three areas: education, emergency health care, and incarceration.

Proponents of deporting all unauthorized immigrants contend that while some of them pay taxes, those amounts don’t come close offsetting the costs they incur in these three areas.

But an exhaustive 2017 study by the National Academies of Science concluded that while the costs do exceed revenues for immigrant households for the first years they are here – authorized or not – by the second generation an immigrant family lives in the U.S., that pattern is reversed, with tax revenues from the family far exceeding expenses.

Few beyond the National Academies of Science have attempted to quantify the costs associated with undocumented households, because of the difficulty of the task. What has been attempted is based on educated estimates because data on the use of services by undocumented immigrants is not collected.

One group that has attempted to do this, state by state, is the Federation for American Immigration Reform, which has pushed for removal of undocumented immigrants.

A 2007 report by the federation estimated that undocumented immigrants who reside in New York cost state taxpayers more than $5.1 billion per year for education, medical care and incarceration. The bulk of that sum, more than $4.3 billion annually, went to educate the children of undocumented families; $690 million went to emergency health care, and another $165 million a year went to the costs of incarcerating immigrants found guilty of a crime, the federation said. Those estimates have not been updated.

The Migration Institute has estimated that 38,000 undocumented students attend New York City Schools, where the average per pupil cost is $23,560. Some of those students incur supplemental costs, particularly in the area of English Language Proficiency.

The federation noted that New York’s decision to allow undocumented students to attend the State University of New York or the City University as in-state students rather than international students has cost the state another $29-$37 million annually.

read more
Undocumented immigrants are not eligible for Medicaid or Medicare or subsidized insurance under the Affordable Care Act. However, any hospital that accepts federal funding must provide emergency medical services to anyone who walks in the door, regardless of legal status.

Estimates of this cost vary widely, from an estimate of $60-147 million by The Urban Institute, to $300 million-plus by the Business First journal, to the Federation for Immigration Reform’s $680 million estimate. The federal government has long provided partial reimbursement to hospitals that serve disproportionate shares of patients who cannot pay for emergency services, but it does not come close to covering all costs.

Similarly, while the federal government provides support to the states to cover their costs of incarcerating undocumented individuals, it covers a tiny portion of those costs. The federation said its incarceration cost computation was based on an estimated undocumented inmate population in New York of 6,500 prisoner years.

The National Academies of Sciences study tallied a broad array of costs incurred on behalf of all immigrants to the U.S., not just undocumented residents.

Then the Academies estimated all revenues received from immigrants, including taxes paid at all levels, state by state. The conclusion was that first-generation immigrants, as a whole, receive more tax-supported services (mostly education) than they give back in tax revenues.
In New York, that deficit was $2,700.

But that equation flipped for second- and third-generation families. In New York, those households paid taxes that exceeded any taxpayer-funded services they received by $7,600 and $4,600, respectively.

Some undocumented immigrants find work in Times Square as Mickey, Spider-Man or Elmo.

Q & A

Common Questions About Undocumented Workers
How can an undocumented worker get hired?
It is illegal to hire undocumented workers in the United States. Yet, millions of undocumented immigrants are employed in various industries throughout the country. According to The Atlantic, many unauthorized immigrants provide falsified Social Security cards to their employers. It is the duty of the employer to certify the Social Security card, but many look the other way or don’t check at all.

In 2010, there were 1.8 million immigrants working with a fake Social Security number, while other 3.9 million worked in the underground economy, according to the Social Security Administration.

Do undocumented workers pay taxes?
Undocumented immigrants can pay taxes through the Individual Taxpayer Identification Number (ITIN), which was created in 1996 by the IRS.  According to the American Immigration Council, the ITIN program allows “foreign nationals and other individuals who are not eligible for a Social Security number (SSN) to pay the taxes they are legally required to pay.”  The ITIN has allowed the IRS to bring in billions of dollars the federal government might otherwise not have been able to collect.

Do undocumented immigrants contribute to Social Security?
The Social Security Administration has become dependent on undocumented immigrants, whose Social Security benefits end up in the SSA trust fund, helping aging Americans collect money, especially the baby boom generation.

A 2013 review of the impact of undocumented immigrants on Social Security concluded that unauthorized immigrants have a positive effect so Social Security financial status, contributing roughly $12 billion to the cash flow of the program for 2010.

Do undocumented immigrants qualify for publicly funded benefits?
Publicly funded benefits, such as welfare, food stamps and Medicaid, require proof of legal immigration status. Authorized children of unauthorized immigrants do qualify for social benefits. Undocumented immigrants are qualified to receive schooling and medical care in case of emergency.

In New York State, all immigrants, including undocumented immigrants, are eligible for Child Health Plus, Prenatal Care Assistance program (PCAP), Family Planning Extension Program (FPEP), AIDS Drug Assistance (ADAP) and Emergency Medicaid, according to the Office of the New York City Comptroller.

Can undocumented immigrants own a business?
Undocumented immigrants can own a business or buy a home using an Individual Taxpayer Identification Number (ITIN), which enables them to pay taxes to the IRS and maintain a track record of good moral character in case they apply for citizenship.

Do undocumented immigrants take American jobs?
A study by the Urban Institute showed that low-skilled native-born and low-skilled immigrants, most of whom are unauthorized, have different jobs. The main jobs held by immigrants with no high school diploma are maids and house cleaners, cooks and miscellaneous workers. Meanwhile, native-born Americans with no high school diploma find work primarily as cashiers, truck drivers, and janitors and building cleaners. The study also found that if undocumented immigrants become authorized that would still not mean higher competition.

Do undocumented immigrants have any legal standing if they are hurt on the job?
In New York State, undocumented workers who are sick or get hurt at their job can receive compensation, which includes medical care for work-related injuries and illnesses, cash benefits if the injury makes them unable to go to work and death benefits for surviving spouse or children, according to the Office of the New York City Comptroller.