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Fact check: What is the net fiscal impact of undocumented immigrants on federal and state budgets in 2020s?
Executive Summary
The evidence from recent studies shows there is no single net fiscal figure for undocumented immigrants in the 2020s; results depend on which population is measured (all immigrants versus undocumented), the time horizon (annual vs. lifetime), the level of government (federal versus state and local), and whether indirect economic effects are counted. Some lifetime analyses find immigrants on net reduce federal deficits, while state and local analyses of migration surges report direct near-term costs, and tax-collection studies show undocumented workers pay tens of billions into federal and state coffers [1] [2] [3]. These differences explain why policymakers cite competing numbers.
1. Why numbers diverge — the framing that changes the math
Different studies use distinct frameworks that produce contrasting fiscal conclusions, and understanding those frames explains the debate. Lifetime fiscal analyses compare taxes paid over a person’s expected remaining life with the present value of services consumed; when studies focus on the average lifetime contribution of new immigrants, they find net fiscal gains at the federal level, attributing the benefit to younger, higher-earning entrants and long-term tax payments [1]. By contrast, short-run budget accounting at state and local levels tracks the immediate costs of public education, health, and safety-net services against current tax offsets, and such snapshots have recorded net costs tied to sudden population increases [2]. The legal-status distinction also matters: many positive fiscal estimates aggregate all immigrants and high-skilled entrants, whereas analyses focused on low-skilled or undocumented groups tend to show smaller or negative direct fiscal impacts when measured narrowly [4] [5].
2. Federal-budget lifetime studies: immigrants as net contributors
Several lifetime-oriented reports conclude that, on average, immigrants lower federal deficits over their lifetimes, driven by long-term earnings and taxes and concentrated benefits from highly educated arrivals. One 2024–2025 era assessment finds the average new immigrant reduces the federal budget deficit by over $10,000 across a lifetime compared with much higher lifetime net costs associated with many native-born cohorts, reflecting benefit use and demographic mixes [1]. These studies emphasize age-at-entry and education: younger, higher-educated immigrants show the strongest positive fiscal returns, while older or less-educated entrants are more likely to impose net costs in direct accounting [5] [1]. The methodological emphasis on present-value, intertemporal accounting and federal-only receipts explains why these estimates diverge from short-term state-level cost calculations.
3. State and local budgets feel short-run pressure from surges
Analyses that examine the 2023–2025 period find measurable short-run fiscal pressure on state and local governments when large inflows occur, even when federal grants partially offset costs. The Congressional Budget Office estimated the 2023 surge in immigration produced a direct net cost of $9.2 billion to state and local budgets, equal to 0.3 percent of spending after federal grants — a nontrivial near-term burden concentrated in education, emergency services, and health care [2]. These figures highlight the timing mismatch: states provide immediate services while federal fiscal benefits from immigrant workforce participation materialize over years or decades. Policymakers focused on near-term budgets therefore emphasize different trade-offs than analysts doing lifetime fiscal accounting.
4. Taxes paid by undocumented workers — large but not decisive alone
Tax-accounting studies report that undocumented immigrants collectively paid roughly $96–100 billion in federal, state, and local taxes in 2022, with about $59 billion to the federal government and $37 billion to state and local governments; estimates also suggest legalization could boost annual tax revenue substantially [3] [6]. These tax contributions demonstrate that undocumented workers are significant net contributors to public coffers via payroll, income, and consumption taxes. However, tax flows are only part of fiscal analysis: costs for public services, education, and local emergency supports must be compared against these revenues, and the balance varies by jurisdiction and the timeframe examined [3] [6].
5. Reconciling the landscape — what the evidence permits policymakers to conclude
The evidence permits three guarded conclusions: first, at the federal lifetime level, many immigrant cohorts—particularly younger and skilled entrants—are net contributors, lowering long-run federal deficits [1]. Second, state and local governments can face real short-run costs from sudden inflows, even after federal grants, which explains fiscal stress reported in 2023 [2]. Third, undocumented immigrants pay substantial taxes—tens of billions annually—so tax contribution arguments cannot be dismissed, yet taxes alone do not settle net fiscal impact without accounting for spending and timing [3] [6]. Stakeholders advancing policy often emphasize the pieces that support their agenda: lifetime deficit reductions for proponents of immigration, and near-term state costs for opponents [4] [2].