How the Earned Income Tax Credit Subsidizes Immigrants

All but the most committed open borders activists agree that federal immigration policy must ultimately work to America’s benefit. Logically then, immigrants who come to the United States should have at least a basic education and skills that would enable them to get a job and become self sufficient.

As Nobel Prize winning economist Milton Friedman once said, “You cannot simultaneously have open immigration and a welfare state.”

Despite the merit of Friedman’s statement, the United States willfully ignores the relationship between immigration and poverty. As more poor immigrants arrive, welfare usage among them increases. This trend dates back to 1990, the period immediately following the 1986 Immigration Reform and Control act, and has remained constant through today. Based on Census Bureau data, from 1990 to 2006, the number of poor Hispanics, for example, increased 3.2 million, from 6 million to 9.2 million.

The equations are simple: as more poor immigrants enter the country, America’s poverty rate rises. And increased poverty means greater welfare dependency. When discussing immigrants’ welfare reliance, the most often cited services are Temporary Assistance to Needy Families, food stamps, Supplemental Security Income, the Women Infants and Children nutrition program (WIC), Medicaid and federal housing assistance.

Immigrants also take advantage of an entire subset of benefits like the federal Earned Income Tax Credit less apparent to the casual observer but costly to American taxpayers who fund them.

To qualify for the EITC people must work, earn less than a designated income level and have three or more qualifying children. For the 2010 tax reporting period, the adjusted gross income must not exceed $43,352 (or a maximum of $48,362 if married, filing jointly and having three or more qualifying children). Assuming all those conditions are met, the maximum EITC credit is $5,666.

An applicant must have a valid social security number and legal working status. Nevertheless, some illegal aliens skirt that basic condition. Since the law allows immigrants to claim EITC for up to three years prior to obtaining legal status, illegal workers often file a tax return during years in which they were not legally authorized employees. An even more widespread abuse occurs related to the requirement that children must live with the family for more than six months a year. The Internal Revenue Service rarely verifies child residency claims. Estimates of recipients including illegal aliens that fraudulently collect EITC range from 22 to 30 percent.

Since large numbers of immigrants have limited skills (31 percent have not completed high school) and therefore work at minimum wage jobs, many pay no taxes on their income but instead collect EITC as well as some of the more common welfare benefits listed above.

The federal government pays out about $35 billion annually in EIRC monies. According to a report issued by the Center for Immigration Studies and based on the 2007 Current Population Survey, between the period from 2000 and 2007, 33.3 percent of immigrant-headed households use at least one welfare program and 41 percent of immigrant families were eligible for EITC. That compares respectively to 19.4 and 17.8 percent of native-headed households.

In conclusion, many working immigrants represent a substantial economic drain. They don’t earn enough money to pay taxes, are heavy users of welfare services and receive EITC subsidies that conservatively amount to at least $10 billion per year.

A two-fold solution is required. First, call an immigration time out during this period of severe unemployment and huge federal deficits. Second, assuming the government insists on immigration, limit the numbers to traditional levels of about 200,000 per year and ensure that new immigrants have the talents to America a stronger nation.

Joe Guzzardi has written editorial columns—mostly about immigration and related social issues – since 1986. He is a senior writing fellow for Californians for Population Stabilization (CAPS) and his columns have frequently been syndicated in various U.S. newspapers and websites. He can be reached at [email protected].