The Cost of Amnesty

President Obama touts the economic benefits of immigration, but the rising price of the Earned Income Tax Credit and Additional Child Tax Credit alone could be dizzying.
Susan Walsh/AP

In a statement announcing his executive amnesty, President Obama reassured doubters that formerly illegal aliens would not qualify for “the same benefits that citizens receive.” As federal agencies begin issuing Social Security numbers to millions of new residents, however, it’s becoming clear that the president’s words were seriously misleading.

Formerly illegal aliens may not qualify for “the same benefits that citizens receive,” but they will very likely qualify for tens of billions of dollars worth of many of the most generous benefits available to citizens. How much, precisely, will become clearer in the coming weeks.

Start, for example, with the Earned Income Tax Credit and the Additional Child Tax Credit. These two means-tested benefits “top up” the wages of low-paid workers. Both are first applied to offset any federal tax liability a worker may have. The remainder of the credit is then refundable in cash to the worker. In the 2011 tax year, the average EITC payment to a family with children was $2,905, according to the Center for Budget and Policy Priorities. The Additional Child Tax Credit works in much the same way, paying an average of $1,800 to qualifying households.

The key fact about these two programs is that they are administered by the Internal Revenue Service as part of the tax code, not as social-welfare programs. The IRS asks only one question as it processes an EITC: Does the credit-seeker have a Social Security number? For the ACTC, the standard is even laxer: Does the credit-seeker have a Social Security number or an Individual Taxpayer Identification Number? (The ITIN is the substitute for a Social Security number widely used by illegal aliens.)

The law and regulations governing whether immigrants qualify for tax credits have already ramified into baffling complexity.  Courts, Congress, and the administration will soon be wrangling over the technical legal status of the people who have received deferred action. As a practical matter, however, they will almost certainly collect cash. The IRS has neither the means nor the resources to deny EITC and ACTC to anyone with a valid nine-digit Social Security number. ACTC already pays huge amounts to illegal aliens holding only ITINs—$4.2 billion in 2010, according to the Treasury Department’s own inspector general. Once those ITIN holders gain Social Security numbers, it will become even less feasible to distinguish between presidentially and congressionally authorized resident aliens, even supposing the administration wished to do so—which of course it does not. So both the EITC and the ACTC are destined to grow hugely.

How much?

Here’s one indicator, courtesy of the Center for Immigration Studies. About 14.5 percent of the native-born population of the United States earns little enough to qualify for the EITC. Almost twice as great a portion of the total immigrant population, 29.7 percent, qualifies. But the specific immigrant groups most likely to benefit from the president’s action earn even less. Fifty-three percent of Mexican-born immigrants, 55 percent of Honduran-born immigrants, and 57 percent of Guatemalan-born immigrants earn little enough to qualify for the EITC. About half the migrants from these communities in the United States are present illegally, and they dominate the numbers among the newly legalized. Almost 87 percent of those who have received deferred action under the president’s 2012 action come either from Mexico or Central America. Everything points to a huge surge in EITC eligibility following this year’s executive action.

The ACTC may grow less, since illegal aliens can already make use of it. On the other hand, people present illegally may hesitate to apply for benefits, lest they be identified and penalized in some way. If those anxieties are overcome, more than 40 percent of Mexican- and Guatemalan-born immigrants will qualify for the ACTC, and about one-third of immigrants from El Salvador and Honduras.

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David Frum is a senior editor at The Atlantic.

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