Immigration, Markets and Progressive Taxation

Oppose "comprehensive" immigration reform and you’re helping bring Hillary Clinton to power argues Wall Street Journal editorial board member Daniel Henninger, writing in last Thursday's OpinionJournal…

The massive migrant flows across the states described earlier--into the private industries of construction, restaurants, agriculture, food-packaging, hotels, health and landscaping--is irrefutably the result of powerful, lava-like free-market economic forces.

No matter how principled conservatives may think themselves on this issue, the fact remains that at crunch time they sent the market to the back of the southbound bus. Sounds much like the extra-market case their opponents make for the Kyoto Treaty. It also sounds like an argument for sending a $2,000 contribution to Hillary Clinton, so the country can be run by people who truly believe in managed economies.

But, as the Projo editorial board suggests in their Saturday paper, more than market-based forces are driving immigration into the U.S...

In 2004, Rhode Island spent over $87 million educating the children of illegal immigrants, according to the U.S. Department of Education. That number is surely higher now and almost matches the surprise $90 million hole in the fiscal 2008 budget.

Several other states and localities, frustrated by the federal government’s incompetence, timidity and inaction, have passed their own laws to reduce illegal immigration within their borders. Some of these efforts have apparently shown success with reports of taxpayer savings. Contrary to myth, most illegal immigrants pay little in taxes.

(Actually, I’m not sure the figure of $87 million is an official Department of Education estimate; I believe it comes from a Federation for American Immigration Reform study which combines demographic data from the Census Bureau and the Immigration and Naturalization Service with per-pupil spending data from the Education Department). Still, whatever the exact number, the Projo editorial board's view of immigration more accurately describes reality than does Henniger's market-only view.

Low skill immigrants are drawn to America because a) the market will provide them with jobs and b) the government will provide them with American-quality public services c) while asking for very little in return in terms of taxes. Point c) is decidedly not the result of market forces; it is the result of our government's policy of progressive taxation. Currently, about 50% of the U.S. population pays no Federal income tax at all. And since the RI income tax piggybacks on the federal income tax, a large number of Rhode Islanders pay no state income tax either. Combine mass immigration of low skill labor with this hyper-progressive tax system, and you increase the number of people entitled to government services and benefits, without creating the matching increase in revenue needed to pay for the services being used.

Are comprehensive immigration advocates honestly promising that government can sustain the existing quality of its public programs as people are added to the system faster than revenues are? Or do they simply believe that the costs associated with new arrivals can always picked up by increasing the progressivity of the tax code, i.e. by jacking up the taxes on the people already here?

To be fair, I suspect Daniel Henninger and the WSJ editorial board would propose a simple solution to this problem -- flatten out the tax code. However, until a flatter tax code becomes a reality, it doesn’t make a whole lot of sense to discuss immigration purely in terms of market forces. As for progressive supporters of immigration reform, they want a hyper-progressive tax code, mass immigration, and an expansive welfare state all at the same time. Unfortunately, a rational, sustainable system cannot embody all three.