Immigrants paid $10.6 trillion more in taxes than they received in benefits over 30 years, cutting US budget deficits by nearly one-third, according to a new Cato Institute study analyzing three decades of government data.
A comprehensive 30-year analysis has found that immigrants have reduced the United States budget deficit by $14.5 trillion between 1994 and 2023, contradicting longstanding claims that immigration burdens taxpayers.
The study, published by the Cato Institute on February 3, reveals that immigrants paid more in taxes than they received in government benefits every single year during the three-decade period. According to the research, immigrants cut US budget deficits by approximately one third in real terms.
Higher Employment Rates Drive Tax Revenue Growth
The study, titled “Immigrants’ Recent Effects on Government Budgets: 1994–2023,” analyzed federal, state, and local government budget data using the National Academies of Sciences, Engineering, and Medicine fiscal effects model. David J. Bier, Director of Immigration Studies at the Cato Institute, co-authored the 95-page report with researchers Michael Howard and Julián Salazar.
According to the Cato Institute, immigrants generated nearly $10.6 trillion more in federal, state, and local taxes than they received in total government spending over the 30-year period. When accounting for savings on interest payments on the national debt, the total savings reached $14.5 trillion.
In 2023 alone, fiscal savings from immigration grew to $878 billion, the highest level ever recorded, according to the research. That year, immigrants paid $1.3 trillion in taxes while receiving only $761 billion in benefits.
The data shows immigrants accounted for 14 percent of tax revenue but only 7 percent of government spending from 1994 to 2023. According to the study, even if the government had spent nothing on immigrants while still collecting their tax revenue, the US would have run a $20 trillion deficit.
The research identifies several key factors explaining the fiscal impact. A significant portion of the US budget consists of fixed costs like military spending and interest payments on past debt, according to the Cato Institute. These expenses do not scale with population growth and must be covered regardless of immigration levels.
The study found that immigrants work at significantly higher rates than the US-born population. While they earn lower hourly wages on average, their higher employment rates result in higher per capita incomes and greater tax contributions than their population share would predict, according to the research.
Education and Retirement Benefits Show Major Savings
According to the Cato Institute, immigrants cost the US education system about half as much as the native-born population because they typically arrive around age 25. The study states this means the country gains workers without paying for their schooling.
The research found immigrants also generate substantial savings in old-age benefits. According to the study, they are far less likely to receive government pensions since they work fewer government jobs. Many immigrants either arrived too late to qualify for Social Security and Medicare or remain ineligible due to their immigration status, the research states.
The findings hold across all educational categories. According to the Cato Institute, even immigrants without bachelor’s degrees reduced the debt by $2.8 trillion over the 30-year period. College-educated immigrants accounted for $11.7 trillion in savings, while those without college degrees contributed $2.8 trillion.
The study found that immigrants at all levels of educational attainment, including high school dropouts, lowered the ratio of deficit to gross domestic product during the study period.
The research estimates that undocumented immigrants likely reduced the deficit by at least $1.7 trillion over the three decades studied. According to the study, while many are ineligible for most welfare programs, they still pay taxes through payroll withholding and other mechanisms.
Long-Term Data Shows Sustained Fiscal Benefits
The study tracked one cohort of immigrants who entered the United States between 1990 and 1993 over three decades. According to the Cato Institute, this group was still paying far more in taxes than they received in benefits after 30 years, with fiscal gains growing over time. In total, this single cohort reduced the deficit by $1.7 trillion, the research states.
When including the second generation, who are mostly still children but will soon become taxpayers, the fiscal effect of immigration remained positive every year from 1994 to 2023, reducing debt by $7.9 trillion, according to the research.
The study projects that the second generation appears poised to create significant fiscal benefits, with their peak earning years potentially producing nearly double the fiscal contributions of the US-born population without immigrant parents.
According to the study, without immigrant contributions, public debt at all levels would already exceed 200 percent of US GDP, nearly twice the 2023 level. Some analysts believe this threshold could trigger a debt crisis, the research notes.
The research builds upon the National Academies of Sciences, Engineering, and Medicine fiscal effects model and uses data from the US Census Bureau’s Current Population Survey spanning March 1994 through 2023.
According to the study documentation, the researchers made several methodological improvements to the original NASEM model, including updated calculations for corporate tax distribution, accounting for how immigration increases property values and tax revenue, and improved estimates for Medicare and Medicaid benefits received.
The Cato Institute describes itself as a libertarian think tank focused on individual liberty, limited government, and free markets. The full study is available on the Cato Institute website.
