The Budgetary Effects of High-Skilled Immigration Reform
37 Pages Posted: 23 May 2009
Date Written: March 2009
Most economists believe that admitting more highly skilled workers from other countries is beneficial to the U.S. economy. This is particularly true of workers in the fields of science, technology, engineering, and mathematics (STEM). Immigration also has positive effects on the federal budget. Highly skilled workers pay more in taxes than less skilled workers and they are not likely to receive federal benefits, particularly in the near term.
This paper examines those fiscal effects to help inform the immigration policy debate. It estimates the number of foreign STEM graduates who would have remained in the U.S. in recent years in the absence of H-1B and green card constraints and employs two established tax models to approximate the federal government's opportunity cost of lost taxes. The analysis also gauges worker outflow due to limits on green cards for H-1B visa holders and estimates losses from that constraint. Those constraints over the years 2003-2007 cost the federal treasury roughly $8 billion in 2008. Legislation considered by Congress during the last few years to loosen green card and H-1B caps could reduce the federal deficit on the order of $100 billion over ten years.
Keywords: immigration, H-1B, green card, high-skilled, federal budget
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