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Dispelling The Divisive Myths Of Comprehensive Immigration Reform

by Robert Gittelson

Editor's note: The following is the text of a speech given by the author to the Notre Dame Law School on September 30, 2008 as part of the Notre Dame Law School's Immigration Symposium.

First of all, I want to say that both my wife Patricia and I feel extremely honored and privileged to have been invited to be here today, to participate in this very important symposium. I want to thank the staff of the Journal of Law, Ethics, and Public Policy, as well as the Hispanic Law Students Association for inviting us to participate, and especially Noah Stanzione and Nick Monaghan for all of their hard work in putting this event together, and for giving me this opportunity to speak to you tonight about a topic that is very near and dear to my heart, which is what I consider to be the urgent need in our country for comprehensive immigration reform legislation.

I've written an article that will be published in the Journal of Law, Ethics and Public Policy, that speaks to what I consider to the be heart of the divisiveness in the ongoing debate about comprehensive immigration reform, and that is the preponderance of frankly erroneous information that has been widely disseminated by the opponents of this plan. Toward that end, my article, "The Centrists Against the Ideologues: What Are the Falsehoods that Divide Americans on the Issue of Comprehensive Immigration Reform?" seeks to correct or debunk some of the more pervasive myths that have lead to the congressional stalemate on this legislation.

In the article, I identify four of the most prominent and divisive myths. First, That CIR is bad for our national security. Second, that Immigrants cost our country more in social services then they contribute in tax revenue. Third, the CIR is basically just code for amnesty, and that if it passes, it will just make the problem worse, by encouraging increased illegal immigration. And fourth, that because these undocumented immigrants came here illegally, the U.S. has no moral or ethical obligation to legalize their status and allow them to stay.

Due to the unprecedented nature of the national financial crisis that has emerged so prominently over the past week or so, I feel that it is timely to discuss one specific myth that I discuss in my article, and that is the myth that illegal or undocumented immigrants cost our country more in social services then they contribute to our tax base.

Patti and I went out to dinner a few weeks ago with my cousin and his wife. I consider my cousin to be a very well educated and intelligent person. He's a successful surgeon and businessman. And yet, when I told him about this symposium on immigration, he made a comment that really gave me pause. He said that he was for comprehensive immigration reform, but he also matter of factly mentioned that he realized that the illegal immigrants cost us all a lot of money in subsidies.

I didn't get into it with him, but I realized at that moment that if my cousin was convinced that illegal immigrants were a net drain on our tax revenue, that this was really a very publicly misunderstood issue.

Before I read the section of my article about this myth, I'd like to fill in a little background information. First, that while the tax issue is a myth, it goes hand in hand with a truism. The truism is that undocumented immigrants do jobs that citizens just won't do. That one is not 100% true, but there is more then an element of truth to it. I happened to catch an interesting floor speech on CSPAN late one night by Iowa Rep. Steve King, (Iowa's 5th Congressional District). Rep. King serves on both the Agriculture and Immigration sub-committees, so he will certainly have a voice in the upcoming battle to get a CIR bill approved. In any event, here is what we are up against. He figures that according to his research, illegal laborers account for approximately 6.9 million jobs in this country. He then argued that since these are mostly low paying, unskilled jobs, they really only should count as 2.2 million jobs, based on his assumption that since they are paid less, they are worth less to our economy. He then calculated that if the rest of us were just willing to work an 11 minutes per day, (he suggests that we all cut our morning and afternoon coffee breaks by 5.5 minutes each), then we can deport all of the illegal aliens in the country, and not even feel the effects on our economy. Well, problem solved. And it was so simple.

I tell you this because it related to a story from my personal work experience. This story is from just before 9/11, around 2000. In manufacturing, especially in the apparel industry, goods are often produced through the use of contractors. In my case, I basically just bought yarn. I had it shipped to the knitter, who then shipped it to the dye house, who then shipped it to the cutter, who shipped it to the sewer, who then shipped it to the printer. This story is about the printer, who also happens to be a good friend of mine, and so we worked closely together, and I was very involved with helping him through this situation.

One day, he gets a call, allegedly from the INS, (this was before ICE). They tell him that they will be coming to audit his books, to see if any of his employees are here illegally. When I saw him, he was kind of freaking out. Not because he was worried about getting into legal trouble, but because of how this could affect his business. You see, he was complying with the letter of the law. This was before e-verify, but even now, since e-verify is voluntary, as long as you had an ID and a social security card on file, you were in compliance, since employers are not expected to be document experts.

The problem was that his best guess was that perhaps half of his employees were probably illegal. He has what I call a medium size manufacturing operation, with about 120 employees, most of whom had been working for him for over a decade. By the way, since there are probably something like 10 million illegal workers employed in the country, he's not "the" guy. They're almost all the guy.

So, he's freaking out because he has a problem. He has to find out ASAP who's legal, and who's not, which wasn't as easy as it sounds back then, because this was before e-verify. He wound up hiring an HR expert to work on this problem for him. But frankly, that was the easy part. The impossible part was finding 60 experienced legal operators to replace the 60 he had to let go.

Some might say, well he shouldn't be greedy. Just fire the 60 illegal workers, and do half the business. Or, replace the 60 workers. Let me tell you why that's not a real world solution.

First of all, good experienced operators all have jobs already. The only way to hire skilled operators on a large scale, is to steal them away from other factories. Now, that might help one factory, but since you're only stealing them from another factory, that doesn't help the overall economy, because it's a zero sum game.

So, in reality, while he did find maybe a couple of skilled workers, despite advertising, putting up signs, word of mouth, and even using employment agencies, he couldn't find more then a handful of operators. Now, after a few weeks had gone by, he began to suspect that the INS call was probably a prank, but still, he figures that since he has a vulnerability, he might as well solve the problem if he can.

But here's the key point. If he were to lose half his workforce, he wouldn't still have half his business. It doesn't work that way. His customers use his factory because he can produce a certain large volume, at a certain level of quality, at a certain speed, and at a certain price. His customers were big, (they are the one's that have consistent business), and for him, 120 employees was the magic number. 60 employees wouldn't allow him to use 9 machines running 2 shifts per day, which is the formula that works for his customers, at his overhead. With only 60 employees, he would have much less volume, at slower speeds, and he would have to raise his prices to meet his facilities overhead. He would lose much more then half his business.

And by the way, let's not forget the human element here. Like I said, most of the workers, legal or illegal, have worked for him 10, 12, even 15 years. There is a relationship here. These people were good hard workers, and there is a loyalty component. Letting them go wasn't fun. And he paid them well. The average worker in his operation made over twice the minimum wage, legal or not, because technically, as far as he was concerned, all workers are legal as far as he knows, and he pays them what they're worth.

So, the challenge was to find new workers, and if they weren't skilled, at least start to train them. I told him about a program run by the State Unemployment Dept. They had tons of legal workers. Also, they had a great program, where they would reimburse the employer 80% of the first 6 months salary as a tax credit, then 50% of the 2nd 6 months, and finally 20% of the third 6 months. The catch was that to qualify, the employee had to work at least six months. So he had his HR people start to interview these workers, and he wound up interviewing hundreds of them.

Here is exactly how that worked out: Out of 52 employees hired through the State Unemployment Office over a 12 month period, (and please note that only the best prospects interviewed were hired), 27 reported back to work after the first week, 9 were still employed after one month, and 2 after one year. That's roughly a 4% success rate, or more accurately a 96% non-success rate.

The point is that it's very difficult if not impossible to just replace the undocumented workers that are here. In the case of my friend, the reality is that while perhaps 60 of his workers were illegal, in a very real sense, the 60 legal workers owed at least a part of their income, if not their job, to the presence of the 60 illegal workers. I'm telling you that experience tells me that it's a fact, not a theory.

If we look at this from a taxation point of view, the 60 illegal workers pay their taxes. They're deducted off the top, and they actually wind up paying a higher effective tax rate, because they don't get a refund like legal workers do. However, you can make the case that the taxes paid by the legal workers is also at least partially attributable to the presence of their illegal co-workers. Also, the executives and managers, who pay higher taxes, owe a portion of their wages to the 60 illegal workers. The owner, who I know for a fact pays $300,000-$500,000 a year in taxes, owes a significant portion of his profit to these illegal workers.

Let me read the section from my article about this topic.

This leads me to the second myth that I'd like to tackle, that being that our illegal immigrants are a net burden to our tax base. This is perhaps the most disingenuous myth in the Restrictionist's arsenal. I've heard tons of erroneous propaganda to this effect. Often they site the "costs of illegal immigration" as totaling in the billions of dollars. Well, they are half right. Illegal immigrants do cost taxpayers billions of dollars in social services. However, it is disingenuous to stop the argument there. It's like saying that it costs Toyota $15,000 to build a car. Yes, there is a cost associated with building a car, just as there is a cost associated with illegal immigration. On the other hand, if Toyota sells that car for $25,000, then there is actually a gross profit of $10,000, which is an entirely different and much more accurate way to look at the picture. The same is true with illegal immigrants in this country. The vast majority pay income taxes. Many pay property taxes, some pay corporate taxes, and all of them pay sales taxes.

The vast majority of the academic and government studies have concluded that illegal immigrants actually pay more taxes into the system then they receive in benefits, although to be fair, there have been a few studies commissioned by anti-immigration organizations such as the Heritage Foundation and the Center for Immigration Studies, which have not surprisingly reached an opposite conclusion. According to Francine Lipman, a Tax Law Professor at Chapman Law School, "Every empirical study of illegals' economic impact demonstrates the opposite . . .: undocumenteds actually contribute more to public coffers in taxes than they cost in social services. Moreover, undocumented immigrants contribute to the U.S. economy through their investments and consumption of goods and services; filling of millions of essential worker positions resulting in subsidiary job creation, increased productivity and lower costs of goods and services; and unrequited contributions to Social Security, Medicare and unemployment insurance programs. Eighty-five percent of eminent economists surveyed have concluded that undocumented immigrants have had a positive (seventy-four percent) or neutral (eleven percent) impact on the U.S. economy."6

That being said, I say that these academic arguments are, well, academic. The reality is that it really doesn't matter if the undocumented population pays a little more or a little less then what they receive back in social services, because these revenue figures are dwarfed by the only figure that really counts. The important figure is the amount of tax revenue that is generated directly and indirectly to our tax base because of, and through the presence of, these 12,000,000 to 20,000,000 undocumented people.

While of course these people pay taxes, (and they would pay even more taxes after CIR), their tax contributions are minute compared to the taxes paid by:

  1. The corporations that the undocumented workers generate revenue for.
  2. The additional legal co-workers that owe their income, in whole or in part, to the presence of the undocumented workers that work with them, (often at much higher tax rate salaries or commissions then the undocumented lower wage employees).
  3. The owners or shareholders of the companies that they work for, (again, at much higher tax rates because of much larger incomes).
  4. The property taxes paid by the business's that the undocumented work for.
  5. The taxes paid by the companies, owners, and the employees of business's that produce revenue by working with the companies that employ the undocumented workers, (grocery chains, for example, that sell produce picked by undocumented workers).
However, even these figures, while much larger then the direct taxes paid by the undocumented workers, really don't tell the whole story at all. To really appreciate the fiscal impact of the 12,000,000 to 20,000,000 undocumented people on our economy, and therefore on our tax base, you have to look at the full macroeconomic impact of these people on the overall economy. When one considers the multiplicative effect of each dollar spent or generated by the undocumented people, as well as the legal citizens that they work with directly and indirectly, on the overall economy, the amount of tax revenue attributable to the labor of the undocumented workers skyrockets. This is because the multiplicative effect takes into consideration the fact that when one person spends a dollar, that same dollar gets recycled several times throughout the economy, generating tax revenue at each stop along the way.

When you look at this equation through a macro-economic lens, (which is the only accurate way to look at it), then the tax revenue generated through and because of the undocumented population is several times the amount that they receive back in social services. It's not even remotely close. Many economists believe that immigrants are not the problem, but rather are the solution to many economic problems. Julian Simon, renowned economist, has noted that "every study that provides dollar estimates show that when the sum of the tax contributions to city, state and federal government are allowed for, those tax payments vastly exceed the cost of the services used, by a factor of perhaps five, ten or more."7

In fact, contrary to the myth that illegal immigrants cost us more in social services than they contribute to our tax base, I would also argue that the legalization of our undocumented immigrant population, not to mention our future need for additional immigrants, will greatly and positively impact the viability of our country's future social service commitments to our aging citizenry, particularly Social Security and Medicare. In short, we will need the vital financial contributions that these immigrants will be paying into these programs for years to come. According to Dowell Myers, a planning professor in the USC school of Policy, Planning, and Development, in his book Immigrants and Boomers, "Immigrants and boomers need each other. These are two populations whose destinies are going to converge in less than 20 years. We already know a lot about the boomers' coming retirement impacts, but we still underestimate the immigrants and how they can help. Between 1980 and 2015, the cost of programs for the elderly will increase from 31 percent of the federal budget to 48 percent. Meanwhile, the ratio of seniors to working-age residents, including immigrants, will grow from 250 seniors per 1,000 working-age residents in 2010 to 411 per 1,000 in 2030."8 According to Francine Lipman, "Over the next 75 years, new immigrants will provide a net benefit of approximately $611 billion in present value to the Social Security system."9 Also, according to the Immigration Policy Center, "Immigrants Pay More in Taxes Than They Use in Services Over Their Lifetimes: Depending on skills and level of education, each immigrant pays, on average, between $20,000 and $80,000 more in taxes than he or she consumes in public benefits. Immigrants' Relative Youth Contributes To Social Security's Health: Current levels of immigration will provide a net benefit to the Social Security system of nearly $450 billion in taxes paid over benefits received during the 2006-2030 period, and almost $4.4 trillion during the 2006-2080 period. This is because 75 percent of immigrants arrive in the United States when they are in their prime working years (age 18 to 65). But the share of native-born citizens in their prime working years now stands at only 60 percent, and will decline rapidly over the coming decades as the Baby Boomers retire."14 So, in point of fact, we either have to start having many more babies as soon as possible, or we need to face up to the reality that we need Comprehensive Immigration Reform going forward, if for no other reason that we need the tax contributions of all of these immigrants to help pay for our retirement.

Just to put this into a local context, there was an article a couple of weeks ago in the Journal Gazette about a meeting of Indiana lawmakers and legal academics to discuss the feasibility of state legislation on immigration. Not surprisingly, the academics couldn't reach a consensus on the issue. However, they did agree on their need for more and better information on which to base their decision. "We have a very wide diversity of viewpoints on this issue," said Rep. Scott Pelath, D-Michigan City, "The state may be called on to act on federal issue, so we want facts, facts, and more facts."

Here's where I come in. Let me read the summation from my article:

In summation, we have to face the fact that in the upcoming debate for Comprehensive Immigration Reform legislation, there are very few clearly defined black and white issues. The final solutions will almost certainly emerge as murky shades of gray. That being said, it is vital that we go into this debate with as many factual truths as possible, and eliminate propaganda, spin, and outright falsehoods. There are millions of lives that are hanging in the balance, as well as nothing short of our national security and economic vitality. With the stakes so high, this debate deserves nothing less than our best, bi-partisan good faith effort to achieve workable and enforceable legislation. Our government has an ethical responsibility to enact this vital legislation, and it has a moral responsibility to make sure that the final legislation reflects fairness, inclusiveness, and the American values that we hold to be self evident.

About The Author

Robert Gittelson has been a garment manufacturer in the Los Angeles area for over 25 years. His wife, Patricia Gittelson, is an immigration attorney with offices in Van Nuys and Oxnard, California. Robert also works closely with Patricia on the administrative side of her immigration practice. Throughout his career, Mr. Gittelson has developed practical, first hand experience in dealing with the immigration issues that are challenging our country today.

The opinions expressed in this article do not necessarily reflect the opinion of ILW.COM.