Remittances Sent by Illegal Immigrants Cost America $38 Billion Annually, They’re Like a Hidden Tax
Imagine the worst possible tax you can think of. What would it look like?
If you’re like most people, you thought of some fat, curly-haired king sitting in a palace spending your money on foppish garments and a harem of French harlots. That’s a bad tax. No doubt about it.
But at least he’s (presumably) your king, and he’s spending the money in yourcountry. Eventually you will see that money again, no matter how frivolously he spends it.
I can think of a worse tax: pretend the above situation’s exactly the same in every respect except now he’s not your king. He’s king of Timbuktu. Even worse. It’s bad enough you’re paying for someone’s pomp and circumstance, but now he’s not even buying the pomp locally—you’ll never see that money again.
Paying taxes, no matter how inefficient, is better than paying tribute to a foreign land. Redistribution is bad, elimination is altogether worse.
And therein lies one of the biggest problems I have with illegal immigration: illegal aliens come the US, work (rarely paying income tax), and then send a large chunk of their earnings back home via remittances. In a way, remittances are a hidden tax that Americans pay for the privilege of underpaying illegal workers—and it adds up.
Illegal Immigrants Send $38 Billion Abroad In Remittances Every Year
Now I admit this estimate isn’t perfect: we have to make some assumptions, but I think they’re reasonable assumptions.
First, let’s assume that remittances from America are either sent by first-generation legal immigrants, or illegal immigrants. Let’s also assume that these two groups are sending equal amounts of money home per person—legal immigrants make more per capita, but send a much smaller proportion of their pay abroad. I think these are fair assumptions.
Now let’s get to the numbers: according to Pew Research‘s 2018 remittance outflow data, America lost $138.2 billion in remittances in 2016.
Given that there are 40 million first generation immigrants, and (at least) 11.1 million illegal immigrants, this means there are 51.1 million people sending remittances abroad. We’ll go with the low number to be conservative, although a recent study by Yale University concluded that there were 22.8 million illegals living in America.
If we divide up the number of dollars remitted according to this proportion, we can conclude that illegal immigrants likely remit $38 billion per year. That’s a lot of money. For perspective, it’s as much as the entire annual GDP of the US states of South Dakota, or Montana—or the European country of Serbia.
And of course, if we used the larger figure from Yale, this would be even higher.
My point: illegal immigration is a complicated issue, and there are many costs associated with it that often aren’t considered. Every dollar that disappears via remittances is ejected from the local economy, never to return to the community—this reduces the velocity of money, leading to liquidity problems in small towns. This is the exact same effect that high taxes have: money flows out of communities and concentrates in distant places: taxes end up in Washington DC, remittances end up in Carlos Slim’s pockets.
But the biggest cost associated with illegal immigration is the burden they place on American taxpayers by consuming far more in government services than they contribute in taxes. In fact, America spends $135 billion annually caring for illegal aliens. This figure includes local, state, and federal costs.
Any way you slice it, illegal immigration is impoverishing American workers, and costing taxpayers big-time.
I worked at a bar years ago with a guy that was in the country illegally and sent a large portion of his pay and tips home. He told me that younger members of the family would come up to the US for a few years to work and send money home where it was used by the family to build and extend the family home as well as to invest in the family business. US dollars can go a long way in Mexico, especially if it’s in cash. I was a bit envious when I saw photos of the home and ranch. It was a multi-generational household which is rare in the US, but the home was designed so there was good separation between grandparents, older/married couples with children and younger unmarried members while still having parts of the home that were used by all such as large kitchens and courtyards. In the US is far more common for each generation to have their own separate housing and then to subsidize young adults along with paying for assistance/care for the older generation.
The problem can be multi-fold. The income possibilities are so great in the US that it’s no wonder many want to come North. There isn’t much of a barrier to getting work and in many areas, knowing English well isn’t an issue as so many can speak Spanish. The government and businesses go out of their way to cater to Spanish speakers. The buying power of the Dollar over the Peso outside of tourist areas and for residents is huge. Ford makes so many parts in Mexico because they make out like bandits when it comes to wages and exchange rates. It’s not that they are paying poverty wages, it’s that it takes less money to live at a certain level in Mexico than it does in the US.