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A Project of The Annenberg Public Policy Center

Immigration Ad Distorts ‘Tax Implications’

A new TV spot claims Americans will be “stuck with the tax bill” for President Obama’s order giving legal status to millions of immigrants. What bill? Those immigrants will produce more in taxes than they will consume, according to the very authority cited by the ad’s sponsor.

The ad was announced April 7 by Californians for Population Stabilization, a group advocating tighter controls on immigration. It is running only in Iowa and on national cable channels, the group said. A spokesman said the cost of the ad buy is in the “six figures” and will run through April 15 — which is the deadline for filing federal income taxes.

The ad features images of Republican and Democratic presidential prospects with their mouths zippered shut. The narrator says they “don’t talk much about the tax implications” of Obama’s action granting eligibility for temporary legal status and work permits to nearly 5 million persons who have been living in the U.S. without permission.

The narrator goes on to say that “amnesty gives illegal aliens the right to take American jobs and apply for $1.7 billion in tax refunds, even though many illegal aliens never paid taxes, and struggling American workers will be stuck with the tax bill.” And it further says “your tax bill may depend” on rescinding the president’s order.

In its news release, the sponsor cites “Congressional Budget Office projections” as its authority for the claim about tax refunds. But the CBO’s analysis actually shows that the overall “tax implications” of Obama’s order would cut the federal deficit rather than creating any new “bill” for American taxpayers.

It’s true that the CBO estimated in a Jan. 29 letter that one of the budgetary effects of Obama’s action (and an earlier order granting temporary legal status to immigrants who were brought to the U.S. as children) would be to increase federal payments for Earned Income Tax Credits and per-child tax credits by a total of more than $10 billion spread over 10 years.

So where does the ad get the $1.7 billion figure? Some newly legal workers may be able to claim EITC refunds for prior years, provided they had worked and file tax returns. Some Republicans have called this an “amnesty bonus,” and we covered that in detail in a Feb. 20 item. According to a March 4 report by the McClatchy Washington bureau, the nonpartisan tax experts at the congressional Joint Committee on Taxation found that these retroactive refunds would amount to $1.7 billion over 10 years (nearly all in the first five years). It’s this so-called “amnesty bonus” that the CAP’s ad refers to, a CAP spokesman told us.

But that “bonus” and all the other tax refunds are only part of the overall budget effects.

The CBO’s Jan. 29 letter also estimated that the president’s order would bring in more than $22 billion in new tax revenue. Most of that would come from increased payments of Social Security taxes levied on newly reported earnings.

And the net result — even figuring in added federal payments for Affordable Care Act subsidies, Medicaid and other federal programs for which the newly legal residents could qualify — would be a decrease in federal deficits, totaling just under $7.5 billion over 10 years.

Where would the increased revenue come from? CBO, citing an analysis by the Joint Committee on Taxation, said the biggest effect comes from newly legal immigrants openly declaring their income and paying taxes rather than hiding it for fear of discovery and deportation. Also, the JCT experts figure, wages for legal workers tend to be higher than for those in the underground economy. Any increase in reported wages results in higher payroll tax collections.

In short, CBO says the budgetary pluses of the president’s action will outweigh the minuses. But this ad tries to give viewers the opposite impression.

— Brooks Jackson