People are talking about the negative impact that the normalization of illegal aliens will have on the Social Security System. I agree, this will take a bankrupt system and maybe take it out of reach of repair, especially since we don’t have the political will to allow for Social Security to migrate to “Private Accounts” (see my post on the problem with Social Security here). But long before the severity of this impact on Social Security is noticed the country stands on the edge of bankruptcy from another little understood effect of legalizing and making Citizens the current illegal aliens.
This effect comes from the Earned Income Tax Credit (EIC). This is a provision of the tax code that essentially boils down to Welfare for employed people earning up to $38,347 per year if married and having one or two children. I have heard proponents of the Hispanic community often state that the contribution of the illegal’s (or undocumented workers as they say) is positive for our economy and not a burden. Ha, talk about bold face lies. Don’t believe it for a second at least as it come down to the damage to the public sector.
Here is how it works. When these people are mainstreamed and qualified for EIC they will qualify for this credit with one child. Let’s examine a typical situation. Being that the illegal aliens usually have larger families, having two children is a common situation. The EIC maxes out with 2 children. This is an outright payment to an individual through an income tax refund to people that don’t even pay or owe taxes. It is a “refund” of money which wasn’t withheld in the first place.
If this typical two child illegal immigrant family earns $16,850 (which seems very like for this category of worker) they will have zero federal income tax withheld and when they file their tax return they get a refund of $5,385 which is composed of the following: $4,522 EIC and $833 for Additional Child Tax Credit.
Can you imagine that $5,385 right out of your pocket so some employer can enjoy low cost labor. Again the proponents of the illegal workers who have previously stated that they are contributing to the tax pool would say that this doesn’t take into account the Social Security Taxes being withheld. I’ve calculated the withholding and that would be in the above case a whopping total of $1,289.00 (for both Social Security and Medicare Tax). So in this illustration there is a net benefit to the formerly illegal alien of $4,096 per taxpayer.
Now let me say that getting this outright grant of thousands of dollars is not figured into their income when it comes to determining their eligibility for Medicaid, Supplemental Social Security (SSI), Food Stamps, Low Income Housing, and Temporary Assistance for Needy Families. These are additional expenses that YOU the American Taxpayer have to cover for this group.
This is one of the most immediate and expensive reasons why legalizing the illegal’s is a bad idea, even if we can’t find and deport them. So what, just because we can’t find them all and deport them doesn’t necessarily mean that we have to give them the keys to Fort Knox.