From the panel's viewpoint, however, the most serious problem was that existing fiscal impact studies did not even appear to be addressing the key policy-relevant question—what is the taxpayer cost or benefit to native-born Americans of letting an additional immigrant into this country?
Our first priority then was to obtain a coherent conceptual framework in which to understand the issues involving the cost to native-born taxpayers of expanding or contracting the flow of immigrants. The chapter ''An Economic Framework for Assessing the Fiscal Impacts of Immigration," by Thomas MaCurdy, Thomas Nechyba, and Jay Bhattacharya, provides such a framework. The authors posit a minimum set of factors that must be explicitly included in the framework. One of their most important admonitions is that fiscal impact studies must be multi-period. One reason is that both taxes and expenditures are extremely sensitive to age. If an immigrant arrives at an age at which his or her taxes are temporarily high and receipt of government benefits is temporarily low, the immigrant will look like a bonus to taxpayers. However, this could all be negated in the next period if expenditures rise and taxes fall.
One critical distinction in the government sector involves the separation of spending into three categories—public goods, interest on debt, and all others. In the extreme, immigrants do not increase spending on the first two categories but they do on the third. Fiscal impact studies should also be comprehensive in their treatment of expenditures and taxes. Compared with the native born, immigrant households are relatively heavy users of some government services, such as schools and income-conditioned transfer programs, and relatively light users of other government services, such as Social Security and Medicare. A corollary of this comprehensiveness requirement is that all sectors of government—federal, state, and local—should be included when analyzing fiscal impacts. Some programs—such as Social Security and Medicare—are concentrated at one level of government (federal) whereas other programs—e.g., schools—are the primary responsibility of other levels of government (state and local).
Fiscal impact studies must be explicit in their assumptions about who ends up paying taxes (tax incidence) and about the cost of providing government services (marginal versus average cost). A common mistake is to assume that those who end up paying a tax are the same people from whom the tax is collected.
One enduring salient fact about immigration into the United States involves geographic concentration. Immigrants have always moved to relatively few places, settling where they have family, friends, or fellow countrymen. Most immigrants still live in a handful of states and in less than a dozen cities. This geographic concentration means that any state or local fiscal effects of immigration (through taxes and government expenditures) may also be concentrated in a few states. With this in mind, our panel relied on fiscal impact studies in two of the important immigrant states—New Jersey and California. The New Jersey study is summarized in "Fiscal Impacts of Immigrant and Native Households: A