Extending the Child Tax Credit to Undocumented Immigrants Is Playing with Fire

Buried within the Democrats’ multi-trillion-dollar reconciliation package is a provision to extend the recently expanded Child Tax Credit (CTC) to undocumented immigrants. This would be a grave mistake, and I say that as both a supporter of the CTC expansion and as a proponent of more liberal immigration.

When the Tax Cuts and Jobs Act increased the CTC in 2017, it also amended the law to require households claiming the credit to provide a valid Social Security Number (SSN) for each eligible child. Prior to the reform, a family could claim the per-child tax refund using only an Individual Taxpayer Identification Number or ITIN. The IRS created ITINs in 1996 to ensure immigrants who are unable to obtain an SSN can still file taxes if they need to—including immigrants without lawful status.

Allowing mixed-status families or immigrants with citizen children to claim the CTC is one thing. Extending it to undocumented children without an SSN is outright playing with fire. While the approximately 675,000 children who aren’t eligible for a SSN because of their immigration status would surely benefit from a monthly payment of $250–$300 per child, that’s all the more reason for Congress to create a pathway to their legal status. In contrast, eroding the distinctions afforded by citizenship or legal residency in lieu of reaching a political settlement on immigration reform effectively end-runs the democratic process, which is important to uphold even if one dislikes the consequences of the current impasse.

Whither the Social Contract?

Since the late 1990s, there has been a stable political consensus that legal permanent residents (i.e., green card holders) must generally wait five years before having access to federal public assistance programs like SNAP and SSI. Non-refundable tax credits were not considered part of that compact since there are obvious normative distinctions between a household with a positive income tax liability claiming the personal exemption, say, versus providing non-citizens with an unconditional cash benefit. With the CTC now “fully refundable” (i.e., a flat cash benefit), one cannot treat removing the SSN requirement as simply restoring the ITIN precedent without ignoring that important distinction and, in the process, obliterating a much more established precedent.

Following the Trump Administration’s “Public Charge” debacle, it is hard to imagine a policy move more disastrous for the politics of immigration reform—and more likely to galvanize a powerful anti-CTC backlash—than providing a de facto UBI for kids to anyone who sets foot in the country. The incentive effect on border crossings and other forms of induced migration could also be dramatic. Consider that the value of the CTC for an infant child is now $3,600 per year. That alone represents 40% of Colombia’s per capita income, and nearly 120 percent of Haiti’s. This is why countries with unconditional welfare benefits also tend to have relatively restrictive immigration laws. America’s historical openness to immigration, in contrast, has in large part been enabled by rules and program structures that minimize the fiscal cost of lower wage migrants. As my organization’s namesake, Bill Niskanen, once put it: “Build a wall around the welfare state, not around the country.”

Nor is this concern purely hypothetical. Following the enlargement of the European Union in 2004, countries with generous family allowance like Norway experienced a large influx of migrants from poorer EU countries like Poland who suddenly became entitled to Norway’s welfare benefits under the EEA agreement. As IZA researchers Bernt Bratsberg and Knut Røed note, recent immigrants subsequently became vulnerable to exploitation and social parallelization:

For families with children, [the cash benefit] entails that a job in Norway may be attractive even if the offered wage is extremely low. For example, the Norwegian cash‐for‐care subsidy for a one‐year old child now amounts to NOK 6,000 per month, which adjusted to the 2010 wage levels and exchange rates used in Table 1 corresponds to 629 Euros, or around 80 percent of average earnings in Poland. Such features give employers and prospective immigrant employees incentives to agree on very low wages and poor working conditions. While this can be a win‐win situation for the employer and the immigrant worker – at least in the short run – it may stimulate the creation of poor jobs with high subsequent unemployment or disability risk and substantial (expected) costs for the welfare state.

In response to these and related concerns, enlargement pushed Europe to enact a series of reforms that tightened benefit access, including minimum residency requirements and a rule requiring all EEA residents to pay into their host country’s social security scheme for at least five years. Indeed, whether the reaction was justified or not, the 2004 enlargement plausibly led to the rise of Eurosceptic political parties across Western Europe; a backlash that culminated in Britain’s exit from the EU altogether.

Migration Robustness Matters

My own research has found that, far from abusing welfare programs, immigrants to the U.S. actually have significantly lower rates of dependency than natives. Yet this finding is policy-contingent, and doesn’t change the fact that immigration advocates must take America’s broader political economy—including public perceptions—into account if they are truly serious about increasing rates of immigration on a sustainable basis.

As I’ve long argued, a generous welfare state and liberalized immigration are not as incompatible as some libertarian economists have suggested. A given welfare system can be more or less robust to large scale migration depending on a variety of design factors. Contributory social insurance programs like Social Security and Unemployment Insurance, for example, require a minimum work history and only pay out in proportion to how much a worker has paid in. This helps make social insurance schemes robust to low wage migration even if progressive benefit structures imply that their actuarial balance is not truly exact. At the other end of the robustness spectrum are in-kind benefits like public housing, which typically have an inelastic supply and means-tested eligibility rules. This sets lower income natives and immigrants up for a salient, zero-sum conflict over a scarce resource, which evidence suggests directly contributed to the rise of far-right parties in countries like Austria and Denmark, given their long history of social housing.

For an unconditional cash benefit like the CTC, preserving the five-year waiting period for green card holders would probably suffice to undercut these dynamics. Better yet, moving the credit into the Social Security Administration—as proposed by both Senator Romney and American Compass—would remove the option to use ITINs altogether, while conferring significant advantages in program administration. Unfortunately, the decision to grant benefit eligibility to undocumented immigrants does not end at the CTC. The text of the reconciliation bill also indicates that child care subsidies and free community college (the very sorts of inelastic, in-kind benefits discussed above) will likewise be available to individuals regardless of their “basis of citizenship, alienage, or immigration status.”

Personally, I would love to see the expanded CTC made permanent, and favor a comprehensive immigration reform that includes a pathway to citizenship. Taking realistic political economy into account, however, I fear removing the SSN requirement for the CTC will actually move both of these goals significantly out of reach. Unfortunately, among issue advocates on the left, such 2nd order considerations appear entirely absent, to say nothing of how little they understand the normative roots of the welfare state in citizen-centered mutual aid. In place of nuanced arguments, I see only appeals to the most callow forms of egalitarianism, paired implicitly with the dictum: fiat justitia ruat caelum.

“Let justice be done though the heavens fall.” To which I respond, Cave quid vis: Be careful what you wish for.