Stanford Progressive

America’s Brand New Police State: The Effects of a New Immigration Law on Arizona’s Struggling Economy

By Colin Gray, published June, 2010


There’s no doubt that Arizona’s new law, the “Support Our Law Enforcement and Safe Neighborhoods Act” – more commonly referred to as SB 1070 – is creating quite a stir nationwide. Arizona is home to an estimated half-million undocumented immigrants; that’s about 12% of the state’s total population, according to one study by the Center for Immigration Studies in Washington, D.C. The law makes illegal immigration a state crime as well as a federal crime as of July 28, 2010. This means that not only Federal agents, but state police, are required to ask for proof of citizenship from any suspicious-looking individual. Police are now allowed to make arrests “without a warrant, if… the officer has probable cause” to believe that the immigrant is an “alien” (SB1070). The law also encourages individuals to sue counties where the law is not being adequately enforced and, notably, makes it illegal to hire workers or be hired out of vehicles impeding traffic (a move designed to curtail day labor). Despite the passage of House Bill 2162, which specified when police could and could not question individuals, critics around the country are arguing that the bill legalizes racial profiling.

Threatened by an up-and-coming conservative rival, John McCain has voiced his support for the bill. Governor Jan Brewer, also threatened in the upcoming gubernatorial race, has signed the bill into law. Rasmussen polls suggest that 70% of Arizonans are in favor of the law, while a similar Gallup poll suggests that 51% of Americans (out of the 78% who have heard about the law) support it. On the other side, protests have broken out around the country, including a 50 000 person protest in Los Angeles led by singer Gloria Estefan. Regardless of the emotion, the Constitutionality, or the efficacy of the law, a crucial and often unmentioned question remains: is the bill actually good for Arizona? More specifically, what are the likely ramifications of such a law on an Arizonan economy, which is already struggling with a $3 billion budget deficit this year? In this particular case, a draconian immigration law such as this is likely to do more harm than good to Arizona’s economy.
The first and perhaps most obvious effect of the law is an exodus of undocumented immigrants. Is this a bad thing for the Arizonan economy? Some will say “no”: less undocumented immigrants means less competition for jobs and higher wages for unskilled labor. This is absolutely true in the short-run. George Borias and Lawrence Katz of Harvard University estimate that “illegal immigration caused a 3.6 percent reduction in the wages of non-high school graduates in the U.S. during 1980-2000″ . However, the influx of workers into these low-skilled jobs via illegal immigration greatly benefits the middle and upper classes in the U.S., who get cheaper goods without the drawback on increased job competition. According to the New York Times, the study originally cited a wage decrease of 8.2%, but shaved that number down as other factors were taken into account.

The second major economic argument of those who support SB1070 is that removing illegal immigrants frees the state of liabilities in health, education, and other social services. Again, this is a valid argument in the short-run. In their first years of work, undocumented immigrants do not pay as much into taxes as they use in services, not because of their undocumented status but because they are low wage and thus fit into a low tax bracket. It is a common misconception that illegal immigrants use more social services than citizens. In fact, studies have shown that the average immigrant costs the government less than half of the money spent on full citizens in social services. Another major misconception is that these immigrants do not pay taxes. Aside from sales taxes, two-thirds of undocumented immigrants pay payroll taxes, Social Security taxes, and Medicare taxes. Yet, without a social security number, undocumented immigrants are not eligible to receive Social Security nor Medicare benefits, and thus add a subsidy of about $1.5 billion to Medicare and about $7 billion to Social Security every year (that’s about 10% of Social Security’s current surplus). These workers can file taxes with the IRS using an Individual Tax Identification Number rather than a Social Security number. The mechanism was invented in 1996 to allow foreigners who need to file U.S. taxes the ability to do so, although most individuals with ITIN numbers are probably undocumented immigrants. The IRS does not share this information with other government agencies, and issued 1.5 million ITINs in 2006. Between 1996 and 2003, the IRS received $50 billion in tax payments through this method. Thus, as workers gain skills and their children become educated in the U.S., their family begins to pay positive dividends to the U.S. government.

Some studies do suggest a net cost to illegal immigration, including a study by the Center for Immigration Studies in D.C. which put the yearly net cost at $10.4 billion. Yet, the study drew intense criticism for failing to account for the revenues from American-born children of illegal immigrants. One study by the Tomas Rivera Policy Institute claimed a net cost of $179.2 million ($128 per undocumented immigrant), while a 2007 study by the White House Council of Economic Advisors estimated that immigrants and their descendants contribute as much as $80,000 (per capita, measured in 1996 dollars) more than they use. The Council also suggested a net gain to the U.S. economy of about $37 billion per year due to illegal immigration. In Arizona specifically, the Perryman Group estimates that the state would lose $26.2 billion in economy activity, $11.7 billion in gross state product, and approximately 140 324 jobs in the long run. It is not unreasonable to say that an attempt to drive out these workers in a state $3 billion past its budget may do more harm than good.

Less contested but equally significant is the idea that SB1070 will drive away documented Latinos and other minorities who feel targeted. This will have unanimously deleterious effects on Arizona’s economy. First, these immigrants will bring their purchasing power with them when they leave. One study by the University of Georgia’s Selig Center for Economic Growth claims that Latino purchasing power in the U.S. was $735.6 billion in 2005, and is quickly approaching $1 trillion per year. Immigrants will leave with their labor businesses, as well. A study by the University of Arizona suggests that Arizona’s immigrant workers contributed $44 billion to the Arizonan economy in 2004. Latinos owned 35 000 businesses, employed 39 363 people, and had sales receipts of $4.3 billion in 2002 (the last year for which data are available). It is unwise for the state of Arizona to drive this demographic away, if for no other reason than lost revenue.

Another significant cost is already becoming apparent: the cost of lawsuits against the State for racial profiling. Numerous examples provide a sense of how expensive such lawsuits can be. County supervisors in Prince William County, Virginia repealed a proposition increasing police enforcement of immigration law after hearing the estimated minimum cost: $14 million in five years. Sheriff Joe Arpaio of Maricopa County in Phoenix, Arizona has seen the cost of racial profiling lawsuits first-hand. His office faced 2 700 lawsuits between 2004 and 2007 alone That’s 50 times the number of lawsuits against the sheriffs of New York, Los Angeles, Chicago, and Houston combined. This has cost the state $43 million since his tenure in 1993.
Many non-Latino employers are also hurt by this bill, and might rationally decide to take their businesses elsewhere. The law explicitly curtails hiring workers on the street for day labor jobs by making it illegal to hire or be hired “if the motor vehicle blocks or impedes the normal movement of traffic” (SB1070). Day laborers are commonly hired out of trucks. The economic effects of this have yet to be studied, but are most likely far from negligible. Other more subtle effects are already being seen. Some out-of-state firms are refusing to do business in Arizona in protest of the law: the Arizona Hotel & Lodging Association was notified of 19 canceled meetings in the first week after the bill was signed into law. This represents a loss of $6 million in a single industry within the first week after the bill’s approval.

In the last two years, 100 000 immigrants have left Arizona due to immigration crackdowns and a bad economy. Regardless of moral, legal, or political affiliations, it is reasonable to predict a sharp contraction in Arizona’s economy due to SB1070. Arizona’s legislature cannot afford to ignore this.

Correction: The original version of this article suggested that the Center for Immigration Studies conducted the polls showing 70% of Arizona residents supported S.B. 1070. This was due to a misprint on the Center for Immigration Studies website – it was a Rasmussen poll that gave the above figures. The Stanford Progressive apologizes for the mistake.


10 Comments »

  1.  wigglwagon, August 26, 2010 @ 4:43 am

    The cost to government support programs for American families that have been forced into unemployment and poverty by the illegal aliens are always omitted. Every employed illegal alien has an unemployed American family as a counter part. According to this article, we could totally heal our economy by importing about 100 million more illegal aliens.

  2.  AJay, August 26, 2010 @ 4:57 am

    I have read a lot of studies on the effects of illegal immigrants, but I have not read one for or against that can give hard numbers. The truth is we do not know the number of illegals. It could be 12 or 25 million or 30 million. There is pretty good information on how many illegal immigrant children are in public schools, but even that is probably low. I think I could cull together enough studies that would make a strong case that there is a large cost. I wonder if those studies included the new schools that had to be built because of the 2-4 million children that were added to the schools. Or factored in the cost of operating said schools for 3 decades? And how much money is spent on health care and other welfare? If you can’t ask about the status before granting services (which occurs in many states) how do you even begin to approach an accurate number? Are we talking plus or minus 1 trillion or 10 trillion?

    I remember when the debt was high in the 80′s and 90′s, economists talked about how debt is good for the economy. My view has always been the right thing to do is pay off the debt completely and if the economy suffers it is very easy to go back into debt. The same is true with the illegal immigration issue. Instead of trying to convince each other that illegals are good or bad for the economy, let us enforce the laws (the right thing to do)by making the illegals go back home. If after a few years we find the economy suffering I am sure we can find a billion people who would like to come to the US….legally.
    I have noticed lately that the President and every immigrant “rights” person I have seen lately is saying that enforcing our laws “is immpossible” “we cannot deport 12 million people.” These people either have an ulterior motive or are just bad leaders. “The moon is too far away we can never get there and we will never try” JFK? Yes deporting millions of illegals would be hard, but we should choose to do it because it is our law and our country and it is the right thing to do.

    I understand that most of the Mexican illegals are escaping a truly corrupt, armpit of a society, but we cannot bend our laws because of this fact. I was in China recently and there are about 300 million (about as many people currently in US) poverty stricken people who would gladly come to America. Should we as a nation be able to choose who we want to allow into our country? Other countries do. As Americans we have to ask ourselves how many is too many and should those who break-in continue to be rewarded? Complicated subject I know.
    I think if we did deport all of those illegals who have had a tast of America it may actually make Mexico a better country in the future. I do not know if Mexicans have that spirit of JFK, it is far easier to sneak into the US than change the corruption in your own country. Hopefully we Americans and our politicians will choose to do what is right not because it is easy, but because it is hard.

  3.  steve, August 26, 2010 @ 12:41 pm

    Every single alien “BROKE THE LAW!” Our Government, has allowed the invasion of 20 to 30 million criminals which is the largest invasion of any Nation, at any time, in direct violation of Article IV, Section IV of our Constitution. They allow the invasion, they force American tax payers to pay Billions of dollars to provide Welfare, Prison cells, Educate the invaders children, free medical care, the invaders break numerous laws,massive document fraud, & are destroying our schools, hospitals, communities, culture & standard of living while Robbing, Raping, Killing & Assaulting American Citizens WAKE UP PEOPLE!
    http://www.youtube.com/watch?v=tsH8xvjTAlo
    http://www.youtube.com/watch?v=Btj6IeOFkis&feature=player_embedded
    http://immigrationcounters.com/
    http://www.ojjpac.org/memorial.asp
    http://www.immigrationshumancost.org/
    http://www.newswithviews.com/Wooldridge/frosty580.htm
    http://www.youtube.com/watch?v=7KcwIy_fQuU&feature=player_embedded
    Every Non-representing representative, up to and including obama and holder need to be IMPEACHED! for not upholding the oath of office that they swore to uphold and defend the Constitution! If these clowns were to do their job, this would all be a Moot point!

  4.  Facts, August 26, 2010 @ 3:11 pm

    THE FACTS ARE THAT JAN BREWER AND THE REPUBLICANS ARE DOING THIS TO GET REELECTED, HERE ARE FACTS.

    1, HOW MUCH MONEY $$$$$$$ IS ALLOCATED TO ENFORCE THIS LAW?? NONE.

    2, HOW MANY NEW POLICEMEN / WOMEN SHES HIRED TO HOLD AND PROCESS THE HUNDREDS OF THOUSANDS OF UNDOCUMENTED IMMIGRANTS? NONE.

    3, HOW MANY NEW IMMIGRATION JUDGES SHES HIRED TO PROCESS THE THOUSANDS OF DEPORTATION CASES?? NONE.

    4, HOW MANY NEW JAILS SHES BUILT TO HOLD THE THOUSANDS OF UNDOCUMENTED IMMIGRANTS? NONE.

    5, HOW MANY BUSES / PLANES SHES BROUGHT TO DEPORT THE HUNDREDS OF THOUSANDS OF THOSE WHO ARE ORDERED BY THE IMMIGRATION JUDGES TO BE DEPORTED?? NONE.

    CAN ANYONE ANSWER THESE FACTS? THE REPUBLICAN STATES ARE TRYING TO MAKE THIS THEIR PLATFORM, THEY WILL LOSE BIGGGGGGGGGGGGGGGG TIME.
    ALL ARE GODS CHILDREN. NO HUMAN IS ABOVE ANOTHER. ALL ARE CREATED BY ONE ALMIGHTY GOD WHO LOVES ALL HIS CHILDREN.
    I AM NOT SAYING DON’T CLOSE THE BORDERS I AM SAYING STOP THE FOOLISH HATE AND IGNORANCE.

    What both these Republicans FORGOT to Mention in their SPIN POLITICS is that

    It’s all about economics! Removing undocumented workers from the U.S. would total a loss of $1.8 trillion in annual spending and $651.5 billion in annual economic output, according to a study by the economic analysis firm The Perryman Group. It would cost about $28 billion per year to apprehend illegal immigrants, $6 billion a year to detain them, $500 million for extra beds, $2 million to judicially process them and $1.6 billion to transport them home. $230 Billion is the estimated amount it would cost over the next five years to enact the scenario of the mass-deportation caucus and deport the undocumented population, according to a report by the Center for American Progress. Legalization of undocumented immigrants would significantly expand the economy—by a cumulative $1.5 trillion in gross domestic product over 10 years. A deportation approach, by contrast, would have the cumulative effect of draining $2.5 trillion over 10 years from the U.S. economy. Illegal immigrants are paying their share of taxes, they pay the same taxes as you and me when they purchase anything, They don’t carry a card that says Undocumented Immigrant, DON’T CHARGE TAXES
    Start looking at FACTS & NUMBERS.

    Who’s behind these laws?

    The Immigration Reform Law Institute, or IRLI, the legal arm of the Federation for American Immigration Reform, or FAIR, drafted the Arizona law and most of the copycat bills. The Southern Poverty Law Center designated FAIR a hate group because of its founder’s writings, its repeated participation with white nationalist groups, and its receipt of major funding from a racist organization.

    Copycat laws frequently rely on the work of attorney Kris Kobach, who works for IRLI. Kobach’s lawyering has cost localities who have hired him millions of dollars while the laws have been found unconstitutional. The Arizona law was brought forth by State Senator Russell Pearce, who the Arizona press has described as having a history of associating with neo-Nazis and sending anti-Semitic emails.

  5.  Facts, August 26, 2010 @ 3:11 pm

    http://www.marketwatch.com/story/reagan-insider-gop-destroyed-us-economy-2010-08-10

    This week, the Federation for American Immigration Reform (FAIR) came out with a report entitled, The Fiscal Burden of Illegal Immigration on U.S. Taxpayers, which discusses the costs of unauthorized immigration to the United States. As usual, FAIR has put out a highly misleading fiscal snapshot of the costs allegedly imposed on U.S. taxpayers by unauthorized immigrants and completely discounts the economic contributions of unauthorized workers and consumers. Moreover, FAIR inflates their costs in a variety of ways and conveniently ignores any contributions that would offset these costs.

    While the publication is long and deals with a wide range of issues that warrant more dissection by credible economic experts, the trade publication Education Week has already begun the deconstruction with an item that sheds light on their misleading claims about providing English language services in schools.

    Another argument FAIR makes, which makes it hard to glean what their solution would be is the high cost of deporting undocumented workers which FAIR blames on the immigrants themselves. It’s a somewhat circular argument to say that the cost of undocumented immigrants includes the cost of failing law enforcement efforts. So, in essence, FAIR is saying that the deport-them-all approach costs too much money and doesn’t work. Yet their “solution” is to spend even more money on enforcement.

    FAIR’s data is meant only to reinforce their vision of “attrition through enforcement.” It is not rooted in an effort to move the immigration debate forward. Therefore, passing comprehensive immigration reform – which would yield a cumulative $1.5 trillion in added U.S. gross domestic product over 10 years – is the only sound economic decision the United States can make.

    SOURCE Immigration Policy Center

    Who’s behind these laws?

    The Immigration Reform Law Institute, or IRLI, the legal arm of the Federation for American Immigration Reform, or FAIR, drafted the Arizona law and most of the copycat bills. The Southern Poverty Law Center designated FAIR a hate group because of its founder’s writings, its repeated participation with white nationalist groups, and its receipt of major funding from a racist organization.

    Copycat laws frequently rely on the work of attorney Kris Kobach, who works for IRLI. Kobach’s lawyering has cost localities who have hired him millions of dollars while the laws have been found unconstitutional. The Arizona law was brought forth by State Senator Russell Pearce, who the Arizona press has described as having a history of associating with neo-Nazis and sending anti-Semitic emails.

  6.  Facts, August 26, 2010 @ 3:12 pm

    Before you Scream and show Ignorance and Hate at least read the Immigration Law regarding Undocumented Immigrnats. http://thomas.loc.gov/cgi-bin/query/F?c111:1:./temp/~c111807rby:e428513:

    The Undocumented immigrants paying more taxes than you think!!

    http://www.cfr.org/content/publications/attachments/ImmigrationCSR26.pdf

    http://www.immigrationpolicy.org/

    http://www.immigrationpolicy.org/images/File/factcheck//EconomicsofCIRFullDoc.pdf

    Eight million Undocumented immigrants pay Social Security, Medicare and income taxes. Denying public services to people who pay their taxes is an affront to America’s bedrock belief in fairness. But many “pull-up-the-drawbridge” politicians want to do just that when it comes to Undocumented immigrants.

    The fact that Undocumented immigrants pay taxes at all will come as news to many Americans. A stunning two thirds of Undocumented immigrants pay Medicare, Social Security and personal income taxes.

    Yet, nativists like Congressman Tom Tancredo, R-Colo., have popularized the notion that illegal aliens are a colossal drain on the nation’s hospitals, schools and welfare programs — consuming services that they don’t pay for.

    In reality, the 1996 welfare reform bill disqualified Undocumented immigrants from nearly all means tested government programs including food stamps, housing assistance, Medicaid and Medicare-funded hospitalization.

    The only services that illegals can still get are emergency medical care and K-12 education. Nevertheless, Tancredo and his ilk pushed a bill through the House criminalizing all aid to illegal aliens — even private acts of charity by priests, nurses and social workers.

    Potentially, any soup kitchen that offers so much as a free lunch to an illegal could face up to five years in prison and seizure of assets. The Senate bill that recently collapsed would have tempered these draconian measures against private aid.

    But no one — Democrat or Republican — seems to oppose the idea of withholding public services. Earlier this year, Congress passed a law that requires everyone who gets Medicaid — the government-funded health care program for the poor — to offer proof of U.S. citizenship so we can avoid “theft of these benefits by illegal aliens,” as Rep. Charlie Norwood, R-Ga., puts it. But, immigrants aren’t flocking to the United States to mooch off the government.

    According to a study by the Urban Institute, the 1996 welfare reform effort dramatically reduced the use of welfare by undocumented immigrant households, exactly as intended. And another vital thing happened in 1996: the Internal Revenue Service began issuing identification numbers to enable illegal immigrants who don’t have Social Security numbers to file taxes.

    One might have imagined that those fearing deportation or confronting the prospect of paying for their safety net through their own meager wages would take a pass on the IRS’ scheme. Not so. Close to 8 million of the 12 million or so illegal aliens in the country today file personal income taxes using these numbers, contributing billions to federal coffers.

    No doubt they hope that this will one day help them acquire legal status — a plaintive expression of their desire to play by the rules and come out of the shadows. What’s more, aliens who are not self-employed have Social Security and Medicare taxes automatically withheld from their paychecks.

    Since undocumented workers have only fake numbers, they’ll never be able to collect the benefits these taxes are meant to pay for. Last year, the revenues from these fake numbers — that the Social Security administration stashes in the “earnings suspense file” — added up to 10 percent of the Social Security surplus.

    The file is growing, on average, by more than $50 billion a year. Beyond federal taxes, all illegals automatically pay state sales taxes that contribute toward the upkeep of public facilities such as roads that they use, and property taxes through their rent that contribute toward the schooling of their children.

    The non-partisan National Research Council found that when the taxes paid by the children of low-skilled immigrant families — most of whom are illegal — are factored in, they contribute on average $80,000 more to federal coffers than they consume. Yes, many illegal migrants impose a strain on border communities on whose doorstep they first arrive, broke and unemployed.

    To solve this problem equitably, these communities ought to receive the surplus taxes that federal government collects from immigrants. But the real reason border communities are strained is the lack of a guest worker program.

    Such a program would match willing workers with willing employers in advance so that they wouldn’t be stuck for long periods where they disembark while searching for jobs. The cost of undocumented aliens is an issue that immigrant bashers have created to whip up indignation against people they don’t want here in the first place.

    With the Senate having just returned from yet another vacation and promising to revisit the stalled immigration bill, politicians ought to set the record straight: Illegals are not milking the government. If anything, it is the other way around.

    The Undocumented Immigrants pay the exact same amount of taxes like you and me when they buy Things, rent a house, fill up gas, drink a beer or wine, buy appliances, play the states lottery and mega millions . Below are the links to just a few sites that will show you exactly how much tax you or the Undocumented Immigrant pays , so you see they are NOT FREELOADERS, THEY PAY TAXES AND TOLLS Exactly the same as you, Now if you take out 10% from your states /city Budget what will your city/state look like financially ?

    Stop your folly thinking , you are wise USE YOUR WISDOM to see the reality. They pay more taxes than you think, Including FEDERAL INCOME TAX using a ITN Number that is given to them by the IRS, Social Security Taxes and State taxes that are withheld form their paychecks automatically.

    Taxes, paid by You & the Undocumented are the same in each state check your state : http://www.taxadmin.org/fta/rate/sales.html

    GAS Taxes paid by you & the Undocumented are the same. Go to and check out your states tax; http://www.gaspricewatch.com/usgastaxes.asp

    Cigarette Taxes paid by you & the Undocumented are the same, check this out in : http://www.taxadmin.org/fta/rate/cigarett.html

    Clothing Sales Taxes, are the same paid by you & the Undocumented Immigrant; http://en.wikipedia.org/wiki/Sales_taxes_in_the_United_States

    City Taxes, are the same paid by you or the Undocumented, since he pays rent and the LANDLORD pays the city : http://www.town-usa.com/statetax/statetaxlist.html

    Beer Taxes, are the same paid by you or the Undocumented: http://www.taxadmin.org/fta/rate/beer.html

    TAX DATA : http://www.taxfoundation.org/taxdata/show/245.html

  7.  Bryan Griffith, August 26, 2010 @ 3:38 pm

    Mr. Gray,

    To my knowledge, the Center for Immigration Studies never commissioned a poll of AZ SB1070. I am referencing the below quote from your story.

    “Arizona polls by the Center for Immigration Studies suggest that 70% of Arizonans are in favor of the law…”

    Please correct this error. Or, if I am incorrect, please contact me.

    Bryan Griffith
    Multimedia Director
    Center for Immigration Studies

  8.  Agent of Chaos, August 26, 2010 @ 3:59 pm

    Some people just love spreading mis-information and outright lies.
    SB 1070 is actually more lenient than federal law. The BP can pull people for absolutely no reason and demand ID while Arizona law enforcement officers can’t. Those that are here legally have nothing to worry about, only those here illegally and their advocates are having fits about it.

  9.  Bradford Fleming, September 2, 2010 @ 12:33 pm

    Aliens of the state are not all criminals, although some of them but not all. Some aliens were just scammed by an illegal recruiter or other stories like that. I think they should be given a chance to prove themselves that they are worthy to be in Arizona for the skill they have, give them pardon and pay for the taxes they missed.

  10.  Lisa, September 20, 2010 @ 4:48 pm

    I agree with Bradford Fleming that aliens need to have some opportunity to prove their skills or whatever than they can bee good citizens. I can’t imagine such way but I am not the person who runs this regions :)


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