The astonishing fiscal effects of high-skilled immigration
Better than free
In our new report, Exceptional by Design, we present abundant evidence that high-skilled immigration increases innovation, entrepreneurship, and the growth of strategic industries — all while reducing inequality. And as we show in this brief excerpt from the report, high-skilled immigration also has a remarkable impact on the nation’s finances.
The evidence is clear that high-skilled immigration is a free lunch. It costs the government nothing.
Actually, less than nothing — high-skilled immigration makes money for U.S. taxpayers.
How much money? To start with a conservative estimate, we look at the near-term, direct fiscal impacts of H-1B workers. (H-1Bs are temporary work visas for skilled workers, assigned by lottery. Any well-targeted reform of high-skilled immigration, one that prioritizes higher earners and significantly expands available visas, will bring in new arrivals whose average pay is similar to that of H-1B participants, which is why this benchmark is useful.)
In 2023, the average H-1B holder earned $130,000,1 double the average personal income for all U.S. workers.2 We estimate that each of these H-1B holders pays $32,156 in taxes on average, with their employers paying $10,785.3
Government spending on these immigrants — for transportation, healthcare, energy, and other such items — amounts to $3,452 each.
The result: Each additional high-skilled immigrant added $39,489 to the federal government’s coffers in 2023 — and will contribute even more in subsequent years as their wages climb. (Nominal wages all throughout the economy tend to rise over time, and this trend certainly applies to high-skilled immigrants’ wages as well.)
When we include the effects of their families, the gains are even bigger. Children are a net cost to the U.S. taxpayer because of education costs, but many foreign-born spouses of H-1B holders also work and pay taxes. Combining the effects of the H-1B holders, their spouses, and their children, we estimate that the average effect of H-1B holder households is a net increase of $40,058 in federal government revenues per household. (The fiscal benefits would be even bigger if more spouses of H-1B holders were allowed to work. Many are not.)
This estimate implies that an extra 100,000 high-skilled immigrant visas per year, each held for 6 years on average, would generate a total of $225 billion in net revenues over a 10-year budget window.4
Adding 500,000 high-skilled immigrant visas per year would yield a taxpayer benefit of roughly $1.1 trillion dollars.
Consider another estimate, this one from The National Academy of Arts and Sciences, which projected the combined fiscal impact of high-skilled immigration across a much longer time horizon, 75 years — including the effects of immigrants’ families. (Second generation immigrants go to college, find work, and pay taxes themselves.)
The Academy found that a typical new high-skilled immigrant with a bachelor’s degree adds on net $481,000 to local, state, and federal coffers. Immigrants with graduate degrees have an even larger impact, adding $812,000 more in net revenue.5
These figures are impressive enough, but we believe they are nonetheless far too conservative. They measure only the direct effects of high-skilled immigrants via the taxes paid by them and their descendants.
The estimates entirely omit the fiscal effects of greater innovation, more entrepreneurship, more inventions, more startups, and more high-paying jobs created. The massive, enduring contributions of “outlier” immigrants are ignored. (How do you measure the fiscal impact of Russian immigrant Sergey Brin, the co-founder of Google, which has likely affected the productivity of practically every single U.S. worker and company?)
All of these benefits, by stimulating economic growth, raise the wages of non-immigrants as well and further increase the taxes collected on those wages.
There is no way to know the precise fiscal effect when accounting for all of these additional, indirect windfalls, which are hard to measure but nonetheless enormous.6 Despite the methodological challenge, it is certain that the fiscal effect is much, much bigger even than the already impressive estimates that neglect so many of these benefits.
The fiscal boost from expanding high-skilled immigration could be used by Congress to fund other priorities — public spending, tax cuts, or simply reducing the deficit to reinforce the soundness of the U.S. Treasury market. Regardless of which political party holds sway in a given moment, the extraordinary fiscal effect of high-skilled immigration provides options. It expands the range of available possibilities for how the government can help American workers and families.
These numbers represent the mean fiscal H-1B holder. The median, or typical, earnings are a more modest but still very high $118,000, which produces a net fiscal impact of $35,274. The mean is larger than the median because some H-1B holders have very high earnings. For example, according to Labor Condition Application data from the Department of Labor, the 95th percentile of H-1B holders earned $217,625 in 2023, and the 99th percentile earned $300,000. The mean salary is more relevant for estimating aggregate fiscal impacts than the median.
Annual mean wage is $65,470 according to the Bureau of Labor Statistics May 2023 National Occupational Employment and Wage Estimates from May 2023, the most recent available.
We use the tax model from the National Tax Foundation, H-1B wage disclosure data from the Department of Labor, federal tax revenues from the White House Historical Accounts, excise taxes from the Bureau of Economic Analysis, other H-1B income data from “Characteristics of H-1B Specialty Occupation Workers” annual reports to Congress, and economic projections from the Congressional Budget Office. The model can be found in the EIG Github.
Note this fiscal impact assumes 44 percent of H-1B workers become sponsored for Green Cards in their seventh year, following “Why Legal Immigration Is Nearly Impossible,” by David Bier.
“The Economic and Fiscal Consequences of Immigration,” National Academy of Sciences (2017).
For example, see again: Inara S. Tareque, Jorge Guzman, and Dan Wang, “High-skilled immigration enhances regional entrepreneurship,” Proceedings of the National Academy of Sciences, 121 no. 37 (September 2024). The authors found that the influence of H-1B holders on other people’s entrepreneurship increased their fiscal impact by 19 percent.