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Illegal Immigrants a Drop in the Ocean of Internal Revenue Service Fraud

By: Fergus Hodgson - @FergHodgson - Oct 23, 2013, 8:23 am

Every couple of months it seems, a new story breaks about outrageous fraud committed by illegal immigrants in the United States — in particular how they milk the US federal tax collection agency, the IRS. This doesn’t surprise me. Unfortunately, many people are eager for an excuse to beat up on illegal immigrants, so these stories generate plenty of internet traffic.

However, that is exactly what these stories are: excuses to garner eyeballs, not real news.

The latest comes from IowaWatchdog.org, an affiliate in a network I normally take seriously.

While harrying and stalling tea party groups seeking nonprofit status, the Internal Revenue Service mailed [US]$4.2 billion in child-credit checks to undocumented immigrants.

Critics say midlevel IRS bureaucrats continue to abuse the Additional Child Tax Credit program by dispensing $1,000 checks to families in this country illegally.

Sixty-six comments (at last check) testify to the tabloid appeal, and a bunch of other outlets have jumped on the bandwagon, including Fox News and Human Events.

The irony lost on these readers and media outlets is that immigrants — regardless of legal status — have much lower crime rates than native-born individuals. From the National Bureau of Economic Research:

In fact, immigrants have much lower institutionalization (incarceration) rates than the native born – on the order of one-fifth the rate of natives. More recently arrived immigrants have the lowest relative incarceration rates, and this difference increased from 1980 to 2000.

Further, the San Francisco Chronicle has reported that “Foreign-born residents make up 35 percent of the [California’s] overall population, but only 17 percent of the adult prison population.” The original research for that statistic came from the Public Policy Institute of California:

Among men ages 18-40 – the age group most likely to commit crime – the U.S.-born are 10 times more likely than the foreign-born to be in jail or prison. Even among noncitizen men from Mexico ages 18-40 – a group disproportionately likely to have entered the United States illegally – the authors find very low rates of institutionalization [emphasis mine].

In the particular case of fraud with the IRS, the illegal immigrant activity in the Watchdog story doesn’t even compare to the broader pervasiveness of noncompliance. Research from the University of Wisconsin, Madison, indicates that 18 to 19 percent of all income goes unreported in the United States. (The IRS estimates the rate to be 17 percent.) That alone comes to approximately US$500 billion.

And while people complain about US$4.2 billion for people stuck in the underclass due to an inability to participate in the formal economy, middle class US Americans received US$70 billion in welfare in the form of the mortgage interest deduction. Owning a home means you should pay lower taxes than people who cannot afford one — obviously.

You can be sure I do not support the child tax credit policy or people claiming it illegally, but these programs are rife with abuse already, without bringing illegal immigrants into the equation. Consider that 9.3 percent of Unemployment Insurance payments are overpaid — US$7.2 billion — according to the US Labor Department, and overpayments get as high as 42 percent in Louisiana.

You hypocrite, first take the log out of your own eye, and then you will see clearly to take the speck out of your brother’s eye.
~ Matthew 7:5

Fergus Hodgson Fergus Hodgson

Fergus Hodgson was the founding editor in chief of the PanAm Post, up until January 2016, and he now studies finance at Tulane University in Louisiana and Francisco Marroquín University in Guatemala. Originally from New Zealand, he has also lived in Argentina, Canada, Colombia, Ecuador, Ireland, and the United States. Follow @FergHodgson and his Facebook page.