The Maryland DREAM Act: Does it Economically Benefit Maryland?

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1 The Maryland DREAM Act: Does it Economically Benefit Maryland? Javel Jay Wilson September 13, 2012

2 Yes, The Maryland DREAM Act Economically Benefits Maryland! The Maryland DREAM Act helps our Maryland youth be in a better position to: Invest in their education by paying tuition Use their increased wages from obtaining a degree to purchase goods and services Pay for quality housing and eventually purchase homes All of these expenditures increase revenue for Maryland s economy by increasing: Tuition and fee revenue at state institutions of higher education Sales tax revenue from increased purchasing power Income tax revenue resulting from increased earning potential The state will miss out on millions of dollars in additional tax revenue collected from these workers increased income and consumption if the Maryland DREAM Act is not passed. QUICK FACTS: The state funding formula increase per student at community colleges is only $2,100. Tuition at all community colleges in the state for students that are affected by the Maryland DREAM Act is more than projected outlays. In Montgomery County a student who is able to attend Montgomery Community College would produce a net benefit of: $2,172 per student not including additional revenue from books and fees. Almost 4 out every 5 jobs lost from December 2007 to January 2010 belonged to workers with no formal postsecondary education 1. According to Pew Research Center Maryland immigrants represent over 6% of the labor force within the state 2. Maryland would lose $15.3 Billion dollars in economic activity, 73,627 jobs and $6.8 Billion in gross state product if undocumented workers left the state. 3 Maryland is ranked # 31 in 2012 by CNBC in America s Top States for Business and # 19 in 2011 by Forbes for Best States for Business and Career. Texas, the first state to pass legislation similar to the Maryland DREAM Act is ranked # 1 in 2012 by CNBC in America s Top States for Business and # 6 by Forbes for Best States for Business and Career. 1 Carnevale, Jayasundera & Cheah The College Advantage Georgetown Public Policy Institute (August 15, 2012) 2 Jeffrey S. Passel and D Vera Cohn. Unauthorized Immigrant Population: National and State Trends, Washington, DC: Pew Hispanic Center (February 1, 2011). 3 Center for American Progress (April 3, 2012) pg. 1

3 Educating all of Maryland high school graduates makes economic sense for the future growth of the Maryland Economy. The Maryland DREAM Act enables students to afford to pay tuition at community colleges for two years and University System of Maryland institutions for two years. Many undocumented students would not otherwise enroll in college because they can not afford to pay out-of-state tuition. The current cost of out-of state tuition is 2x to 3x more expensive than in-state-tuition The Maryland DREAM Act immediately assists in adding revenue to the state. It does this by increasing the student population base that is paying tuition and fees. Maryland College Benefits With an associate s degree a person s median weekly earnings increases 20% versus just having a high school diploma. With a bachelor s degree the percentage of a person s median weekly earnings increases by 65%. According to the Bureau of Labor Statistics Second Quarter 2012 Weekly Earning Release, the median weekly earnings of college graduates with a bachelor s degree is $500 higher than someone with a high school diploma. This calculates into approximately a $26k a year difference and over $1.6 M dollars over a person s lifetime ( See Pages 6 &7) This income difference results in $118k to $145k in forgone state revenue per student. These figures do not factor in the additional income gains from raises and promotions over the course of an individual s career, keep inflation constant at 1.5% and assume only 40% of purchases are made in Maryland. Please note these forgone revenue figures do not include the additional revenue lost from tuition, fees and supplies paid while the student is enrolled. pg. 2

4 According to the bureau of labor statistics the unemployment rate for those with a college degree was less than ½ of those without one. Approximately 9% of individuals without a college degree are unemployed as of July Only 4% of those with a college degree were unemployed as of July According to The Impact of Immigrant Entrepreneurs and Professionals on US Competitiveness study commissioned by The National Venture Capital Association (NVCA), Immigrant-founded venture-backed public companies today employ an estimated 220,000 people in the United States and over 400,000 people globally. Maryland s future depends on the cultivation of intellectual capital and a more educated workforce. When college is within a student s reach, they will be encouraged to excel. In the absence of not being able to pay in-state-tuition rates many Maryland DREAM Act students will not enroll in college. Without obtaining a college degree they are more likely to become unemployed during turbulent economic times. These students then experience a greater risk of becoming a permanent underclass in society with increased social costs for The State of Maryland. Colorado Senator Angela Giron recently spoke about granting in-state-tuition to undocumented students graduating from a Colorado State high school. Senator Giron noted: It has always been the right thing to do, and now, it is the economically smart thing to do. We can t and must not allow another generation of young immigrants to struggle for the chance to contribute to American society J. Hanel, Colorado Senate Debates: Illegal Immigrant tuition, (February 3, 2011) pg. 3

5 The Maryland DREAM Act will increase federal tax revenues Higher earning students who graduate from a Maryland College or University will pay more in federal payroll taxes, contributing more to programs like Social Security. At the federal level implementing legislation related to the Maryland DREAM would result in an approximately $25 billion dollar surplus over a ten year period 6 Stephen C. Goss, Chief Actuary of the Social Security Administration said that by 2007, The Social Security Trust Fund had received a net benefit of over $120 Billion dollars from undocumented workers. That represented over 5.4% of the trust fund s total assets of $2.24 trillion that year. The cumulative contribution is surely higher by now. 7 The MD DREAM Act represents an opportunity for Maryland taxpayers to exponentially increase the return on investment in the youth s that public school system educates in their K 12 years. 6 Congressional Budget Office Report, (December 2, 2010) 7 Edward Schumacher Mators, How immigrants are helping social security Washington Post (September 3, 2010) pg. 4

6 The Maryland DREAM Act helps promote economic growth for all MD residents. According to the Council of Economic Advisers under President George W. Bush and The Federal Reserve Bank of San Francisco immigrant workers complement native workers (rather than compete with them) and increase productivity overall 8 The Impact of Immigrant Entrepreneurs and Professionals on US Competitiveness study commissioned by The National Venture Capital Association (NVCA) states that the current market capitalization of publicly traded immigrant founded venture backed companies in the U.S. exceeds $500 Billion dollars and most venture-backed companies started by immigrant entrepreneurs are technology-related companies that pay high salaries for white collar professional positions. The Maryland DREAM Act educates the workforce to meet today and tomorrow s economic needs. Some opponents say: Why does getting a college degree matter when they cannot get a job? As of June 2012, The Department of Homeland Security s Deferred Action Program enables all of our Maryland high-school graduates to legally obtain employment after completing college. The policy promotes greater economic growth that stems from a better educated workforce. An increased supply of skilled students advances Maryland s competitive position in the science, technology, engineering and medicine fields. This makes the state more attractive to businesses requiring a skilled labor force. The current in-state tuition rate exceeds the marginal cost of adding an extra student. The law therefore results in an increase in state wealth. The state is not likely to hire more teachers, build new classrooms or even buy more desks for MD DREAM Act students. The additional costs of this law are more perception than reality. 9 8 Edward P. Lazear, Chairman Immigration Economic Impact Council of Economic Advisers (June 20, 2007) & Giovanni Peri, The Effects of Immigrants on U.S. Employment and Productivity Federal Reserve Bank of San Francisco (August 30, 2010) 9 John J. Walters, Maryland Public Policy Institute pg. 5

7 MD DREAM Act Calculations - Projection 1 September 2012 Inflation Factor 1.50% Sales Tax Rate 6.00% Estimated Federal Tax Rate 25.00% Estimated Social Security Rate 6.20% Estimated State Income Tax Rate 4.75% Note: - Projections keep inflation constant at 1.5% and do not factor in any wage increases from raises and promotions over an individuals lifetime. - Sales tax revenue is estimated based on approximately 40% of individuals goods and services consumption being based in Maryland - Projections assume retirement at the age of 67 - Actual numbers may vary but would likelybe increased Average Yearly Earnings Difference 26,260 degree vs. high school diploma Year Age Income Difference State Income Social Security Federal Income Sales Total State Total Year ,260 1,247 1,628 6, Year ,654 1,266 1,653 6, Year ,054 1,285 1,677 6, Year ,460 1,304 1,702 6, Year ,871 1,324 1,728 6, Year ,289 1,344 1,754 7, Year ,714 1,364 1,780 7, Year ,145 1,384 1,807 7, Year ,582 1,405 1,834 7, Year ,025 1,426 1,862 7, Year ,476 1,448 1,889 7, Year ,933 1,469 1,918 7, Year ,397 1,491 1,947 7, Year ,868 1,514 1,976 7, Year ,346 1,536 2,005 8, Year ,831 1,559 2,036 8, Year ,324 1,583 2,066 8, Year ,823 1,607 2,097 8, Year ,331 1,631 2,129 8, Year ,846 1,655 2,160 8, Year ,368 1,680 2,193 8, Year ,899 1,705 2,226 8, Year ,437 1,731 2,259 9, Year ,984 1,757 2,293 9, Year ,539 1,783 2,327 9, Year ,102 1,810 2,362 9, Year ,673 1,837 2,398 9, Year ,253 1,865 2,434 9, Year ,842 1,893 2,470 9, Year ,440 1,921 2,507 10, Year ,046 1,950 2,545 10, Year ,662 1,979 2,583 10, Year ,287 2,009 2,622 10, Year ,921 2,039 2,661 10, Year ,565 2,069 2,701 10, Year ,219 2,100 2,742 11, Year ,882 2,132 2,783 11, Year ,555 2,164 2,824 11, Year ,239 2,196 2,867 11, Year ,932 2,229 2,910 11, Year ,636 2,263 2,953 11, Year ,351 2,297 2,998 12, Year ,076 2,331 3,043 12, Year ,812 2,366 3,088 12, Year ,559 2,402 3,135 12, Totals: $ 1,670,509 $ 79,349 $ 103,572 $ 417,627 $ 40,092 $ 119,441 $ 640,640 Javel "Jay" Wilson MD Dream Act Earnings Calculations pg. 6

8 MD DREAM Act Calculations Projection 2 September 2012 Inflation Factor 1.50% Sales Tax Rate 6.00% Estimated Federal Tax Rate 25.00% Estimated Social Security Rate 6.20% Estimated State Income Tax Rate 4.75% Avg Yearly Earnings Difference Bachelors 26,260 degree vs. high school diploma Avg Yearly Earnings Difference Adv Degree 36,868 advanced degree vs. high school diploma Note: - Projections keep inflation constant at 1.5% and do not factor in any wage increases from raises and promotions over an individuals lifetime. - Sales tax revenue is estimated based on approximately 40% of individuals goods and services consumption being based in Maryland - Projections assume retirement at the age of 67 - Actual numbers may vary but would likelybe increased Year Age Income Difference State Income Tax Social Security Federal Income Sales Total State Total Year ,260 1,247 1,628 6, Year ,654 1,266 1,653 6, Year ,054 1,285 1,677 6, Year ,460 1,304 1,702 6, Year ,871 1,324 1,728 6, Year ,289 1,344 1,754 7, Year ,714 1,364 1,780 7, Year ,145 1,384 1,807 7, Year ,582 1,405 1,834 7, Year 10 Advanced Degree Obtained 32 37,421 1,777 2,320 9, Year ,982 1,804 2,355 9, Year ,552 1,831 2,390 9, Year ,130 1,859 2,426 9, Year ,717 1,887 2,462 9, Year ,313 1,915 2,499 10, Year ,918 1,944 2,537 10, Year ,532 1,973 2,575 10, Year ,155 2,002 2,614 10, Year ,787 2,032 2,653 10, Year ,429 2,063 2,693 10, Year ,080 2,094 2,733 11, Year ,741 2,125 2,774 11, Year ,412 2,157 2,816 11, Year ,094 2,189 2,858 11, Year ,785 2,222 2,901 11, Year ,487 2,256 2,944 11, Year ,199 2,289 2,988 12, Year ,922 2,324 3,033 12, Year ,656 2,359 3,079 12, Year ,401 2,394 3,125 12, Year ,157 2,430 3,172 12, Year ,924 2,466 3,219 12, Year ,703 2,503 3,268 13, Year ,493 2,541 3,317 13, Year ,296 2,579 3,366 13, Year ,110 2,618 3,417 13, Year ,937 2,657 3,468 13, Year ,776 2,697 3,520 14, Year ,628 2,737 3,573 14, Year ,492 2,778 3,627 14, Year ,369 2,820 3,681 14, Year ,260 2,862 3,736 15, Year ,164 2,905 3,792 15, Year ,081 2,949 3,849 15, Year ,013 2,993 3,907 15, Totals: $ 2,020,143 $ 95,957 $ 125,249 $ 505,036 $ 48,483 $ 144,440 $ 774,725 Javel "Jay" Wilson MD Dream Act Earnings Calculations pg. 7