The Maryland DREAM Act: Does it Economically Benefit Maryland?

The Maryland DREAM Act: Does it Economically Benefit Maryland? Javel Jay Wilson September 13, 2012 Jlwilson82@gmail.com

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, 2010. Washington, DC: Pew Hispanic Center (February 1, 2011). 3 Center for American Progress (April 3, 2012) pg. 1

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

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 2012. Only 4% of those with a college degree were unemployed as of July 2012 4 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. 5 4 http://www.bls.gov/news.release/empsit.t04.htm 5 J. Hanel, Colorado Senate Debates: Illegal Immigrant tuition, (February 3, 2011) pg. 3

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

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

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 1 23 26,260 1,247 1,628 6,565 630 Year 2 24 26,654 1,266 1,653 6,663 640 Year 3 25 27,054 1,285 1,677 6,763 649 Year 4 26 27,460 1,304 1,702 6,865 659 Year 5 27 27,871 1,324 1,728 6,968 669 Year 6 28 28,289 1,344 1,754 7,072 679 Year 7 29 28,714 1,364 1,780 7,178 689 Year 8 30 29,145 1,384 1,807 7,286 699 Year 9 31 29,582 1,405 1,834 7,395 710 Year 10 32 30,025 1,426 1,862 7,506 721 Year 11 33 30,476 1,448 1,889 7,619 731 Year 12 34 30,933 1,469 1,918 7,733 742 Year 13 35 31,397 1,491 1,947 7,849 754 Year 14 36 31,868 1,514 1,976 7,967 765 Year 15 37 32,346 1,536 2,005 8,086 776 Year 16 38 32,831 1,559 2,036 8,208 788 Year 17 39 33,324 1,583 2,066 8,331 800 Year 18 40 33,823 1,607 2,097 8,456 812 Year 19 41 34,331 1,631 2,129 8,583 824 Year 20 42 34,846 1,655 2,160 8,711 836 Year 21 43 35,368 1,680 2,193 8,842 849 Year 22 44 35,899 1,705 2,226 8,975 862 Year 23 45 36,437 1,731 2,259 9,109 874 Year 24 46 36,984 1,757 2,293 9,246 888 Year 25 47 37,539 1,783 2,327 9,385 901 Year 26 48 38,102 1,810 2,362 9,525 914 Year 27 49 38,673 1,837 2,398 9,668 928 Year 28 50 39,253 1,865 2,434 9,813 942 Year 29 51 39,842 1,893 2,470 9,961 956 Year 30 52 40,440 1,921 2,507 10,110 971 Year 31 53 41,046 1,950 2,545 10,262 985 Year 32 54 41,662 1,979 2,583 10,416 1000 Year 33 55 42,287 2,009 2,622 10,572 1015 Year 34 56 42,921 2,039 2,661 10,730 1030 Year 35 57 43,565 2,069 2,701 10,891 1046 Year 36 58 44,219 2,100 2,742 11,055 1061 Year 37 59 44,882 2,132 2,783 11,221 1077 Year 38 60 45,555 2,164 2,824 11,389 1093 Year 39 61 46,239 2,196 2,867 11,560 1110 Year 40 62 46,932 2,229 2,910 11,733 1126 Year 41 63 47,636 2,263 2,953 11,909 1143 Year 42 64 48,351 2,297 2,998 12,088 1160 Year 43 65 49,076 2,331 3,043 12,269 1178 Year 44 66 49,812 2,366 3,088 12,453 1195 Year 45 67 50,559 2,402 3,135 12,640 1213 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

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 1 23 26,260 1,247 1,628 6,565 630.24 Year 2 24 26,654 1,266 1,653 6,663 640 Year 3 25 27,054 1,285 1,677 6,763 649 Year 4 26 27,460 1,304 1,702 6,865 659 Year 5 27 27,871 1,324 1,728 6,968 669 Year 6 28 28,289 1,344 1,754 7,072 679 Year 7 29 28,714 1,364 1,780 7,178 689 Year 8 30 29,145 1,384 1,807 7,286 699 Year 9 31 29,582 1,405 1,834 7,395 710 Year 10 Advanced Degree Obtained 32 37,421 1,777 2,320 9,355 898 Year 11 33 37,982 1,804 2,355 9,496 912 Year 12 34 38,552 1,831 2,390 9,638 925 Year 13 35 39,130 1,859 2,426 9,783 939 Year 14 36 39,717 1,887 2,462 9,929 953 Year 15 37 40,313 1,915 2,499 10,078 968 Year 16 38 40,918 1,944 2,537 10,229 982 Year 17 39 41,532 1,973 2,575 10,383 997 Year 18 40 42,155 2,002 2,614 10,539 1012 Year 19 41 42,787 2,032 2,653 10,697 1027 Year 20 42 43,429 2,063 2,693 10,857 1042 Year 21 43 44,080 2,094 2,733 11,020 1058 Year 22 44 44,741 2,125 2,774 11,185 1074 Year 23 45 45,412 2,157 2,816 11,353 1090 Year 24 46 46,094 2,189 2,858 11,523 1106 Year 25 47 46,785 2,222 2,901 11,696 1123 Year 26 48 47,487 2,256 2,944 11,872 1140 Year 27 49 48,199 2,289 2,988 12,050 1157 Year 28 50 48,922 2,324 3,033 12,231 1174 Year 29 51 49,656 2,359 3,079 12,414 1192 Year 30 52 50,401 2,394 3,125 12,600 1210 Year 31 53 51,157 2,430 3,172 12,789 1228 Year 32 54 51,924 2,466 3,219 12,981 1246 Year 33 55 52,703 2,503 3,268 13,176 1265 Year 34 56 53,493 2,541 3,317 13,373 1284 Year 35 57 54,296 2,579 3,366 13,574 1303 Year 36 58 55,110 2,618 3,417 13,778 1323 Year 37 59 55,937 2,657 3,468 13,984 1342 Year 38 60 56,776 2,697 3,520 14,194 1363 Year 39 61 57,628 2,737 3,573 14,407 1383 Year 40 62 58,492 2,778 3,627 14,623 1404 Year 41 63 59,369 2,820 3,681 14,842 1425 Year 42 64 60,260 2,862 3,736 15,065 1446 Year 43 65 61,164 2,905 3,792 15,291 1468 Year 44 66 62,081 2,949 3,849 15,520 1490 Year 45 67 63,013 2,993 3,907 15,753 1512 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