The fiscal burden hypothesis, also known as the net fiscal burden hypothesis, states that migration (of certain types, or under certain circumstances) imposes a net fiscal burden on the immigrant-receiving countries. In other words, the marginal cost to the government incurred due to the migrant’s entry (including costs of social service provision to the migrant, as well as somewhat increased costs of general public services such as roads) exceeds the marginal revenue the government earns from the migrant (through a combination of direct taxes on the migrant’s economic activity and taxes on other economic activity that occurs as a result of the migrant’s presence).
The fiscal burden hypothesis is typically viewed as part of the welfare state/fiscal burden objection cluster, though the hypothesis itself is merely a factual assertion rather than a normative statement. It is conceptually distinct from the welfare magnet hypothesis. Whereas the fiscal burden hypothesis is a hypothesis about the effect that migration policy and migration outcomes have on fiscal outcomes, the welfare magnet hypothesis is a hypothesis about the effect that fiscal policy has on migration outcomes.
The fiscal burden hypothesis is closely related to both these arguments against migration, even though they contradict each other in some respects:
- Contraction of welfare state: By creating a fiscal burden, migration will lead to cutbacks in the welfare state, due both to necessity and to public support.
- Expansion of welfare state: The welfare state grows as a proportion of the economy because of migrants’ disproportionately large use of this, and this growth is closely related to the fact that migration imposes a net fiscal burden on the immigrant-receiving countries.