Price elasticity datapoint of the day, citizenship edition

By Felix Salmon
November 5, 2009
John Quelch reports:

Legal immigrants to the US who are resident for five years (or three years for those who marry a US citizen) can apply for US citizenship. Currently, citizenship application and processing fees in the US are $675 per person, up from $60 two decades ago. These fees, which exclude the costs of individual legal assistance or private citizenship classes, were increased by 69% in July 2007...

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John Quelch reports:

Legal immigrants to the US who are resident for five years (or three years for those who marry a US citizen) can apply for US citizenship. Currently, citizenship application and processing fees in the US are $675 per person, up from $60 two decades ago. These fees, which exclude the costs of individual legal assistance or private citizenship classes, were increased by 69% in July 2007…

The number of US citizenship applications from legal residents dropped by 50 percent in the two years after the price increase. As a result, the Federal agency handling citizenship applications still runs a budget deficit, suggesting to some bureaucrats that the price needs to be raised again!

Quelch then disappears into some weird fantasty world where citizenship costs $30,000, minus “an income tax deduction of value-based citizenship fees over five years,” whatever that’s supposed to be. But the fact is that we’re talking about the marginal value of citizenship over permanent residence here, and that marginal value is very low indeed.

Quelch has the upside right, and it’s limited:

New citizens get to vote, apply for federal jobs, and bring their families to the US.

For some people, the last of these is very valuable indeed. For most people, none of them is worth much at all. For one of my relations, there were tax reasons for becoming a US citizen, which I never really understood. For me, the biggest upside to becoming a US citizen would simply be the reduction in airport risk. Dahlia Lithwick explains:

I am in this country on a green card. You should also know that over my almost 20-year residence in this country, I have been told by more than one INS official that I have absolutely no rights here and that, visa or no visa, my residence here can be terminated at their discretion.

On the other hand, Quelch doesn’t mention the downsides of citizenship at all. The most obvious is jury service: if you’re not a citizen, you get an automatic get-out-of-jury-service-free card, and it’s valid for life. Nice. And then there’s taxes. If a permanent resident leaves the country and stops being a US resident for tax purposes, she doesn’t need to pay any US taxes at all. A US citizen, by contrast, needs to pay US taxes on her global income for her entire life, no matter where she lives. On top of that, many countries require that if you become a US citizen, you need to give up your initial citizenship. Which is a major decision indeed. Finally, there’s the fact that if you travel on your US passport, you run a slightly greater chance of being hated on by the people in whose lands you’re travelling.

So it comes as little surprise that as the price of citizenship increases, the demand for it falls, to the point at which the overwhelming majority of citizenship-eligible permanent residents already decline to apply for it.

The thing which confuses me is why the US would encourage a system which creates a weird not-quite-citizen class of permanent residents who don’t get to vote but who otherwise walk and quack like any other first-generation American. If my American wife wanted to live and work in the UK, we’d simply apply for her to get a UK passport. Why doesn’t the US system work the same way?

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