Impact of Demography on Taxes and Spending

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Changes in the size, location, and age composition of the population can put substantial pressure on government agencies and programs, and the budgets that pay for them.  Shifts of population from place to place and changes in marriage and pregnancy patterns all shift the demands for local services like health and education, often fairly rapidly.  Aging clearly reduces tax revenue and increases demand for Medicare/Medicaid and Social Security, the two biggest items in the federal budget.  Sagging birth rates reduce the supply of workers to pay taxes in the future.  Immigration can potentially have a substantial positive net effect on government budgets, depending on the level of human capital brought by the immigrants.

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