Do immigrants from higher-income countries improve local public finances? Many local and national governments seek to attract them, expecting that increased local consumption will stimulate the economy and broaden the tax base, yet their fiscal impact remains unclear. Using data for Spanish municipalities and a shift share instrument based on preexisting immigrant networks, I find that a one percentage point increase in the local population share of immigrants from higher-income countries reduces per capita revenue and expenditure by about 1.6%. This decline reflects population growth from both immigrants and natives, with no change in total revenue or expenditure. Evidence indicates that such immigration is associated with more seasonal residents and a reallocation of employment toward hospitality and services, which lowers average worker income. These mechanisms explain why immigration from higher-income countries does not improve local public finances despite expanding the resident population.
