A new study shows that illegal immigrants paid nearly $100 billion in federal, state and local taxes in 2022, while many are excluded from the programs funded by their taxes. The findings contradict anti-immigrant rhetoric that illegal immigrants “destroy” social programs.
In 40 states, undocumented immigrants paid higher taxes than the top 1 percent of those states' income brackets, according to a study released Tuesday by the Institute on Taxation and Economic Policy, a left-leaning nonprofit think tank.
The study, which uses estimates of illegal immigrants' tax contributions starting in 2022, shows that they totaled $96.7 billion that year. The study's authors also found that illegal immigrants would pay $40.2 billion more per year in federal, state and local taxes if the entire undocumented population had access to work permits. The Institute on Taxation and Economic Policy argued that this increase would come from higher wages associated with work permits and easier compliance with income tax laws.
The report also sheds further light on the tax revenue generated by illegal immigrants at the state and local level. Illegal immigrants pay 46% of their state and local tax payments through sales and excise taxes. Six states – New Jersey, New York, California, Florida, Texas and Illinois – have each generated more than $1 billion in tax revenue from illegal immigrants, according to the nonprofit organization.
According to the report, undocumented immigrants in Georgia pay $928,500 annually. With legal residency, that amount could rise to $1.2 billion.
Illegal immigrants pay property taxes and sales taxes, as well as federal payroll taxes deducted from their wages, and file their income tax returns using their individual taxpayer identification number. Although these payroll taxes fund Medicare, Social Security and unemployment insurance, illegal immigrants are ineligible to enroll in and receive regular benefits from these social programs. They can also face obstacles in obtaining tax refunds, including fraud by unscrupulous tax preparers who target immigrant communities, Jackie Vimo, senior economic justice policy analyst at the National Immigration Law Center, said in a media briefing about the report.
“There are a ton of laws that prevent illegal workers from getting benefits…” said Richard C. Auxier, senior policy fellow at the Urban-Brookings Tax Policy Center, a nonpartisan think tank that was not involved in the study. “…They get a lot of political attention. At the end of the day, they're just regular people paying regular taxes.”
Alexis Tsoukalas, senior policy analyst at the Florida Policy Institute, a nonprofit focused on economic mobility for Floridians, told reporters Monday she was surprised at how much the state collects in taxes from illegal immigrants compared to the wealthiest in the state. The current tax rate for illegal immigrants in Florida is 8%, compared to 2.7% for the state's top 1%.
“This means that hundreds of thousands of people are contributing more than their share to public services that they do not have access to, while those who give the most and benefit the most are contributing the least,” Tsoukalas said.
The study was released against the backdrop of a political climate in which states have passed laws to arrest people they suspect of entering the U.S. illegally (which was previously within the federal power). The Biden administration has announced an executive action that will allow the deportation of many asylum seekers without reviewing their applications. The Republican Party platform for 2024 promises the “largest deportation effort in American history” if former President Donald Trump is re-elected against likely Democratic nominee Kamala Harris. Tax policy will also be a focus of Congress and the White House next year as provisions of Trump's 2017 tax law expire.
Aside from the human cost that deportations impose on families, policy experts and researchers argue that illegal immigrants are a boon to the economy and thus also impose economic costs. Immigration and economic experts who spoke about the importance of the report on Monday pointed to the Congressional Budget Office's July report on the rise in immigration and its impact on the economy and budget. It said this rise in immigration will result in $1.2 trillion in additional federal revenue from 2024 to 2034.
Carl Davis, research director at the Institute on Taxation and Economic Policy, said that deporting illegal immigrants in the United States must also consider economic consequences that go beyond taxes.
“If you deport someone and they then stop making taxable purchases in their community, that number would reflect a reduction in their sales tax payments to the community, but it would not capture the second ripple effect: that businesses are making less profit because they have fewer customers,” Davis said in a media briefing about the study.
Auxier said researchers have found that children from undocumented immigrant households receive education subsidies that may be higher than the tax payments of lower-income working adults, but that's more of an income issue than a specific immigration problem. The other side of the coin, Auxier said, is that undocumented households may actually give back more in the future than they received.
“The same studies show that American households give more than they get when their children go to school and then work because the parents came here, worked, paid into Social Security and Medicare and got no benefits,” he said. “The kids went to school, then got a job and then made enough money to be a net contributor.”
Policy experts also pointed to the labor shortage — 8.1 million job openings and 6.8 million unemployed — as a reason to welcome the economic contribution of undocumented immigrants. South Dakota, North Dakota, Maryland, Vermont, Maine and South Carolina are some of the states with the worst labor shortages, according to a Washington Post analysis of Bureau of Labor Statistics data.
“Immigrants are already filling these [labor] “If mass deportations occur and millions of immigrants are separated from their families and the country they call home, there will be not only human consequences, but severe impacts on the economy and the available labor force,” says Vimo of the National Immigration Law Center, an organization that advocates for racial, economic and social justice for low-income immigrants.
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