Undocumented Immigrants Contribute Nearly $100 Billion in Taxes, Study Reveals

A recent study reveals that undocumented immigrants contributed nearly $100 billion in tax revenues to federal, state, and local governments in 2022, despite being largely excluded from the benefits funded by these taxes. This contradicts narratives suggesting that undocumented immigrants are detrimental to social programs.

The Institute on Taxation and Economic Policy (ITEP), a nonprofit think tank, conducted the study. It found that undocumented immigrants in 40 states paid higher tax rates than the top 1% of earners in those same states. The study, released Tuesday, estimated that undocumented immigrants’ total tax contributions amounted to $96.7 billion in 2022. Additionally, it suggested that granting work authorization to all undocumented immigrants could boost their tax contributions by another $40.2 billion annually, attributed to increased wages and better compliance with income tax laws.

The report also highlighted the significant state and local tax revenues generated by undocumented immigrants. These individuals contribute 46% of their state and local taxes via sales and excise taxes. For example, states like New Jersey, New York, California, Florida, Texas, and Illinois each raised over $1 billion in tax revenue from undocumented immigrants.

Despite paying property taxes, sales taxes, federal payroll taxes, and income taxes using Individual Taxpayer Identification Numbers, undocumented immigrants are not eligible for benefits from programs like Medicare, Social Security, and Unemployment Insurance. They also face barriers, such as being targets of scams by unscrupulous tax preparers. “There are tons of laws that prevent undocumented workers from getting benefits,” noted Richard C. Auxier from the Urban-Brookings Tax Policy Center in a media call discussing the findings.

Alexis Tsoukalas from the Florida Policy Institute observed that undocumented immigrants in Florida face an 8% tax rate, compared to 2.7% for the wealthiest residents. She criticized the disparity, saying, “Hundreds of thousands of everyday people are contributing more than their share to public services they cannot even access.”

The study’s release comes amid a politically charged environment with states enacting laws to arrest suspected undocumented immigrants and federal actions aimed at expediting deportations. The 2024 Republican Party platform promises a massive deportation operation if former President Donald Trump is re-elected. Tax policy is also poised to be a hot topic as provisions of the 2017 Trump tax law are set to expire.

Beyond the human toll, experts argue that deporting undocumented immigrants could economically harm the U.S. The Congressional Budget Office recently reported that increased immigration could add $1.2 trillion in federal revenue from 2024 to 2034. Carl Davis from ITEP cautioned about the ripple effects of deportation, saying, “Deporting someone reduces their taxable purchases in the community, impacting local business profits and sales tax revenues.”

Auxier further noted that children of undocumented immigrants often receive education benefits exceeding their parents’ tax payments, due to low income levels, but that this household contributes more over time. “These children grow up, work, and become net contributors,” Auxier explained.

Labor shortages in states like South Dakota, Maryland, and Vermont underscore the economic need for undocumented workers. The National Immigration Law Center’s Jackie Vimo emphasized that mass deportations would exacerbate these shortages. “We’ll not only face a human impact but a severe economic effect,” Vimo warned.