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

A recent study has revealed that undocumented immigrants contributed nearly $100 billion in federal, state, and local tax revenue in 2022, even though many are excluded from benefiting from the programs funded by these taxes. This conclusion contradicts anti-immigrant assertions that undocumented individuals are a drain on social services.

According to the Institute on Taxation and Economic Policy (ITEP), a left-leaning nonprofit think tank, undocumented immigrants in 40 states paid higher tax rates than the top 1% income earners in those states. The study, released Tuesday, estimates their tax contributions at $96.7 billion for 2022. Authors also projected an additional $40.2 billion per year could be generated if all undocumented individuals were given work authorization, which would lead to higher wages and easier compliance with tax laws.

The report highlighted that 46% of state and local tax payments from undocumented immigrants come from sales and excise taxes. Six states — New Jersey, New York, California, Florida, Texas, and Illinois — each collected over $1 billion in tax revenues from these individuals. Despite paying federal payroll taxes that fund Medicare, Social Security, and Unemployment Insurance, undocumented immigrants are barred from accessing these programs.

Jackie Vimo, senior analyst of economic justice policy at the National Immigration Law Center, noted that undocumented workers face challenges such as scams by unethical tax preparers. At the same time, Richard C. Auxier from the Urban-Brookings Tax Policy Center stressed that these workers are regular people contributing normally to the tax system.

Alexis Tsoukalas from the Florida Policy Institute pointed out that undocumented immigrants in Florida are taxed at a rate of 8%, compared to the 2.7% rate for the state’s wealthiest. This inequity means that many undocumented people contribute more to public services they can’t use, while the wealthiest contribute the least.

This study arrives during a politically charged period where states are enacting laws to arrest individuals suspected of illegal entry, an action traditionally managed by federal authorities. Recent policies from the Biden administration and promises from the Republican Party for mass deportations heighten the stakes. Furthermore, upcoming tax policy debates in Congress could shape the fiscal landscape as Trump’s 2017 tax law provisions are set to expire.

Economic experts argue that deporting undocumented immigrants would harm the economy. The Congressional Budget Office’s report from July indicated that rising immigration would add $1.2 trillion to federal revenue from 2024 to 2034. Carl Davis, ITEP research director, emphasized the ripple economic effects of deportations, impacting local business profits and sales tax revenue.

Auxier outlined a nuanced perspective, noting that while children in undocumented households might receive more educational benefits compared to the tax contributions of lower-income adults, this scenario changes over time as children grow and start contributing to the economy themselves.

With a significant labor shortage in the U.S., experts like Jackie Vimo advocate for recognizing the economic roles of undocumented immigrants. States such as South Dakota, North Dakota, Maryland, Vermont, Maine, and South Carolina face acute labor gaps. Mass deportations would not only separate families but severely impact the workforce and broader economy.