Study says undocumented immigrants paid almost $97 billion in taxes

A new study estimates that undocumented immigrants paid nearly $97 billion in federal, state and local taxes in 2022, while often being shut out of the programs their taxes fund.

In 40 states, undocumented immigrants paid higher tax rates than the top 1% of the income scale in those states, 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 undocumented immigrants’ tax contributions as of 2022, shows those totaled $96.7 billion that year. In Maryland, they paid an estimated $779.3 million in total taxes that year, the ninth most among states, according to the report.

Study authors also found that undocumented immigrants would contribute $40.2 billion more per year in federal, state and local taxes – an additional $262 million in Maryland – if all of the undocumented population had access to work authorization. The report’s authors reasoned that this boost would come from higher wages associated with employment authorization and easier compliance with income tax laws.

The report also shed further light on the tax revenue provided by undocumented immigrants on the state and local level. Undocumented immigrants are paying 46% of their state and local tax payments through sales and excise taxes. Six states — New Jersey, New York, California, Florida, Texas, and Illinois — were able to raise more than $1 billion each in tax revenue from undocumented immigrants, the nonprofit said.

Undocumented immigrants pay property taxes and sales taxes, and federal payroll taxes taken from their wages, as well as income tax returns using Individual Taxpayer Identification numbers. Those payroll taxes fund Medicare, Social Security and unemployment insurance, social programs that undocumented immigrants are not eligible to enroll in and receive regular benefits from.

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Immigrants can also face barriers to getting tax refunds, including getting scammed by unscrupulous tax preparers who target immigrant communities, said Jackie Vimo, senior analyst of economic justice policy at the National Immigration Law Center, in a media call on the report. The center focuses on racial, economic and social justice for low-income immigrants.

“There are tons of laws that prevent undocumented workers from getting benefits,” said Richard C. Auxier, a principal policy associate 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 normal people paying normal taxes.”

Alexis Tsoukalas, senior policy analyst at Florida Policy Institute, a nonprofit focused on economic mobility for Floridians, told reporters on Monday that she was struck by how much the state collected in taxes from undocumented immigrants compared to the wealthiest in the state. The current tax rate for undocumented immigrants in Florida is 8% compared to the top 1% of the state at 2.7%.

“This means hundreds of thousands of everyday people are contributing more than their share to public services they cannot even access, meanwhile those with the most to give and the most to benefit contribute the least,” Tsoukalas said.

The findings appear to counter anti-immigrant rhetoric that undocumented immigrants are “destroying” social programs.

The study comes at a time when states are passing laws to arrest people they suspect of entering the U.S. illegally, a power long reserved for the federal government, and the Biden administration has taken executive action to allow for the deportation of many asylum seekers without processing their claims. The Republican Party platform this year promises the “largest deportation operation in American history” if former President Donald Trump is reelected, and tax policy will also be front and center for Congress and the White House next year as provisions of Trump’s tax law, passed in 2017, are set to expire.

Aside from the human cost of deportations on families, policy experts and researchers are making the case that there is an economic cost as well, arguing that undocumented immigrants are a boon to the economy. Immigration and economic experts who spoke about the significance of the report on Monday highlighted the Congressional Budget Office’s July report on the rise in immigration and its effects on the economy and budget, which found that this increase in immigration would add $1.2 trillion in federal revenue from 2024 to 2034.

Carl Davis, research director at the Institute on Taxation and Economic Policy, said there are economic ripple effects to consider in the deportation of undocumented immigrants in the U.S. beyond taxes.

“If you deported someone and they’re no longer making taxable purchases in their community, that number would reflect a reduction in their sales tax payments to the community but it wouldn’t capture that second ripple effect of the business has less profits because they have fewer customers,” Davis said in a media call on the study.

Auxier said that researchers have found that while children in an undocumented immigrant household receive education benefits that could be larger than the tax payments of their lower-income working parents, that is more of an income issue than a specific immigration issue. The other side of that coin, Auxier notes, is that in the future, undocumented households may in fact give back more than they received.

“Those same studies tend to note that if the children go to school and they then go get jobs, now the American household is giving more than it got because the parents came here, worked, paid into Social Security, Medicare and didn’t get any benefits,” he said. “The kid went to school and then they got a job and then they started earning enough money that they were a net contributor.”

Policy experts also pointed to a labor shortage — 8.1 million job openings and 6.8 million unemployed workers in June, according to the U.S. Chamber of Commerce — as a reason to embrace the economic contributions of undocumented immigrants. Maryland, South Dakota, North Dakota, Vermont, Maine, and South Carolina are some of the states facing the greatest labor shortages, according to a Washington Post analysis of Bureau of Labor Statistics data.

“Immigrants are already filling that [labor] gap and if we have mass deportations where millions of immigrants are torn from their family members and the country they have made home, we will not only have the human impact of this, but we’ll have a severe effect on the economy and available workforce,” said Vimo of the National Immigration Law Center.