Undocumented immigrants pay more than their fair share of taxes
The reality of President-elect Donald Trump’s goal for mass deportations of undocumented immigrants is beginning to set in. Stephen Miller, Trump’s pick for deputy chief of staff, expressed plans for the administration to begin “the largest deportation operation in American history” shortly after Inauguration Day.
While undocumented immigrants continue to be the incoming administration’s favorite scapegoat, we shouldn’t lose sight of one of the many ways these community members contribute to federal, state and local economies: through their tax dollars.
Much like their neighbors, undocumented immigrants pay sales and excise taxes on goods and services such as groceries, gas and utilities. They pay property tax regardless of whether they own a home or rent (since landlords pass on a portion of the tax on to renters). They pay payroll taxes via automatic withholdings from paychecks and income taxes in various ways, like by filing with what the IRS calls an ITIN, or Individual Taxpayer Identification Number.
According to an in-depth analysis (to which I contributed) by the Institute on Taxation and Economic Policy, the undocumented population in 2022 paid almost $97 billion in taxes, with over $54 billion in payments to the federal government and more than $37 billion paid out to states and localities. Put another way, the U.S. stands to lose $8.9 billion in tax revenue for every 1 million undocumented immigrants who are sent out of this country under a program of mass deportation.
Undocumented immigrants help fund teacher salaries, road and bridge repairs and other local quality-of-life improvements. They also pay into vital programs that make up our social safety net (including Social Security, Medicare and unemployment insurance) even though they will likely never see any benefits from these programs — because, in most circumstances, they are legally prohibited from accessing them. This is in addition to being barred from important federal credits like the Earned Income Tax Credit and, in some cases, the Child Tax Credit.
At the state level, undocumented immigrants make most of their tax payments through sales and excise taxes ($15.1 billion) on everyday purchases, followed by property taxes ($10.4 billion) and personal and business income taxes ($7 billion).
When measured as a share of their income, undocumented immigrants paid an average effective state and local tax rate of 8.9 percent. This means that they pay a higher share of their income toward these taxes than many of those in the top 1 percent, who paid an average nationwide effective tax rate of just 7.2 percent to their home states. In fact, we find that undocumented immigrants in 40 states have higher state and local effective tax rates than the wealthiest residents living within their respective borders.
Deporting undocumented immigrants en masse would be costly and bring hardship to not just the families and communities being torn apart, but average Americans as well. After all, you don’t get cheaper housing and food by removing 20 percent of workers in the construction sector or over 1.6 million workers in the food industry.
The immigration debate in the U.S. is complex and deserves far more nuance and understanding than it has historically been afforded. Undocumented immigrants contribute in many underrecognized ways to communities and economies. Instead of drastic measures, we should craft long-term solutions that take human dignity, compassion and basic facts into account.
Marco Guzman is a senior policy analyst at the Institute on Taxation and Economic Policy.