President Trump made many promises on the campaign trail. One of which was to breathe new life into what some see as a stagnant U.S. economy. In fact, there are indications that it was this one promise that motivated a great many of his supporters and may have won him the White House. However, the task of fixing the economy runs headlong into another one of Trump’s central promises: that he will rid the United States of the 11 million undocumented immigrants who now live here.
If Trump thinks he can deliver on both of these promises simultaneously, he is wrong.
It is foolish to believe that economic growth is going to be stimulated while deporting millions of workers, consumers, entrepreneurs, and taxpayers. If the president really wants to create an immigration policy that fosters economic growth, he should grant undocumented immigrants a pathway to legal status, which would enable them to earn more, spend more, invest more, and pay more in taxes. In the case of taxes, the Institute on Taxation and Economic Policy (ITEP) illustrated this point well in a report released this week.
Undocumented immigrants pay approximately $11.7 billion in state and local taxes each year according to ITEP. This figure, which is based on 2014 data, “includes more than $7 billion in sales and excise taxes, $3.6 billion in property taxes, and $1.1 billion in personal income taxes.” Were currently undocumented immigrants able to acquire legal status, their total contribution to state and local tax coffers would be $2.2 billion higher—or $13.9 billion.
It is telling that undocumented immigrants, who tend to earn low wages, pay a greater share of their income (8 percent) in state and local taxes than the top 1 percent of taxpayers, who pay only 5.4 percent of their income. The state and local tax rate of currently undocumented immigrants would increase to 8.6 percent of their income if they had legal status.
Another important contribution made by undocumented taxpayers is their payments into the Social Security system. In 2013, the Social Security Administration estimated that “earnings by undocumented immigrants result in a net positive effect on Social Security financial status generally, and that this effect contributed roughly $12 billion to the cash flow of the program for 2010.” Since undocumented immigrants aren’t eligible for Social Security benefits, this revenue from undocumented workers subsidizes the retirement of U.S. citizens.
The tax payments of undocumented immigrants represent only one way in which they contribute to the U.S. economy. The Partnership for a New American Economy (PNAE), for instance, estimates that undocumented immigrants wielded $157.3 billion in purchasing power as of 2014—which is money spent in numerous U.S. businesses, which in turn supports many jobs held by U.S. citizens. In addition, more than 912,000 undocumented entrepreneurs generated $17.2 billion in business income that year.
Undocumented immigrants also create value through their labor, especially in those parts of the workforce where they are most concentrated. According to the Pew Research Center, undocumented immigrants are 26 percent of the labor force in farming occupations, 15 percent in construction, 9 percent in production, 9 percent in service, and 6 percent in transportation.
In other words, undocumented immigrants have a ripple effect on the U.S. economy—working, buying, investing, paying taxes. If the Trump Administration truly wants to improve the lot of native-born workers, it’s not going to do so by ripping 11 million people out of the economy. Instead, Trump should seek to empower all of the workers who are already here to earn good wages (under decent working conditions) and thereby give more back when they pay taxes, shop, or go into business for themselves.
Unfortunately, the anti-immigrant ideology which seems to be guiding the administration has little to do with economic reality.
Photo by 401(k) 2012.
FILED UNDER: Entrepreneurship, featured, Institute on Taxation and Economic Policy, Partnership for a New American Economy, Pew Research Center, taxes