Undocumented immigrants who live and work in the United States pay billions of dollars in taxes every year to state and local governments. Given the chance to earn legal status, they would pay even more. Those are the simple yet powerful conclusions of a new study by the Institute on Taxation and Economic Policy (ITEP). According to ITEP, “undocumented immigrants paid an estimated total of $10.6 billion in state and local taxes in 2010.” Moreover, “allowing undocumented immigrants to work in the United States legally would increase their state and local tax contributions by an estimated $2 billion a year.” In short, legalization pays.
Undocumented immigrants pay taxes in many different forms. As ITEP explains, “in addition to paying sales and excise taxes when they purchase goods and services like utilities, clothing and gasoline, undocumented immigrants also pay property taxes directly on their homes or indirectly as renters, and at least half are paying income taxes despite lacking legal status.” The net result in nearly $11 billion per year in state and local tax payments, including:
- $8.1 billion in sales and excise taxes.
- $1.2 billion in income taxes.
- $1.2 billion in property taxes.
The taxpaying power of undocumented immigrants would grow were they able to acquire legal status. According to ITEP:
“Legalization would increase immigrant wages both because of their increased bargaining power with employers and because of their increased investment in their own language and skill development, thus increasing the taxes paid by those same immigrants. But, the most significant revenue gain comes from simply having these immigrants fully participate in the federal, state and local tax system, requiring them to pay state personal income taxes.”
ITEP estimates that, provided the opportunity to earn legal status, formerly undocumented immigrants would pay a total of $12.7 billion in state and local taxes each year, including:
- $8.5 billion in sales and excise taxes.
- $2.8 billion in income taxes.
- $1.3 billion in property taxes.
Looked at differently, undocumented immigrants paid approximately 6.4 percent of their income on state and local taxes in 2010. With legal status, that would increase to approximately 7 percent.
More tax revenue is but one of the economic benefits that would flow from legalization of the undocumented population. Formerly undocumented immigrants would earn more, spend more, save more, invest more, and produce more. The spillover effects would be felt throughout the U.S economy to the benefit of all workers, foreign-born and native-born alike.
FILED UNDER: immigration legislation, state immigrant tax revenue, taxes, undocumented immigration