Undocumented immigrants pay billions in taxes: study

Undocumented immigrants pay billions in taxes: study · Yahoo Finance

Immigration reform is an especially contentious issue in this election cycle. But one nonprofit is hoping to set the record straight about at least one aspect of undocumented immigrants: According to a report by The Institute on Taxation and Economic Policy (ITEP), undocumented immigrants pay state and local taxes like any other American citizen.

The non-partisan research organization, updated its study, “Undocumented Immigrants’ State & Local Tax Contributions,” and researchers found that undocumented immigrants in the US pay an estimated $11.64 billion in state and local taxes annually.

“The best evidence suggests that at least 50% of undocumented immigrant households currently file income tax returns using Individual Tax Identification Numbers (ITINs), and many who do not file income tax returns still have taxes deducted from their paychecks,” the report says. (As of 2013, there are 11 million undocumented immigrants living in the US.) Included in their near $12 billion in state and local taxes contribution, around $6.9 billion comes from sales and excise taxes, $3.6 billion from property taxes and $1.1 billion from personal income taxes.

Undocumented immigrants in the US pay on average an estimated 8% of their incomes in state and local taxes – compare that to the top 1% of taxpayers who pay an average effective tax rate of 5.4%, according to the report.

A more interesting find was that if all of the undocumented immigrants were granted legal status, allowing them to work legally, their respective state and local tax contributions would increase by around $2.1 billion a year while their nationwide tax rate would increase to 8.6%.

In addition, President Obama’s executive actions in 2012 and 2014 – called Deferred Action for Childhood Arrivals and Deferred Action for Parents of Americans and Lawful Permanent Residents – provides eligible undocumented immigrants work permits and temporary relief from deportation. The Supreme Court is scheduled to review the executive actions this spring, and if it rules in favor of the Obama administration, it could make way for an increase in tax contributions from the 5 million undocumented immigrants who stand to benefit.

ITEP’s study found that if Obama’s programs are fully implemented, current state and local tax contributions could increase by more than $805 million. The report says: “Due to the mandates of the executive actions and the strong incentives undocumented immigrants have for compliance with the tax laws, it is also logical to assume full tax compliance for this impacted population.”

What’s more, if Congress passes a comprehensive immigration reform and gives legal status to current undocumented immigrants, it would open them up to a wider range of employment opportunities, higher pay – and higher taxes, as well. “Multiple studies have shown that legal immigrants have higher wages than undocumented immigrants, thus gaining legal status could lead to a boost in wages,” ITEP said.