Undocumented Immigrants Pay Billions in State and Local Taxes and Would Pay Substantially More Under Comprehensive Immigration Reform


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Immigration policy—it’s a politically contentious issue but one of key importance in current state and national debates. To dispel inaccuracies and provide sufficient information to inform these debates, ITEP released today an updated report on the state and local tax contributions of undocumented immigrants. 

The report, Undocumented Immigrants’ State and Local Tax Contributions, finds that undocumented immigrants living in the United States collectively pay an estimated $11.64 billion dollars each year in state and local taxes. Contributions vary by state, ranging from less than $2.2 million in Montana with an estimated undocumented population of 4,000 to more than $3.1 billion in California, home to more than 3 million undocumented immigrants. Nationwide, the average tax contributions of undocumented immigrants equal 8 percent of their income. In contrast, the top 1 percent of taxpayers in the United States pay an average nationwide effective tax rate of just 5.4 percent.

See the report for state-by-state estimates on undocumented immigrants’ current state and local tax contributions, including breakdowns of sales and excise, personal income, and property taxes.

Further, the report shows how the tax contributions of undocumented immigrants would increase if more were granted a pathway to legal status due to increased earnings and higher compliance with the tax code. If all undocumented immigrants in the United States were granted legal status and allowed to work legally, their state and local tax contributions would increase by an estimated $2.13 billion a year, with their nationwide effective state and local tax rate increasing to 8.6 percent.

The report also examines the potential state and local tax impact if President Obama’s 2012 and 2014 executive actions are upheld and fully implemented.  We estimate that the tax contributions of the more than 5 million undocumented immigrants who would be eligible for temporary reprieve under the actions would increase by an estimated $805 million. (Smaller gains in this scenario reflect the fact that the executive actions would only affect around 46 percent of the undocumented population and do not grant a full pathway to legal status.)

See the report for state-by-state estimates of the post-reform state and local tax contributions of the total undocumented immigrant population and of the 5 million undocumented immigrants directly affected by President Obama’s executive actions.

While our estimates look only at the tax consequences of immigration reform on state and local taxes, it’s important to note that our findings mirror those at the federal level. Full immigration reform at the federal level would decrease the deficit and generate more than $450 billion in additional federal revenue over the next decade, according to a 2010 report from the non-partisan Congressional Budget Office. And the president’s executive actions are estimated to have positive effects on labor market growth and productivity, as well as wages and economic growth according to both the Council of Economic Advisers and the Center for American Progress.

To view the full report, find state-specific data, or review our methodology go to www.itep.org/immigration/.

Thank you for visiting Tax Justice Blog. CTJ and ITEP staff will soon retire this domain. But ITEP staff are still blogging! You can find the same level of insight and analysis and select Tax Justice Blog archives at our new blog, http://www.justtaxesblog.org/

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