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Study Reveals Undocumented Immigrants Contributed Nearly $100 Billion in Taxes

by Hyacinth

A new study reveals that undocumented immigrants contributed nearly $100 billion in federal, state, and local taxes in 2022, despite being excluded from many programs their taxes support. This finding challenges the narrative that undocumented immigrants drain social programs.

According to the Institute on Taxation and Economic Policy (ITEP), a nonprofit think tank, undocumented immigrants paid higher tax rates than the wealthiest 1% in 40 states. The study estimates that undocumented immigrants contributed $96.7 billion in taxes last year. Additionally, it suggests that granting work authorization to all undocumented immigrants could increase their tax contributions by $40.2 billion annually due to higher wages and easier tax compliance.

The report highlights the significant state and local tax revenue generated by undocumented immigrants. They pay 46% of these taxes through sales and excise taxes. States such as New Jersey, New York, California, Florida, Texas, and Illinois each collected over $1 billion from this demographic.

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Undocumented immigrants also pay property taxes, sales taxes, and federal payroll taxes, including contributions to Medicare, Social Security, and Unemployment Insurance. However, they are ineligible for benefits from these programs. They also face challenges in obtaining tax refunds, often falling victim to unscrupulous tax preparers, noted Jackie Vimo, senior policy analyst at the National Immigration Law Center.

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“There are many laws that prevent undocumented workers from accessing benefits,” said Richard C. Auxier of the Urban-Brookings Tax Policy Center. “At the end of the day, they’re just normal people paying normal taxes.”

Alexis Tsoukalas from the Florida Policy Institute observed that undocumented immigrants in Florida pay a tax rate of 8%, compared to 2.7% for the state’s wealthiest 1%. “Hundreds of thousands of everyday people are contributing more than their share to public services they cannot access, while those with the most to give contribute the least,” Tsoukalas said.

The study comes amid a politically charged environment. States are enacting laws to detain suspected illegal entrants, the Biden administration has announced actions to deport many asylum seekers without processing their claims, and the 2024 Republican Party platform includes plans for extensive deportations if former President Donald Trump is re-elected.

Experts argue that deporting undocumented immigrants would not only have a human cost but also an economic one. The Congressional Budget Office’s July report indicated that rising immigration could add $1.2 trillion in federal revenue from 2024 to 2034.

Carl Davis of ITEP emphasized the broader economic impact of deportations. “Deporting someone means fewer taxable purchases and reduced business profits due to fewer customers,” he explained.

Auxier noted that while children in undocumented households receive education benefits potentially exceeding their parents’ tax payments, this is an income issue rather than an immigration issue. Over time, these households may contribute more than they receive. “Parents pay into Social Security and Medicare without receiving benefits, while children, once employed, can become net contributors,” he said.

Policy experts also point to labor shortages, with 8.1 million job openings and 6.8 million unemployed workers, as a reason to value the economic contributions of undocumented immigrants. States like South Dakota, North Dakota, Maryland, Vermont, Maine, and South Carolina face significant labor shortages, according to the Bureau of Labor Statistics.

“Undocumented immigrants are already filling labor gaps,” said Vimo. “Mass deportations would not only cause human suffering but also severely impact the economy and workforce availability.”

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