Undocumented Immigrants in New Jersey Contribute Over $1 Billion in Taxes.
A recent study reveals that New Jersey is one of six states where undocumented immigrants contribute over $1 billion in state and local taxes. This study, conducted by the Institute on Taxation and Economic Policy, aims to quantify the tax contributions of undocumented immigrants across the nation.
The study highlights that more than a third of the taxes paid by undocumented immigrants fund programs such as Social Security, Medicare, and unemployment benefits, which they are unable to access. Carl Davis, a researcher for the study, stated, “Undocumented immigrants contribute significantly to our services through various tax collections. We found that the income tax compliance rate in undocumented communities is higher than many expect, but it’s essential to note that income tax is just one of many taxes.”
In 2022, the estimated 428,000 undocumented immigrants in New Jersey contributed $1.3 billion in state and local taxes. If these residents secured work authorization, their contributions would increase by an additional $332 million annually.
In 2023, undocumented immigrants comprised about 7% of New Jersey’s workforce, according to Pew Research. Despite their significant economic contributions, they remain excluded from most safety net protections. Eliana Fernandez, director of organizing at Make the Road New Jersey, emphasized the critical role of the undocumented community in the state’s economy and called for lawmakers to expand access to the safety net for these individuals.
Providing benefits to undocumented immigrants is a contentious issue. Governor Phil Murphy faced criticism from Republicans when he launched a $40 million pandemic relief fund for undocumented immigrants, providing some families with up to $4,000.
Nationally, the study estimates that 10.9 million undocumented immigrants contributed $96.7 billion in federal, state, and local taxes, with nearly $60 billion going to the federal government and about $37 billion to states and localities. Most of these contributions come from immigrants in six states: California, Texas, New York, Florida, Illinois, and New Jersey.
Granting work authorization to the current undocumented population would increase tax contributions by $40 billion to $136.9 billion. Most of this new revenue would go to the federal government, with around $7 billion benefiting states and localities.
The study underscores that immigration policy choices have substantial implications for public revenue. However, most undocumented immigrants are not eligible for work authorization due to a complex application process managed by the federal government. Eligibility requires being in the U.S. on a specific visa or belonging to a protected class, such as asylum seekers or Deferred Action for Childhood Arrivals (DACA) recipients.
With an influx of undocumented immigrants, there has been growing support from businesses and advocates for extending work authorization to those without legal status or visas. In June, the Biden administration announced it would expand work authorization for undocumented residents who have lived in the U.S. for at least 10 years and are married to U.S. citizens.
In New Jersey, the study found that about a third of taxes paid by undocumented immigrants are sales and excise taxes, another third are property taxes paid directly or indirectly through rent, and the remaining third are income and payroll taxes. The effective state and local tax rate for undocumented immigrants in New Jersey is 8.4%, compared to 10.5% for the state’s top earners. With legal working status, the tax rate for undocumented workers would rise to 9.5%.