Report on Federal and State Tax Contributions by Undocumented Immigrants
The Institute on Taxation and Economic Policy, a non-profit, non-partisan tax policy organization, analyzed data on federal, state, and local tax payments made by undocumented immigrants nationwide. The resulting report contains estimates of the overall tax contributions of the approximately 10.9 million undocumented immigrants living in the U.S. as of 2022, as well as state-by-state estimates for those immigrants’ payments of state and local taxes. The report also forecasts the growth in tax contributions that would occur under a scenario in which these taxpayers were granted work authorization.
Report Highlights
Undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022. Of that, $59.4 billion went to the federal government and $37.3 billion was paid to state and local governments.
Undocumented immigrants paid federal, state, and local taxes of $8,889 per person in 2022. In other words, for every 1 million undocumented immigrants who reside in the country, public services receive $8.9 billion in additional tax revenue.
More than a third of the tax dollars paid by undocumented immigrants go toward payroll taxes dedicated to funding programs that these workers are barred from accessing. Undocumented immigrants paid $25.7 billion in Social Security taxes, $6.4 billion in Medicare taxes, and $1.8 billion in unemployment insurance taxes in 2022.
At the state and local levels, slightly less than half (46 percent, or $15.1 billion) of the tax payments made by undocumented immigrants are through sales and excise taxes levied on their purchases. Most other payments are made through property taxes, such as those levied on homeowners and renters (31 percent, or $10.4 billion), or through personal and business income taxes (21 percent, or $7.0 billion).
Six states raised more than $1 billion each in tax revenue from undocumented immigrants living within their borders: California ($8.5 billion), Texas ($4.9 billion), New York ($3.1 billion), Florida ($1.8 billion), Illinois ($1.5 billion), and New Jersey ($1.3 billion).
In a large majority of states (40), undocumented immigrants pay higher state and local tax rates than the top 1 percent of households living within their borders.
Income tax payments by undocumented immigrants are affected by laws that require them to pay more than otherwise similarly situated U.S. citizens. Undocumented immigrants are often barred from receiving meaningful tax credits and sometimes do not claim refunds they are owed due to lack of awareness, concern about their immigration status, or insufficient access to tax preparation assistance.
Providing access to work authorization for undocumented immigrants would increase their tax contributions both because their wages would rise and because their rates of tax compliance would increase. Where work authorization provided to all current undocumented immigrants, their tax contributions would rise by $40.2 billion per year to $136.9 billion. Most of the new revenue raised ($33.1 billion) would flow to the federal government while the remainder ($7.1 billion) would flow to states and localities.
The U.S. stands to lose $8.9 billion in tax revenue for every 1 million undocumented immigrants who are sent out of this country under a program of mass deportation.