Undocumented immigrants contribute to the U.S. economy in many ways. An updated 50-state study, ‘Undocumented Immigrants’ State and Local Tax Contributions’, by the Institute on Taxation and Economic Policy (ITEP) finds that undocumented immigrants’ tax contributions would increase significantly under the Obama Administration’s executive actions and even more substantially under comprehensive immigration reform granting all undocumented immigrants lawful permanent residence.
They fill key jobs, they sustain U.S. businesses through their purchase of goods and services, and contrary to popular misconceptions, they pay taxes to federal, state, and local governments. Their contributions would be even greater if they had a chance to earn legal status and did not have the danger of deportation constantly hanging over their heads. With legal status, they would be able to change jobs more easily and as they found better jobs and their wages increased, their economic clout as consumers and taxpayers would rise as well. This is a winning scenario for both the immigrants themselves and the native-born population.
They also pay property taxes even if they rent. Plus, as ITEP points out, “the best evidence suggests that at least 50 percent 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 11 million undocumented immigrants paid $11.64 billion in state and local taxes. ITEP’s analysis finds their combined nationwide state and local tax contributions would increase by $805 million under full implementation of the administration’s 2012 and 2014 executive actions and by $2.1 billion under comprehensive immigration reform. This would raise the effective state and local tax rate of this group from 8.1 percent to 8.6 percent.
“Regardless of the politically contentious nature of immigration reform, the data show undocumented immigrants greatly contribute to our nation’s economy, not just in labor but also with tax dollars,” said Meg Wiehe, ITEP’s State Tax Policy Director.
These estimates should be kept in mind as for how best to deal with the 11 million undocumented immigrants who now live in the United States. In spite of their undocumented status, these immigrants, and their family members are adding value to the U.S. economy; not only as taxpayers, but as workers, consumers, and entrepreneurs as well. If they had legal status, they would contribute even more. On the other hand, the only alternative, mass deportation would be very costly and needlessly destructive. Common
sense should dictate which route to take.