A groundbreaking study has revealed that undocumented immigrants contributed a staggering $100 billion in federal, state, and local taxes in 2022. This report challenges the prevailing narrative that undocumented immigrants are a burden on social services, showing that they, in fact, significantly bolster the U.S. economy while being largely excluded from the benefits their taxes support.
The Institute on Taxation and Economic Policy (ITEP), a nonprofit think tank, conducted the study, uncovering that in 40 states, undocumented immigrants paid higher tax rates than the top 1% of earners. This striking disparity underscores the significant economic contributions of a group often marginalized in political debates.
In total, undocumented immigrants paid $96.7 billion in taxes in 2022. The study further estimates that if all undocumented immigrants had access to work authorization, they could contribute an additional $40.2 billion annually in taxes. This increase would result from higher wages and easier compliance with tax laws, highlighting the potential economic benefits of more inclusive immigration policies.
One of the most revealing findings comes from Nevada, where undocumented immigrants contributed $507.1 million in tax revenue in 2022, with $271.9 million coming from sales taxes alone. The effective tax rate for undocumented immigrants in Nevada was 8.4%, only slightly below the national average of 8.8%. In contrast, the top 1% of earners in Nevada paid an effective tax rate of just 2.8%, reflecting a broader trend of tax inequality.
Nationally, undocumented immigrants pay a substantial portion of their taxes through sales and excise taxes—46%, to be exact. The study identifies six states—New Jersey, New York, California, Florida, Texas, and Illinois—that each collected over $1 billion in tax revenue from undocumented immigrants in 2022.
Despite contributing to Medicare, Social Security, and Unemployment Insurance through federal payroll taxes, undocumented immigrants are typically barred from accessing these programs. This exclusion underscores a broader injustice, where millions contribute to a system from which they receive little or no benefit. Jackie Vimo, a senior analyst at the National Immigration Law Center, highlighted the challenges undocumented immigrants face, including exploitation by unscrupulous tax preparers.
The study’s release comes amidst a charged political climate. States like Texas have passed laws permitting the arrest of individuals suspected of illegal entry, while the Biden administration has taken executive action to expedite the deportation of asylum seekers. The 2024 Republican Party platform further exacerbates these tensions, promising the “largest deportation operation in American history” if former President Donald Trump is reelected.
However, the economic implications of mass deportations cannot be ignored. Carl Davis, ITEP’s research director, warned of the ripple effects deportations would have on local economies. For instance, if an undocumented immigrant is deported, their absence not only reduces sales tax revenue but also diminishes local business profits, creating a negative economic cycle.
The debate over undocumented immigrants’ economic contributions is further complicated by studies showing that children in undocumented households often receive educational benefits that exceed their parents’ tax contributions. Yet, as Richard C. Auxier of the Urban-Brookings Tax Policy Center notes, this is more an income issue than an immigration one. In the long run, these children are likely to contribute more to the economy, becoming net contributors as they enter the workforce.
As the U.S. faces a labor shortage, with 8.1 million job openings and 6.8 million unemployed workers, the role of undocumented immigrants in filling these gaps is crucial. States like South Dakota, Maryland, and Vermont are experiencing some of the most severe labor shortages. According to Vimo, deporting millions of immigrants would not only devastate families but also cripple local economies and exacerbate the workforce crisis.
In conclusion, this study sheds light on the vital role undocumented immigrants play in the U.S. economy, paying billions in taxes while receiving little in return. As the nation grapples with immigration policy, these findings should prompt a reevaluation of the economic and human costs of exclusionary practices.
