$100 Billion in U.S. Taxes: Who’s Paying?

Did you know that undocumented immigrants in the United States paid nearly $100 billion in taxes? This figure emerges from the approximately 10.9 million individuals who, on average, contributed $8,889 per person. This substantial fiscal input contrasts starkly with the often-negative narratives surrounding immigration. To put this in perspective, the average American pays about $524,625 in taxes over their lifetime, amounting to 34.7% of their estimated total earnings. Let's explore the significance of these contributions and what they imply for U.S. tax policy. 

A Closer Look at the Tax Contributions:

The Institute of Taxation & Economic Policy detailed that undocumented immigrants' tax contributions span several categories, with approximately $37.3 billion going towards state and local taxes, about $32.3 billion allocated to federal social insurance, around $19.5 billion paid in federal income tax, and nearly $7.6 billion covering miscellaneous taxes, including property taxes. These figures highlight the diverse ways in which undocumented immigrants contribute financially to federal and local governments.

Despite paying about 26% of their income in taxes—similar to the median U.S. taxpayer rate—undocumented immigrants face several financial challenges: 

• No Tax Refunds: They cannot claim refunds for overpaid taxes, placing them at a financial disadvantage. 
• Ineligible for Benefits: Despite contributing billions, particularly around $25.7 billion to social security, they are barred from receiving benefits from these programs.

Geographic Distribution of Tax Contributions:

Researchers utilized a combination of demographic and income data spanning five years leading up to 2022. They estimated earnings within various income brackets and applied corresponding effective tax rates to paint a comprehensive fiscal picture. These contributions are not uniformly distributed across the country. States like New York, California, Texas, Florida, Illinois, and New Jersey each collect over $1 billion from undocumented immigrants, highlighting significant regional fiscal inputs. 

The Institute of Taxation & Economic Policy provided a detailed breakdown of the taxes paid by undocumented immigrants, which included several categories. Sales and excise taxes accounted for 46% of the total, amounting to $15.1 billion. Property taxes represented 32%, which totaled $10.4 billion. Income taxes made up 21% of the contributions, equaling $7 billion. Additionally, miscellaneous taxes comprised about $0.5 billion from other sources. This diverse allocation highlights the significant financial contributions that undocumented immigrants make across various tax categories to federal and local governments.  

Potential Fiscal Benefits of Legal Recognition:

The report suggests that granting legal privileges to undocumented immigrants could significantly enhance fiscal benefits: 

• Enhanced Revenue for Governments: An estimated increase in revenue of 19% or $7.05 billion for local and state governments. 
• Increased Federal Contributions: A rise in contributions to federal programs by $21.7 billion for social insurance, $10.8 billion for federal income taxes, and $0.6 billion for other taxes. 

Implications for Immigration Policy:

These findings challenge traditional views on the economic impact of undocumented immigrants and are vital for policymakers and tax professionals. They suggest the need for nuanced policy approaches that recognize and integrate the economic roles of all residents.  

Understanding the full scope of economic contributions from undocumented immigrants is essential as the nation navigates complex immigration issues. This analysis not only informs but also enriches the ongoing dialogue about the role of immigration in shaping the fiscal and social fabric of the United States. It underscores the importance of viewing immigration not just through a lens of cost but as a potential economic benefit, urging a reconsideration of current fiscal and immigration policies. 

In conclusion, the substantial contributions of undocumented immigrants to U.S. tax revenues reveal a story of resilience and significant impact. As policymakers and the public grapple with complex immigration issues, recognizing the full economic contributions of all residents is crucial. This narrative not only informs but also prompts a reevaluation of the role of immigration in the broader economic landscape. Don't forget to subscribe to our newsletter for the latest updates and expert insights.