Federal and State Taxes: Without fail, each Tax Day a prevalent myth resurfaces that conceals the truth about immigrants’ contributions to federal, state, and local taxes. Bolstered by social media and other outlets, it misleadingly asserts that immigrants, particularly those who are undocumented, evade taxes. The facts don’t back up these claims.
Immigrants, including undocumented immigrants, pay taxes. Our analysis of the 2022 American Community Survey (ACS) found that immigrants in the United States have a combined household income of $2.1 trillion and contribute $382.9 billion to federal taxes and $196.3 billion in state and local taxes, leaving them with $1.6 trillion in spending power.
Our findings underscore the fact that immigrants have significant economic influence, helping to support local communities not only as consumers but also as taxpayers. Like all U.S. residents, immigrants do use public services, such as education, healthcare, and public safety.
But the economic contributions of immigrants far exceed the costs of those additional public services. A 2023 CATO study found that first-generation immigrants contributed an average of $16,207 per capita to the economy in 2018 yet cost an average of just $11,361. This resulted in a net fiscal benefit of $4,846 per immigrant in 2012 dollars.
Undocumented immigrants in the U.S. contribute to the tax system through sales, income, and property taxes, often using Individual Tax Identification Numbers (ITINs) to file income tax returns. In 2022, undocumented immigrants had a combined household income of $290.0 billion and paid $21.5 billion in federal taxes and $13.6 billion in state and local taxes. Their combined spending power was $254.8 billion. Despite their substantial contributions, many do not qualify for the benefits their taxes support, such as social security and Medicare benefits or the Earned Income Tax Credit.
Taxes paid by undocumented immigrants also help pay for public higher education, yet undocumented immigrants are also often unable to reap the benefits through in-state tuition options. An analysis of the Higher Education Immigration Portal developed by the Presidents’ Alliance on Higher Education and Immigration, revealed that 26 states do not provide in-state tuition to undocumented residents.
As we move through another tax season, addressing and dispelling the widespread misconceptions about immigrants and their tax contributions is crucial. The facts are undeniable: immigrants, including those who are undocumented, not only meet their tax obligations but also significantly enhance our economy through their contributions. Their collective household income leads to considerable federal and state tax payments, making a profound economic impact. Moreover, their spending power, running into trillions, highlights their indispensable role as consumers, and effective taxpayers, in our communities.
Yet despite their notable contributions many immigrants, especially those who are undocumented, face a challenging contradiction. They contribute to services through their taxes yet remain ineligible to access several services. This situation lays the groundwork for a deeper conversation on fairness and community support. In addressing key immigration issues, our discussions and decisions must be founded on fact. This approach ensures that every member of our society is appropriately recognized for their contributions.
FILED UNDER: Individual Tax Identification Number, taxes
