The United States is home to 50 million immigrants, including about 12 million immigrants who are undocumented, according to the most recent estimates.
Despite widespread misunderstanding about the fact, yes, immigrants, including people who are undocumented, do pay local, state, and federal taxes.
People who are undocumented paid $97 billion in taxes in 2022.
Of the $97 billion total, $59 billion is to federal taxes and $37 billion in state and local taxes.
Our regressive tax system means lower-income people—immigrants and non-immigrants—often pay a higher effective tax rate than higher-income people. In fact, in 40 states, people who are undocumented pay a higher effective tax rate the top 1 percent of tax filers.
Immigrants Pay the Tax Yet Are Excluded from the Benefits
Some taxes are impossible to avoid. Everyone pays sales tax at the store. Everyone pays property tax, both renters who help the landlord afford the tax and owners who pay it directly. Immigrants who are undocumented often also file income tax returns, typically in the hope that doing the right thing will put them in a better position to adjust their immigration status.
Immigrants who are undocumented and work by giving their employer a Social Security number that is not valid wind up paying into systems that support all of us, but from which they are explicitly excluded. That adds up to:
- $25.7 billion paid in Social Security taxes, even though the roughly 60 percent who pay into the system will not receive Social Security benefits the way other Americans do when we retire.
- $6.4 billion in Medicare taxes, even though those who pay will not receive Medicare benefits the way other Americans do when we reach age 65.
- $1.8 billion in unemployment insurance taxes, even though those in jobs where their employers pay the tax will not be eligible for unemployment insurance the way other workers are if they lose their job.
In other words, workers who are undocumented have wages withheld or employers are required to pay for programs that benefit other Americans, but which systematically leave them behind.
Legal Status Would Be a Win-Win
The way things are today, immigrants pay more in taxes than they wind up adding in costs to the government. Over the past 30 years, immigrants generated a total of $10.6 trillion more in federal, state and local tax revenues than they induced in new spending, according to a Cato Institute report, reducing the federal debt by a total of $14.5 trillion. The immigrants who are undocumented likely reduced the deficit by $1.7 trillion (see table 10) over 30 years.
If people who are undocumented were allowed a pathway to citizenship, through federal legislation, there would be a gain to the economy, to individual workers, and also to the state tax coffers. With legal status, immigrants who are currently undocumented would advance in their jobs, and a higher proportion would also file income tax returns. Just looking at the gains to state and local governments, we see the increase would be substantial: instead of $37 billion, the total revenues would be $44 billion, an increase of $7 billion.
