People Who Are Undocumented: Occupations, Taxes Paid, and Long-Term Economic Benefits

Jul 29, 2024 Immigration Research Initiative

The United States is home to over 45 million immigrants, including an estimated 10 million immigrants who are undocumented, according to the most recent estimate of the undocumented population by the Center for Migration Studies, for 2019.¹ This is the pre-covid number of people who were undocumented, many of whom had been here for years. More recent arrivals will also be discussed below.

About three quarters of people who are undocumented come from Latin America—Mexico, Central America, South America, and a portion of the Caribbean. In addition, 17 percent come from Asia, 4 percent from Africa, and 3 percent from Eastern or Western Europe. Top individual countries of birth, after Mexico, are El Salvador, Guatemala, India, Honduras, and China, each making up between 3 and 7 percent of the total.

People who are undocumented are severely limited in their ability to move upward in the economy, so they are typically working in low-wage jobs. Yet, they work in a wide range of low-wage jobs, from retail shops to restaurants, construction, housekeeping, building services, and more. Twenty-nine percent work in services, 24 percent in the sector that includes construction, and 19 percent in production and transportation, and 17 percent in some kind of management position (including a few in professional specialty jobs).

It has for many years been nearly impossible for the vast majority of people who are undocumented to normalize their papers in the United States. Most people who are undocumented (58 percent) have been in this country for ten years or more.

Where Immigrants Who Are Undocumented Come From, And Where They Work

Figure 1: Immigration Research Initiative tabulation of data from the Center for Migration Studies estimates based on 2019 ACS data.

Immigrants Who Are Undocumented Pay $97 Billion in Total Taxes, Including $34 Billion Paying For Social Insurance Programs that Exclude Them From Benefits

Figure 2. Immigration Research Initiative tabulation of data from Institute on Taxation and Economic Policy. People who are undocumented have wages withheld to pay for these programs, yet they are excluded from the benefits other workers get. (Unemployment Insurance is a joint federal/state program.)

Even People Who Are Undocumented Pay Taxes

Despite widespread misunderstanding about the fact, people who are undocumented also pay local, state, and federal taxes.

As a July 2024 report from the nonpartisan Institute on Taxation and Economic Policy (ITEP) shows, people who are undocumented paid $97 billion in taxes in 2022. A total of $34 billion comes from payroll taxes to cover programs that exclude people who are undocumented from getting benefits: $25.6 billion paid to Social Security, $6.4 billion to Medicare, and, through contributions of their employers, $1.8 billion to unemployment insurance (which is a joint federal and state program). 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.²

Of the $97 billion total, $59 billion is to federal taxes and $37 billion in state and local taxes. Among state and local taxes are$15 million in sales tax, $10 billion in property tax, $7 billion in personal and business income taxes as well as more in other taxes. People who are undocumented pay an effective tax rate (total taxes paid divided by total income) of 10 percent in state and local taxes. In fact, in 40 states, according to ITEP analysis, people who are undocumented pay a higher effective tax rate than is paid by the top 1 percent of tax filers in that state.

In ten states, plus Washington, DC, people using ITINs are able to claim the Earned Income Tax Credit they have earned, in other states they are excluded from these earned benefits.³

State and Local Taxes Paid by People Who Are Undocumented

Figure 3. Immigration Research Initiative tabulation of data from Institute on Taxation and Economic Policy.

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. The gains to state and local governments around the country would be substantial: instead of $37 billion, the total revenues would be $44 billion, a gain of $7 billion. ITEP does not estimate the impact of legalization on federal revenues.

Asylum Seekers and New Immigrants Expand the Economy in the Long Run

In the past two years, there has been a sudden and unexpected increase in the number of immigrants arriving to the United States. These new arrivals include people who are seeking asylum, as well as people who may be eligible for temporary protected status (TPS) or other forms of official status—and as a result will likely eventually get at least temporary work authorization. Others are undocumented and will likely be in a similar position as the 10 million other immigrants who are undocumented.

The Congressional Budget Office (CBO) reported in July 2024 that the unexpected increase in the number of immigrants to the U.S. can over the long run be expected to have an overall positive economic and budget impact. The CBO shows an increase to the overall GDP of the United States of $8.9 trillion over the 10-year period it considers, 2024 to 2034. At the end of the 10-year period, that represents a 3.2 percent increase in GDP compared to what it would be without these added immigrants.⁴

The impact on the federal budget is positive as well. Overall, the surge in immigration is expected to decrease the federal deficit by $900 billion over the 10-year period. That is due to an expected increase of $1.2 trillion in federal revenues, as well as an increase of $0.3 trillion in added federal expenses ($1.2 trillion minus $0.3 trillion = $900 billion).

There are significant short-term expenses and challenges in getting new immigrant arrivals settled, most significantly around short-term shelter and finding long-term housing, but also in legal services and education of children for example.

In the long run, however, communities around the country clearly benefit from a growing population and labor force. A series of reports by Immigration Research Initiative in early 2024 modeled the long-term economic outcomes for new immigrants in different regions of the state. Nationwide, immigrants were found to likely increase wages from a median of $22,000 in the first 2 years to $32,000 from 5-10 years and $40,000 for more than 20 years. State and local taxes paid were seen to increase from $2.5 million per 1,000 added workers to $3.6 million per 1,000 workers after immigrants have been here for about five years.⁵

1
Estimate of the number of immigrants who are undocumented and their characteristics are Immigration Research Initiative’s tabulation of data from the Center for Migration Studies (CMS). http://data.cmsny.org/ The CMS data is the most recent available based on the American Community Survey of 2019. More recent migrants are not included in this analysis, and are considered later in the paper. The total number of immigrants in the United States is available from the Census Bureau, and is 45 million in 2019 (the year matching the CMS data), and 46 million in 2022 (the most recent available).
2
“Taxes Paid by Undocumented Immigrants,” Carl Davis, Marco Guzman, and Emma Sifre, Institute on Taxation and Economic Policy, July 2024. One notable exception: Colorado recently passed a Benefit Recovery Fund that allows workers who are undocumented to receive a form of unemployment compensation if they would otherwise qualify for regular unemployment benefits. The Colorado Benefit Recovery Fund is described here: https://ona.colorado.gov/press-release/media-advisory-benefit-recovery-fund-applications-now-open.
3
The overwhelming majority of people filing taxes using ITINs are people who are undocumented, but there are some limited reasons others may also file this way. The National Immigration Law Center has mapped the areas where people filing taxes with ITINs can claim the Earned Income Tax Credit: https://www.nilc.org/issues/taxes/tax-credit-itin-filers/
4
[i] Congressional Budget Office projection is available at: https://www.cbo.gov/publication/60419#:~:text=One%20factor%20that%20is%20projected,have%20occurred%20without%20the%20surge.
5
For data about asylum seekers and new immigrants, see the Immigration Research Initiative Report at: https://immresearch.org/publications/economic-projections-for-asylum-seekers-and-new-immigrants-u-s-and-50-states/