Immigration Reform News 2015: Undocumented Immigrants Paid $12 Billion in Taxes, Says Study
About 11.4 million undocumented immigrants in the U.S. paid nearly $12 billion in state and local taxes in 2012, and granting them lawful permanent residence would further increase total tax collected, a study revealed.
The recent study made by the Washington-based Institute on Taxation and Economic Policy said the average effective state and local tax rate by undocumented immigrants in 2012 was estimated at 8 percent, higher than the 5.4 percent effective tax rate by the top 1 percent of taxpayers.
The Institute said taxes paid by undocumented immigrants in 2012 ranged from as low as $3.23 million in Montana to as high as $3.26 billion in California.
“Granting lawful permanent residence to all 11.4 million undocumented immigrants and allowing them to work in the United States legally would increase their state and local tax contributions by an estimated $2.2 billion a year,” the study said. “Their nationwide effective state and local tax rate would increase to 8.7 percent, which would align their tax contributions with economically similar documented taxpayers.”
The study also said President Obama’s executive actions in 2012 and 2014 – the Deferred Action for Childhood Arrivals and Deferred Action for Parents of Americans and Lawful Permanent Residents – that would make temporary deportation reprieve for about 5.2 million undocumented immigrants would increase state and local tax contributions by an estimated $845 million per year once these were fully in place.
“It would also raise the effective state and local tax rate for this population from 8.1 to 8.7 percent, but the state and local revenue gain is smaller under the executive actions because fewer undocumented immigrants are affected (around 45 percent of the total) and the actions do not grant a full pathway to lawful permanent residence,” the Institute said.
Undocumented immigrants pay state and local taxes including sales and excise taxes when they purchase goods and services, property taxes on their homes or indirectly as renters and income taxes.
“The best evidence suggests that at least 50 percent of undocumented immigrant households currently file income tax returns using Individual Tax Identification Numbers and many who do not file income tax returns still have taxes deducted from their paycheck,” the Institute said.
Granting them lawful permanent residence and allowing them to work in the U.S. legally would also boost state and local taxes, it said.
“Personal income taxes would account for 52 percent of the revenue gain, increasing collections by more than $1.1 billion due to both increased earnings and full compliance with the tax code. Sales and excise taxes would increase by $708 million, and property taxes would grow by $364 million. The overall state and local effective tax rate paid by undocumented immigrants would increase from 8 percent to 8.7 percent,” the study said.
