As the IRS processes millions of tax filings for income earned in 2017, both documented and undocumented immigrants are among the payers who file the accounting paperwork. However, undocumented immigrants receive far fewer benefits in return for their tax dollars than do other taxpayers. Undocumented taxpayers, for example, can’t claim Social Security or Medicare regardless of the amount they’ve paid into the system. Additionally, the earned income tax credit is another benefit off the table for undocumented taxpayers.
According to the Institute of Taxation and Economic Policy, about half of undocumented immigrants working in the United States file a tax return. The Washington, D.C.-based think tank reports 2015 taxes paid by the group at close to $24 billion. The amount reflects returns filed by 4.4 million individual workers without Social Security numbers.
While undocumented immigrants filing tax returns don’t receive immediate benefits for their efforts those who do file create a solid paper trail documenting when they entered the country and their duration of tax dollar contributions. With this, the potential to gain legal status improves as past reform effort requirements have included tax payment.
More prominently than at the federal level, undocumented immigrants significantly contribute to state and local taxes, “collectively paying as estimated $11.64 billion a year,” according to a published report. Included in this figure is $6.9 billion collected in sales and excise taxes, $3.6 billion collected in property taxes that are either paid from direct property ownership or through rental payments and $1.1 billion paid in personal income tax.
Within the state and local tax collection range is around $2.2 million from Montana’s estimated 4,000 undocumented immigrants working in the state to more than $3.1 billion collected from more than 3 million undocumented immigrants working in the state of California.
Currently, undocumented immigrants around the country pay an average of 8 percent of their income to state and local taxes. Granting legal status to these immigrants, experts estimate, state and local income tax contributions would increase by more than $2 billion per year, raising the collective rate to around 8.6 percent of income.
As Congressional resolve around the Deferred Action for Childhood Arrivals (DACA) program remains elusive, the importance of recognizing the importance of immigrant contributions elevates.
“The 1.3 million young immigrants eligible for deferred action contribute tax dollars to communities that help pay for schools, public infrastructure, and other services. Their contributions could be increased by taking steps to ensure that all individuals eligible for deferred action are enrolled, or even by offering a path to citizenship. Conversely, stripping their temporary lawful status or deporting them would increase their tax contributions and deprive our country of a dedicated and diverse generation.”