Some are spending Tax Day at their local post office, grumbling in line about their taxes being too high. They might direct their anger at the government or others might even turn their anger on undocumented immigrants, who television personality Bill O’Reilly once blamed for “dodging taxes.” In reality, undocumented immigrants pay billions in taxes, and would likely be paying tens of billions more if Congress passed comprehensive immigration reform.
A study by the Institute for Taxation and Economic Policy (ITEP) found that undocumented immigrants paid $10.6 billion in state and local taxes in 2010, a figure that includes $1.2 billion in personal income taxes, $1.2 billion in property taxes, and more than $8 billion in sales and excise taxes. The study found that undocumented immigrants are “likely paying about 6.4 percent on average of their income in state and local taxes,” which is a tax rate close to that of “taxpayers in similar income situations and, in many states, can be higher than the effective tax rates paid by upper income taxpayers.”
With the exception of those living in tax-free states, sales taxes are automatic. Sales and excise taxes include goods and services like utilities, clothing, and gasoline. Property taxes are likely unavoidable, even for renters. Landlords pass on apartment taxes by padding the rent, which undocumented immigrants help to pay. An April 2013 Social Security Administration report estimated that undocumented immigrants and their employers paid $13 billion in payroll taxes. And according to a recent Harvard University study, undocumented immigrants’ payroll contributions to Medicare totaled more than $3 billion each year.
State breakdowns show similar immigrant contributions to state income taxes, sales and excise taxes, and properties, with California’s undocumented immigrants paying more than $2.2 billion in state and local taxes in 2010, Virginia’s undocumented population contributing an estimated total of between $145 million and $174 million, and Colorado’s undocumented population paying between $159 million and $194 million in total taxes in 2005.
A recent Center for American Progress report argued that immigration reform could increase tax revenues since legal status and an eventual pathway to citizenship would mean: there would be five million more immigrants paying payroll taxes “on the books;” that immigrants would pay $69 billion more in federal taxes and $40 billion more in state and local taxes over a ten-year period; that workers would add $606 billion to the Social Security trust fund; that there would be a net $155 billion contribution to the Medicare trust fund; and that reform itself would reduce the deficit by $820 billion over the next two decades.