Daily Tax Report: State provides authoritative coverage of state and local tax developments across the 50 U.S. states and the District of Columbia, tracking legislative and regulatory updates,...
Undocumented immigrants pay 8 percent of their income in state and local taxes, while the wealthiest 1 percent of American's pay just 5.4 percent. In this article, Lisa Christensen Gee of the Institute on Taxation and Economic Policy discusses the state and local tax contributions made by undocumented immigrants, and how a pathway to citizenship could increase their contributions.
By Lisa Christensen Gee
Lisa Christensen Gee is a senior policy analyst at the Institute on Taxation and Economic Policy.
Undocumented immigrants living in the United States contribute to our national and state economies in many ways including through the payment of taxes. To better inform debates that often overlook if not misconstrue this latter point, Undocumented Immigrants' State and Local Tax Contributions is a report by the Institute on Taxation and Economic Policy (ITEP) that provides state-by-state and national estimates on the current state and local tax contributions of the 11 million undocumented immigrants living in the United States. The ITEP report also includes estimated increases in contributions if all these taxpayers were granted legal status as part of comprehensive reform.
Undocumented immigrants contribute significantly to state and local taxes, collectively paying an estimated $11.74 billion a year. Like other people living and working in the United States, undocumented immigrants pay property taxes on their homes or through a portion of the rent they pay. They pay sales taxes when they purchase clothing or school supplies, fill up their cars with gas, or purchase celebratory drinks for a special occasion. Many also pay income taxes, with at least 50 percent of undocumented immigrant households filing income tax returns using Individual Tax Identification Numbers (ITINs).
Undocumented immigrants not only pay taxes, they do so at a rate much higher than the wealthiest taxpayers in our nation. As a group, the effective state and local tax rate of undocumented immigrants (total amount of taxes paid divided by their income) is equal to 8% nationwide. To put this in perspective, the average taxpayer in the top 1 % of income in the U.S. pays only 5.4 percent of their income in state and local taxes.
If the 11 million undocumented immigrants living in the United States were granted a pathway to citizenship and could work here legally, their state and local tax contributions can be expected to increase by more than $2.1 billion a year, their average effective tax rates increasing to 8.6 percent. Legal status paves the way to better training, skills, and job opportunities, which is correlated with higher wages; with higher wages comes more taxable income and more purchases subject to sales and other taxes. Legal status also would increase incentives for full compliance with income tax filing, thereby boosting tax receipts.
The question of federal immigration policy of course exceeds the concerns that can be addressed in a fiscal note, but at a time when most states are facing revenue shortages, there are also very real fiscal consequences to the fate of undocumented immigrants in this country that states and localities would be remiss to ignore—billions of dollars in state and local revenue.
Copyright © 2017 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)