Do Illegal Immigrants Pay Taxes?
There is one guarantee in life, if you work and earn an income, you’ll pay taxes to the state and local governments. But is this the case if an individual is an undocumented immigrant?
Simply put, the answer is yes.
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If an immigrant is undocumented, they could easily get away with not paying certain taxes to the government. But there are times when an illegal immigrant has no choice but to pay taxes.
Based on research by The Institute on Taxation and Economic Policy, in 2013, more than $11.0 billion was collected in local and state taxes from more than 11 million undocumented immigrants. (Source: “Undocumented Immigrants’ State & Local Tax Contributions,” The Institute on Taxation and Economic Policy, last accessed October 17, 2017.)
Why Would an Undocumented Immigrant File Tax Returns?
In the United States, it is the law to pay taxes on income earned. Further, if an undocumented immigrant were to go in front of a judge in order to become a U.S. citizen, a history of paying taxes will put them in a more favorable light, possibly leading to them remaining in the country and no longer being undocumented.
There are some cases in which an employer will handle the tax paperwork on their employees’ behalf, which doesn’t get the Internal Revenue Service (IRS) involved. An illegal immigrant would complete a tax return because they are entitled to a tax refund. When an undocumented immigrant sends in a tax filing, it is done through an individual taxpayer identification number (ITIN), since there is no social security number.
Also, income taxes aren’t the only form of tax revenue for local and state governments; there are also property and sales taxes.
How Many Illegal Immigrants Pay Taxes?
It’s estimated that there are more than 11 million undocumented immigrants in the United States. It also is estimated that, of those, roughly five million illegal immigrants pay taxes to the government, based on their income.
How Much Do Undocumented Immigrants Pay in Taxes?
The average income tax rate charged by the U.S. government to undocumented workers is is eight percent. This is slightly more than tax rate charged to the top one percent of income earners in the country, whose average tax rate is 5.4%.
What Kind of Taxes Do Illegal Immigrants Pay?
There are three types of taxes that undocumented immigrants have to pay: income, property, and sales tax. Of those three types, the largest amount of revenue is earned is from sales tax, which accounts for approximately 60% of the total taxes that the government receives. Sales taxes are charged when people purchase goods and services, such as food, clothing, or entertainment.
Property tax accounts for roughly a third of all tax revenue received from illegal immigrants. This, along with sales tax, is an example of a tax that cannot be avoided by either a citizen or non-citizen.
Just under 10% of the tax revenue for municipal and state governments comes from income tax transfers.
There is a possibility that this percentage would be higher if fewer people avoided paying income tax. Right now, a taxpayer can elect to complete a tax return form and still end up not having to pay income tax. If an individual planned to come into the United States, work for a few years, and then leave, it’s possible that the government would never receive a dollar in income tax revenue from that person.
Which States Receive the Most Tax Revenue Income from Undocumented Immigrants?
California tops the list of states that receive the most tax revenue from illegal immigrants: $3.1 billion per year. This makes sense, since California is a border state. At times, individuals will enter the country and remain in the first state they’ve entered. Also, there are many industries in California that offer employment.
Texas is second on the list, receiving approximately $1.5 billion per year in tax revenue from undocumented immigrants. Like California, Texas is a border state. Therefore, entering the state is quite easy. There are also endless opportunities for employment within the state.
To round off the top of the list, New York is the state with the third-highest amount of taxes generated from undocumented residents, at slightly more than $1.0 billion per year. New York City, in particular, is known as the city that never sleeps, and it offers employment in many different sectors.
Which States Receive the Least Amount of Tax Revenue Income from Illegal Immigrants?
Looking at the three lowest-earning states, in terms of tax revenue from undocumented immigrants, it’s clear that their revenue from this segment of the population is much smaller than that found in the top three states.
For example, the last state on the list Montana, only earned $2.2 million in state and local taxes from illegal immigrants. The second-and third-last states on the list are Alaska and Wyoming, with $3.5 million and $3.6 million respectively in total tax revenue from undocumented residents.
Looking at a map and the employment opportunities in these states gives us clues about why they receive the the lowest amounts of taxes from undocumented workers. For instance, Alaska’s weather is on the cold end of the spectrum, and this results in fewer employment opportunities and lower numbers of individuals migrating to the state.
