Undocumented Immigrants Good for Tax Base, Could Be Better

The debate to try to find an immigration reform bill that can get 60 votes has started in the Senate. One persuasive argument that is rarely made in favor of granting undocumented immigrants more permanent status is the economic one. Even now, undocumented immigrants pay taxes despite getting no services in return. They pay sales tax, and a 2016 study shows that approximately 50 percent pay income tax. In 2013, the Institute on Taxation and Economic Policy contended that undocumented immigrants accounted for $11.6 billion in state and local taxes. 

The study goes on to assert that the lack of legal status prevents undocumented immigrants from contributing more. “Multiple studies have shown that legal immigrants have higher wages than undocumented immigrants, thus gaining legal status could lead to a boost in wages,” the study says. “The wage boost is in part due to better job opportunities that would be made available to workers with legal status and also in part to an increase in higher-level skills and better training.” The study shows that if they had legal status, the undocumented immigrant population would add more the $2.1 billion to state and local tax revenues. In Louisiana, that would amount to an increase of more than $13 million, and in Mississippi, another $5 million.

Other studies show similar results. A 2010 study of the impact on federal taxes found that newly legalized workers would account for an additional $4.5 to $5.4 billion in the first three years, and as it becomes less dangerous for undocumented workers to leave the underground economy, many would find jobs that would deduct payroll taxes for the first time. A 2014 study contends that

If deferred action were extended to the 3.7 million undocumented immigrants who are parents or legal guardians of minors that are U.S. citizens, legal permanent residents (LPRs), or are DACA eligible, it would generate a short term $6.8 billion increase in labor income, more than 160,000 jobs and $2.5 billion in new tax revenue.  

During his campaign, Donald Trump’s proposal to deport more than 11 million undocumented immigrants in a two-year time span would cost between $100 billion and $300 billion. Since his election, Trump’s shown little passion for an action of that scope, but the bottom line is that deportation costs money, while studies consistently show that there are clear economic upsides to making it easier for undocumented immigrants to work legally.