National Data | Illegal Aliens Pay Taxes Too—But Too Little
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On Tax Day, April 18, 2011, the Immigration Policy Center released a study claiming that illegal immigrants paid $11.2 billion in state and local taxes in 2010. The liberal Main Stream Media gleefully pointed out that this was more than General Electric Co.—which earned a whopping $14 billion last year. Unauthorized Immigrants Pay Taxes, Too | Immigration Policy Center

(Of course, that's because GE does things like invest in equipment that the public policy encourages by allowing its deduction as a business expense. And anyway, from a strictly economic point of view,corporations don't pay taxes: people—GE's shareholders and consumers—do).

Still, to the casual reader, this juxtaposition might seem puzzling. It implies that, far from being deadbeats, illegal aliens might actually pay their fair share—or more.

Could everything we know about illegals be wrong?

No. There were 11.2 million illegal aliens living in the U.S. in March 2010, according to Pew Hispanic Center estimates released earlier this year. This equals 3.6% of the population.  In that same year state and local governments collected $1.03 trillion of personal income, property, and sales taxes.

Had illegals contributed to state and local coffers in proportion to their population, they would have paid $37 billion (3.6% of $1.03 trillion), or more than three times their actual contribution. 

In per capita terms, illegal immigrants paid an average $1,000 to states and localities in 2010, while the rest of us (U.S-born and legal immigrants) paid $3,402.

The illegal/legal tax gap varies with the tax:


  • Sales taxes are unavoidable, so we would expect illegals to pay this tax at rates similar to others with similar income levels. Figures confirm this: in 2010 illegals paid an average of $750 per year while all others pay $955 in sales tax each year.

  • Property taxes are also hard to avoid. The Immigration Policy Center researchers assume that illegals are renters, and theirlandlords pass the property tax burden to them in the form of higher rents. But illegals are also known to live in cramped quarters, so their average annual property tax payments are quite small: $143 versus $1,576 for the rest of us.

  • Income taxes are honored in the breach, with half of all illegals assumed to evade them by working "off the books". Illegals pay a mere $107 per year in state and local personal income taxes. The rest of us pay more than eight times as much.

The income tax figures may, in fact, overstate the contribution of illegals, many of whom receive a tax refund courtesy of the Earned Income Tax Credit. The EITC check is often larger than their total tax payment, yet it is not deducted from tax payments in the official revenue statistics. As a result the income tax contributions from illegals are certainly far less claimed in this study.

When you consider that illegal immigrant tax evaders displace native-born tax payers, the income tax contribution of illegal aliens could be negative.

And that's their gross contribution. What about net of transfer payments—an issue ignored by the Immigration Policy Center? [Email them]

A few years ago, about the time George W. Bush's amnesty proposal was being considered, the non-partisan CBO summarized research on the impact of illegal immigrants on state and local government budgets. Among CBO's conclusions:

"The tax revenues that unauthorized immigrants generate for state and local governments do not offset the total cost of services provided to those immigrants. Most of the estimates found that even though unauthorized immigrants pay taxes and other fees to state and local jurisdictions, the resulting revenues offset only a portion of the costs incurred by those jurisdictions for providing services related to education, health care, and law enforcement..."[The Impact of Unauthorized Immigrants on the Budgets of State and Local GovernmentsDecember 2007]

Studies cited in the CBO report show revenues paid by illegals fall 20% to 60% short of the costs they impose on state and local governments.

We must have missed the MSM headlines about that.

Edwin S. Rubenstein (email him) is President of ESR Research Economic Consultants in Indianapolis.


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