Immigration Reform Expected to Increase State Tax Revenues $2 Billion

Unauthorized immigrants are already paying $10.6 billion a year in state and local taxes, according to a new analysis that estimates an additional $2 billion revenue increase for the 50 states and the District of Columbia if undocumented immigrants who currently in the U.S. are allowed to work legally.

The study, from the Institute on Taxation and Economic Policy, bolsters another recent study from Congress’s Joint Committee on Taxation and the Congressional Budget Office (see Immigration Bill Expected to Boost Tax Collections). The earlier study found that the bill recently passed by the Senate would save nearly $1 trillion over the next two decades, largely because more than 10 million additional people would be paying taxes. House Republicans are demanding changes in the legislation, however.

The report, Undocumented Immigrants’ State and Local Tax Contributions, assumes a newly legalized immigrant population of 11.2 million fully participating in the federal, state and local tax systems and estimates an overall revenue gain for states of $2 billion a year.

States with progressive tax systems, which include an income tax, would see the most significant revenue change since it is in the income tax where compliance will increase under reform, the report noted. Unauthorized immigrants currently pay approximately the same level of sales and property taxes as other U.S. residents in the same income brackets.

The report contains a clickable 50-state map and provides a breakdown of tax payments by category (sales, income, property) for each state, before and after immigration reform, including the effect of undocumented immigrants becoming newly eligible for state EITCs. It also has key state-by-state data points on the immigrant population underlying the tax analysis, a complete methodology section and footnotes.