Do Illegal Aliens Contribute a Fair Share of Taxes to the Economy?

moneyThe Institute on Taxation and Economic Policy (ITEP) has updated its estimate of the “contribution” of illegal aliens to the economy. In The Nation, Michelle Chen writes on March 14 that ITEP credits illegal aliens with adding $11.6 billion annually in tax payments – nearly $7 billion in sales and excise taxes and $3.6 billion in property taxes. Note that neither of those amounts are ones that can be avoided by working ‘off-the-books’, which allows them to avoid payments for income taxes, Social Security, and unemployment insurance.

But is this significant? The answer is that the ITEP estimate is irrelevant because it ignores that the same amount, or more, would be contributed by legal workers if the illegal workers were unavailable. Legal workers would be much less likely to be working off-the-books and would, therefore, be contributing to the other programs that illegal workers often evade. In addition, because legal workers are much less likely to be sending remittances out of the country, their spending in the United States would be greater and generate more sales tax receipts. Further, if employers did not have a ready supply of exploitable illegal workers, they would have to offer higher wages to attract legal workers. The result would reduce legal worker unemployment, social assistance dependence and poverty.

So when you hear someone citing the ITEP estimate, think about how it documents the failure of the country’s immigration enforcement operations and the social and fiscal consequences that result from that failure. 

avatar About Jack Martin

Jack, who joined FAIR in 1995, is a retired U.S. diplomat with consular experience. He has testified before the U.S. Congress, U.S. Civil Rights Commission, and U.S. Commission on Immigration Reform and has authored studies of immigration issues. His national and international print, TV, and talk radio experience is extensive (including in Spanish).

Comments

  1. avatar Sharron says:

    Yes, indeed, illegal immigrants are contributing more taxes to the American way of life and survival. They are replacing American workers, who, because they are out of work and replaced by lower paid foreign workers, are not paying the taxes they paid when they were gainfully employed. How complicated can the answer be to their contributions to the United States economy through taxation? I’d be curious about the amount of “worker wages” foreigners send home to their native countries.

    This statement about foreign labor contributing tax money to our economy is vague, and really a stupid question and answer. It doesn’t take a brain scientist to respond to their hypothetical question. When you are on a “teeter-totter” and one person jumps off, the other person becomes unstable and falls to the ground. The idea is to balance the two so that “both” people contribute equally to the task.

    • avatar No Change says:

      Really?…how so if they have no papers?…………you are too dramatic……..

    • avatar Leland says:

      The money sent back to Latin American countries totaled 62 billion in 2014. All that money is lost to our local economies.

      • avatar No Change says:

        False……….the owners who paid those illegals made 100 times that……………….besides the food, rent etc etc……

        • avatar Leland says:

          If the money went to American workers it would be spent here. Duh.

        • avatar Damien says:

          The business owners – who profit from cheap, exploitable, illegal workers – can then apply a portion of those profits towards political lobbying, campaign contributions, and other forms of legalized bribery in order to persuade various elected and appointed officials to enact Open Borders policies and legislation which keeps the influx of illegals going.

          As these open borders elitists grow richer, their political influence increases also, as part of a vicious self-reinforcing cycle.

          • avatar Peter says:

            Not really, not not exactly….. These are small business owners….. In their majority….. Etc

          • avatar Damien says:

            Peter / No Change,

            Just a few of the large and politically connected businesses and industries which profit off of illegals include:

            1) Agribusinesses – The five largest agribusiness firms in the U.S. control billions of dollars.

            2) The Hotel and Hospitality Industry

            3) Food service firms

            4) Privatized prison firms

            All of these industries have large and powerful lobbies which exert enormous influence on elected and appointed Government officials.

            As usual, your statements don’t line up with reality.

          • avatar No Change says:

            Damien according to you 20 million people out of 330M of the population….basically have destroyed the US economy……….what kind of drugs do you do?

          • avatar Damien says:

            No Change,

            What are you talking about? I never wrote that the illegals completely destroyed the economy.

            Instead, I have asserted that the influx of illegals imposes an overall drain on the economy due to the following:

            1) The influx of low wage, exploitable illegals prevents many working class Americans from earning a decent living.

            2) The illegals and their families consume a disproportionately large share of taxpayer funds in the form of the following:

            a) Remedial education in Public Schools (English as a second language, etc).

            b) Incarceration costs for criminal illegal aliens.

            c) Illegal alien households draw substantial benefits from food programs and Medicaid through their U.S.-born children.

            These are logical arguments based upon verifiable facts.

            Really, if you want to debate on this forum, you need to come up with something more than unsubstantiated claims, mis-characterizations, and bad grammar.

      • avatar Damien says:

        In addition to the money sent out of the U.S in the form of remittances, there is also the cost (borne by American taxpayers) of the social services – such as remedial education, health care, and food stamps – that are used by the illegal aliens and their dependent family members here in America.

        Then there are also the costs associated with the crimes committed by illegal aliens.

        According to a recent Government Accountability Office Report, “The number of criminal aliens in federal prisons in fiscal year 2010 was about 55,000, and the number of SCAAP (State Criminal Assistance Program) criminal alien incarcerations in state prison systems and local jails was about 296,000 in fiscal year 2009 (the most recent data available), and the majority were from Mexico.”.

        Source GAO Report 11-187 – “Criminal Alien Statistics”, March 2011.

        • avatar Damien says:

          SCAAP actually stands for State Criminal Alien Assistance Program. This is a federal program administered by the BJA (Bureau of Justice Assistance), which uses U.S. Taxpayer dollars to “assist” State and Local Governments with the costs associated with incarcerating Criminal Illegal Aliens.

          Much of this money ends up going to Privatized Prison Management Firms – such as CCA – who just so happen to profit from the inflated prison population brought about by the influx of illegal aliens into the U.S.

          This is Corporatism at its worst.

  2. The Current Federal Tax Base Says It All

    It should be growing with any population growth…..it isn’t with wage mitigation. Also, the total labor force should be increasing with more overpopulation too….it isn’t, its remained almost stagnant since 2007, the Great Recession.

  3. avatar Leland says:

    In the article Michelle Chen says that “Critics might point out that there’s no total figure for the undocumented population’s fiscal ‘cost’, how much undocumented immigrants consume.”

    Which is exactly the point. Because there have been numerous studies of the costs. FAIR has done many on a state by state basis. The Heritage Foundation has done a study on the cost of legalization over the lifetime of those legalized and costs are in the trillions.

    Fact: Illegals are on average unskilled and undereducated. Almost half lack even a high school education.
    Fact: Because of those things, they will generally be low income and pay little in income taxes. A large % will
    be eligible for the earned income tax credit, which is a check from the government of over 5,000. It’s not
    a deduction but a credit, given even if taxes owed are zero.
    Fact: Many will be eligible for all sorts of welfare programs, including Medicaid, because of their low income.

    It’s dishonest to make these claims about some economic riches to be gained from illegals. Everyone pays sales tax. A 12 year old buying a comic book does. Illegals do not, and never will, pay enough taxes to make
    up for their social costs. The children of illegals also drop out of school at extremely high rates and this
    guarantees the same results in another generation. People like Chen need to write the truth because it’s
    there to be written.