Report Shows Immigration Reform Would Increase Tax Contributions Of Undocumented Immigrants

WASHINGTON, D.C. — A report from the non-partisan Congressional Budget Office (CBO) estimated the impact the immigration bill passed in the Senate would have at the federal level and found that it would decrease the deficit and generate more than $450 billion in additional federal revenue over the next decade.

In the public debates over federal immigration reform, much has been made of the argument that undocumented immigrants would be a drain on federal, state and local government resources if granted legal status under reform.  However, the estimated 12 million undocumented immigrants living in the United States are already taxpayers, and that their local, state and federal tax contributions would increase under reform.

A report from the Institute on Taxation and Economic Policy provides state-by-state estimates on the state and local tax contributions of the undocumented immigrants living in the United States.

The key findings are:

  • Undocumented immigrants currently contribute significantly to state and local taxes, collectively paying an estimated $10.6 billion in 2010 with contributions ranging from less than $2 million in Montana to more than $2.2 billion in California. This means these families are likely paying about 6.4 percent on average of their income in state and local taxes.
  • Allowing undocumented immigrants to work in the United States legally would increase their state and local tax contributions by an estimated $2 billion a year. Their effective state and local tax rate would also increase to 7 percent on average, which would put their tax contributions more in line with documented taxpayers with similar incomes.

During 2010, records show that undocumented immigrants in New Jersey paid about $475 million in state and local taxes, but after reforms are enacted, they would contribute about $560 million.

The greatest increase would come in the form of state income taxes, where undocumented immigrants now pay $58 million and reforms that allow them to work legally would raise that amount to $117 million.

New Jersey has an estimated 550,000 undocumented immigrants.

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