VA Undocumented Immigrants Pay $690M In Taxes, Study Says: Here’s How

VIRGINIA — Do undocumented immigrants pay taxes? They do, according to a nonprofit think tank — and in Virginia, they contribute nearly $690 million per year.

With immigration again among the hot-button issues of this year’s presidential election, the Institute on Taxation and Economic Policy (ITEP) released a study on tax payments by undocumented immigrants this week. The analysis and its methodology can be seen online.

According to the ITEP, undocumented immigrants in Virginia paid nearly $690 million in state and local taxes in 2022. Researchers estimate that this amount could have topped $856 million if each had legal status.

An estimated 274,000 undocumented immigrants in Virginia earned a total income of roughly $8.7 billion in 2022, the study found.

How do undocumented workers pay taxes? There are several ways, researchers said.

“Much like their neighbors, undocumented immigrants pay sales and excise taxes on goods and services like utilities, household products and gasoline," the study states. "They pay property taxes either directly on their homes or indirectly when these taxes are folded into the price of their monthly rent. And they pay income and payroll taxes through automatic withholding from their paychecks or by filing income tax returns using Individual Taxpayer Identification Numbers (ITINs)."

In Virginia, some of those contributions in 2022 included:

• Sales and Excise Taxes – $261,400,000
• Property Taxes – $223,800,000
• Personal and Business Income Taxes – $337,800,000

Nationwide, six states raised more than $1 billion each in tax revenue from undocumented immigrants living within their borders in 2022. States that hit the $1 billion mark included California ($8.5 billion), Texas ($4.9 billion), New York ($3.1 billion), Florida ($1.8 billion), Illinois ($1.5 billion) and New Jersey ($1.3 billion).

Nationally, undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022. Ironically, they often are paying higher state and local taxes than the wealthiest residents – the top 1 percent of households – in 40 states, the ITEP said.

Some conservatives have argued that there’s a flip side to the coin: undocumented immigrants also receive government services and increase the burden on local schools and infrastructure. And according to some pundits, the result is a “net fiscal drain” – meaning they get more in services than they pay in taxes.

The Center for Immigration Studies also made this argument at a Congressional hearing on the “impact of illegal immigration on social services” in January. According to a summary of the nonprofit’s testimony:

“[Undocumented] immigrants are a net fiscal drain, meaning they receive more in government services than they pay in taxes. This result is not due to laziness or fraud. [Undocumented] immigrants actually have high rates of work, and they do pay some taxes, including income and payroll taxes. The fundamental reason that [undocumented] immigrants are a net drain is that they have a low average education level, which results in low average earnings and tax payments. It also means a large share qualify for welfare programs, often receiving benefits on behalf of their U.S.-born children. Like their less-educated and low-income U.S.-born counterparts, the tax payments of [undocumented] immigrants do not come close to covering the cost they create.”

Some advocates say that undocumented workers are notoriously underpaid and face wage theft, with many being “segregated” into low-earning service jobs in the restaurant, cleaning and child care industries.

The ITEP says there is another important point to consider: undocumented immigrants are often paying into programs they aren’t eligible for, such as Social Security, unemployment and Medicare. They are also ineligible for federal tax benefits such as the Earned Income Tax Credit and the Child Tax Credit.

“Specifically, we find that in 2022, undocumented immigrants paid $96.7 billion in taxes at the federal, state, and local levels,” researchers said.

More than a third of that amount, $33.9 billion, went toward funding social insurance programs that undocumented immigrants are barred from accessing.

There is also a way to beef up their tax contributions and fatten the bottom line, the ITEP says: let them work – legally.

According to the study:

“Providing access to work authorization for undocumented immigrants would increase their tax contributions both because their wages would rise and because their rates of tax compliance would increase. Under a scenario where work authorization is provided to all current undocumented immigrants, their tax contributions would rise by $40.2 billion per year to $136.9 billion. Most of the new revenue raised in this scenario ($33.1 billion) would flow to the federal government while the remainder ($7.1 billion) would flow to states and localities.”

“The bottom line here is that regardless of immigration status, we all contribute by paying our taxes,” said Marco Guzman, the co-author of the study.