Do undocumented immigrants contribute to the US economy through taxes and consumer spending?

1. Bold Claims: Who Says What and Why It Matters

Multiple analyses assert that undocumented immigrants are net contributors to the tax base and the consumer economy. The Institute on Taxation and Economic Policy (ITEP) figures—cited across sources—place 2022 tax payments at roughly $96.7 billion, with breakdowns between federal and state/local collections reported differently in various summaries ^{[3] [2]}. Other studies and organizational summaries report similar magnitudes for federal and payroll taxes, and point to consumer spending evidence such as sales and excise tax shares to show direct purchasing activity ^{[2] [5]}. These claims matter because they connect immigration status to public finance, program funding, and aggregate demand; they also frame policy debates on legalization’s fiscal impacts and labor-market effects ^{[3] [1]}.

2. The Tax Numbers: Converging Figures and Important Breakdowns

The numbers presented converge around tens of billions of dollars in annual tax contributions but vary in precise totals and fiscal categories. One thread reports $96.7 billion in federal, state, and local taxes for 2022, including roughly $59.4 billion federal and $37.3 billion state/local, with average per-person figures cited ^[3]. Another analysis puts undocumented-headed households at $89.8 billion in total taxes in 2023, divided into $55.8 billion federal and $33.9 billion state and local ^[1]. Payroll-related contributions—Social Security and Medicare—are singled out as substantial and often irrevocable payments because many undocumented workers pay into systems they cannot draw from, with figures like $33.9 billion to Social Security/Medicare/unemployment recurring across summaries ^{[3] [6]}.

3. Consumer Spending: Direct Evidence and Proxy Measures

Consumer spending by undocumented households surfaces both directly and indirectly in the supplied analyses. The California-focused reporting shows 46% of state/local tax contributions from sales and excise taxes, which is direct evidence that undocumented households are purchasing goods and services and thereby stimulating local economies ^[2]. Broader reports frame undocumented immigrants’ spending power in the hundreds of billions—a figure echoed in organizational advocacy summaries—illustrating demand-side impacts on retail, housing, and services ^{[4] [5]}. These sources treat sales-tax shares and household income as credible proxies for consumption, noting that spending supports jobs and local revenues even while some analyses stress aggregated estimates are sensitive to assumptions about household size, underreporting, and informal economic activity ^{[2] [3]}.

4. What Might Change with Legalization: A Policy Angle with Fiscal Upside

Several sources quantify how work authorization would alter fiscal outcomes, arguing legalization would increase tax receipts substantially. ITEP-based summaries estimate an uplift of about $40.2 billion per year in tax collections if undocumented immigrants had legal work authorization, raising total contributions from roughly $96.7 billion to $136.9 billion—a central argument in policy discussions favoring regularization for fiscal benefits ^{[3] [2]}. Advocates and research centers highlight that formalization would boost reported incomes, payroll tax compliance, and state/local revenue; critics caution that projected net fiscal benefits depend on long-term spending on services, demographic shifts, and program eligibility changes, points reflected in alternate framings across the provided analyses ^{[4] [6]}.

5. Disagreements, Methodology Gaps, and Potential Agendas

The analyses show variation in totals and emphases, driven by different data sets, years, and framing. Some summaries emphasize the payroll taxes and Social Security contributions undocumented workers pay despite limited access to benefits, while advocacy-oriented pieces stress the multiplier effects of consumer spending and the gains from legalization ^{[3] [4] [6]}. Sources tied to policy centers or advocacy groups may highlight fiscal benefits of legalization to support reform agendas, whereas academic or neutral reports emphasize methodological caveats about undercounting, informal work, and long-term fiscal costs or savings ^{[1] [7] [8]}. These differences recommend caution: the headline dollar figures are robustly nontrivial, but their net fiscal interpretation varies with assumptions about public service use, eligibility rules, and economic multipliers ^{[2] [6]}.

6. Bottom Line: What the Evidence Solidly Shows

Across the reviewed analyses, it is clear and consistent that undocumented immigrants pay substantial taxes and participate as consumers, injecting tens of billions in tax revenue and supporting local economies through purchases and payroll contributions. While exact totals differ—$89.8 billion in one 2023 summary, $96.7 billion for 2022 in ITEP-derived reporting—the pattern is uniform: undocumented households are economically active taxpayers and spenders, and policy changes altering work authorization would materially shift fiscal outcomes, likely increasing tax contributions ^{[1] [3] [2]}. Readers should weigh these fiscal inputs alongside governance questions about service costs, program eligibility, and labor-market effects when drawing conclusions about net impacts and policy choices ^{[4] [6]}.