Fact check: What is the estimated fiscal impact (costs and taxes paid) of undocumented immigrants on federal and state budgets in recent studies?

Executive Summary: The most recent cross-analyses show that undocumented immigrants paid roughly $96.7–$100 billion in combined federal, state, and local taxes in 2022, with about $59.4 billion to the federal treasury and around $37.3 billion to state and local governments; studies also estimate an additional $40.2 billion in annual tax revenue if work authorization were universally available to the undocumented population, reflecting higher wages and greater tax compliance under legalization. These headline figures come from multiple iterations and summaries of the same Institute on Taxation and Economic Policy (ITEP) research, which consistently highlights concentrated state-level impacts—six states collect more than $1 billion each—and suggests policy change could materially increase receipts ^{[1] [2] [3]}.

1. Big Picture: Nearly $100 Billion and Why That Number Matters

Multiple recent summaries of the ITEP study converge on a near-$100 billion tax contribution by undocumented immigrants in 2022, with the split of approximately $59.4 billion federal / $37.3 billion state and local repeated across reports. That total aggregates payroll taxes, income taxes filed using ITINs, sales and excise taxes, property taxes, and business taxes paid by undocumented workers and households; the study emphasizes these are real, material flows into public coffers despite restricted eligibility for many federal benefits. The consistency of the figure across separate write-ups indicates broad agreement about the magnitude of tax payments, while also signaling that the methodology and assumptions behind ITEP’s estimates drive the conclusion rather than a collection of independently derived datasets ^{[1] [3]}.

2. The Underlying Mechanisms: How Undocumented Workers Pay So Much

The studies point to several mechanisms producing substantial tax payments: payroll taxes withheld from wages (including Social Security and Medicare contributions that undocumented workers mostly cannot reclaim), sales and property taxes, and income taxes filed via Individual Taxpayer Identification Numbers (ITINs). Because many undocumented workers use ITINs or have wages reported under mismatched Social Security numbers, they still contribute to revenue streams while being largely ineligible for many programs. Reports also observe that undocumented workers can face relatively high effective tax rates compared with certain native-born groups because they pay consumption taxes and payroll levies that are not offset by refundable credits, a factor that raises the net fiscal contribution in revenue tallies ^{[3] [4]}.

3. The ‘What If’ of Legalization: $40.2 Billion More on the Table

A core counterfactual in the reports is that granting work authorization to the entire undocumented population would increase annual tax revenues by about $40.2 billion, driven by higher wages, better labor-market outcomes, and greater tax compliance and reporting. The ITEP analysis models wage gains and compliance improvements translating into both higher income and payroll tax receipts as well as amplified economic activity that elevates sales and business taxes. This projection underpins arguments across policy debates: proponents of legalization point to a near-term fiscal boost and reduced shadow-economy leakage, while opponents may question the magnitude or timing of those gains and emphasize costs tied to expanded benefit eligibility—debates that the cited studies note but do not fully resolve within revenue estimates ^{[2] [4]}.

4. Geography and Distribution: Six States, Disproportionate Effects

The tax-contribution findings are highly state-concentrated: six states—New Jersey, New York, California, Florida, Texas, and Illinois—each collect more than $1 billion from undocumented immigrants, reflecting population concentrations and labor-market patterns. The studies underscore that state and local budgets feel the impact differently than the federal budget: while the federal government captures the largest single share via payroll taxes, states rely heavily on sales, property, and income taxes, so the fiscal net effect varies by state revenue mix and expenditures. This geographic focus raises political stakes in state-level debates about legalization, enforcement, and local services because the beneficiaries and payers are unevenly distributed across jurisdictions ^{[2] [1]}.

5. Caveats, Competing Views, and Research Limits

The reports are transparent about limitations: estimates rely on population counts, assumed labor-force participation, wage profiles, tax incidence modeling, and compliance assumptions. Critics frequently challenge underlying assumptions—population size, undercounting, or hypothetical wage gains under legalization—and highlight costs such as public education, health, and safety-net services that the studies acknowledge but treat separately from tax-revenue tallies. The analyses repeatedly note that their figures are not net fiscal balances; they measure taxes paid and projected additional receipts under legalization scenarios but do not present a full cost-benefit accounting of expenditures tied to undocumented residents. Readers should treat the near-$100 billion as a robust measure of revenue contribution while recognizing the separate and ongoing debates over net fiscal impacts and methodological choices ^{[1] [2] [3] [5]}.