Fact check: Do illegal immigrants pay taxes, and if so, how much do they contribute to the US economy?

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

A series of recent reports converge on the finding that undocumented immigrants contributed roughly $96–100 billion in federal, state, and local taxes in 2022, with about $59.4 billion to the federal government and $37.3 billion to state and local governments. This estimate comes from the Institute on Taxation and Economic Policy and has been independently reported and summarized across outlets, which also note that six states each collect more than $1 billion from undocumented residents—underscoring a material fiscal footprint at the state level ^{[1] [4] [5]}. That level of revenue matters to budget conversations because it both supports government services and highlights a mismatch: many undocumented pay into programs they cannot fully access.

2. How They Pay: ITINs, Payroll Withholding, and Sales Taxes

Undocumented immigrants pay through multiple channels: payroll taxes (often deducted even when workers lack work authorization), income taxes filed using Individual Taxpayer Identification Numbers (ITINs), and consumption taxes like sales and property taxes. Tax-filing with an ITIN does not confer legal work status but does allow tax compliance; advocacy and tax clinics emphasize that undocumented workers can file returns and claim refunds when eligible ^{[6] [7]}. Payroll tax contributions are particularly salient because they feed Social Security and Medicare trust funds—even though many undocumented workers are ineligible for full benefits, creating a transfer of funds into federal programs ^[6].

3. Methodology Matters: Why Estimates Diverge

Different organizations use varying models and assumptions—population counts, income distributions, tax-filing behavior, and which taxes to include—producing a range of estimates. For example, the Budget Lab estimated $66 billion in federal income and payroll taxes for 2023, focusing on particular federal tax categories, while ITEP’s broader accounting for 2022 includes federal, state, and local taxes to reach nearly $100 billion ^{[3] [1]}. These methodological choices drive debate: narrower metrics undercount consumption and property taxes, while broader approaches can inflate totals if assumptions about undocumented employment or reporting are optimistic.

4. Policy Dynamics: Work Authorization Could Increase Revenues

Analyses indicate that granting work authorization or legal status raises taxable earnings and therefore tax revenue; one study estimates an additional $40.2 billion per year if all undocumented workers obtained work authorization. That projection reflects higher wages, more formal employment, and consequently greater payroll and income tax collection ^{[5] [8]}. Policy decisions—from regularization pathways to IRS data-sharing agreements with enforcement agencies—affect both taxpayer behavior and revenue flows; research warns that some enforcement or data-sharing moves could reduce tax compliance and produce modest revenue losses ^[3].

5. Fiscal Impact Is Not Solely About Taxes: Costs, Transfers, and Skill Mix

Taxes paid by immigrants are only one side of fiscal impact analyses. Think tanks emphasize different angles: some find new immigrants reduce deficits and expand GDP on balance, particularly high-skilled newcomers, while low-skilled immigration can be costlier due to greater reliance on public benefits ^[9]. This divergence stems from time horizons, benefit assumptions, and which levels of government are considered. Studies in the dataset show that outcomes vary by education, age, and program eligibility, so headline tax numbers need context about public spending and long-term fiscal dynamics ^[9].

6. Political Stakes and Source Agendas: Read the Fine Print

Reports come from organizations with differing missions: ITEP focuses on tax equity and tends to emphasize revenue contributions ^[1], advocacy groups highlight pay-in but limited access to benefits ^[1], while policy institutes like the Manhattan Institute stress skill-targeted immigration reforms to improve fiscal outcomes ^[9]. Each group’s framing shapes assumptions—about population size, tax incidence, and policy effects—so interpreting estimates requires attention to methods and incentives. Readers should weigh multiple studies and look for transparent methodologies before drawing prescriptive conclusions ^{[2] [9]}.