How do tax and fiscal impact studies in Minnesota account for undocumented residents and what assumptions drive their estimates?

1. How studies count undocumented residents: data sources and population assumptions

Researchers rely on a patchwork of administrative and survey-based sources to estimate the undocumented population in Minnesota—often starting from national or state synthetic estimates and adjusting for local labor markets and demographics—because there is no direct census of undocumented status ^{[2] [5]}. The Minnesota Budget Project and ITEP-based work cite state estimates (often tens of thousands, e.g., roughly 82,000–95,000 in different summaries) as the baseline for tax calculations, and changing that headcount (or assuming partial deportation) is what produces proportional revenue swings such as a $22 million annual loss if 10% are removed ^{[3] [6] [4]}.

2. How tax payments are attributed: formal filings, withholding, and indirect taxes

Studies attribute taxes paid by undocumented residents through multiple channels: income and payroll taxes where wages are reported (including through ITIN or mismatched Social Security numbers), sales and excise taxes on consumption, and property-related taxes either paid directly or embedded in rent; the Institute on Taxation and Economic Policy (ITEP) methodology used in state estimates explicitly aggregates these state and local tax categories to reach figures such as $222 million ^{[2] [4] [1]}. Where direct tax filing is incomplete, modelers infer payments from labor market participation rates and consumption patterns, which introduces uncertainty but captures the reality that undocumented workers routinely contribute via sales taxes and payroll withholding when employed in the formal economy ^{[2] [7]}.

3. Key behavioral and economic assumptions that drive estimates

Two interlocking assumptions shape results: first, wage and employment profiles (who works, in what occupations, and at what pay) determine tax bases; second, behavioral responses to policy changes—legalization that raises wages and formal employment versus deportation that eliminates income—alter tax revenues through wage boosts or population loss ^{[2] [8] [3]}. ITEP-style reports often include a “wage boost” counterfactual that assumes legalization allows better job matching and higher earnings, yielding higher tax receipts (an estimated $72 million increase under some scenarios cited by Minnesota Budget Project), while equilibrium economic models account for indirect effects on native wages and consumption as well ^{[3] [2] [8]}.

4. How costs (services and benefits) are treated and contested

Fiscal-impact studies vary on counting expenditures: some tally only means-tested benefits actually accessible to undocumented residents, others model use of public goods like K–12 education and emergency health services; partisan analyses diverge sharply, and neutral observers warn the data are insufficient to pin precise net-cost numbers—Minnesota Center for Fiscal Excellence explicitly notes wide divergence and limited certainty around projected costs of adding undocumented people to programs like MinnesotaCare ^[9]. The Legislative Auditor and academic models include transfer receipts where applicable but also emphasize indirect fiscal channels, creating differing net balances depending on which benefits and time horizons are counted ^{[7] [8]}.

5. Sources of uncertainty and competing narratives

Uncertainty stems from varying baseline population estimates, underreporting in administrative records, assumptions about informal versus formal employment, and different choices about which taxes and expenditures to include; advocacy-oriented reports (Minnesota Budget Project, ITEP) emphasize contributions and potential gains from legalization, while fiscal watchdogs point to gaps and divergent cost estimates, resulting in politicized headlines despite overlapping empirical cores ^{[1] [2] [9]}. Where claims exceed what methods can support, reporters and analysts should flag the specific assumptions—population size, wage growth, benefit access—that explain why two studies on Minnesota can reach contrasting conclusions ^{[3] [9]}.

6. Bottom line for interpreting Minnesota estimates

Minnesota estimates that undocumented residents paid roughly $222 million in state and local taxes in 2022 is grounded in ITEP-style aggregation of income, payroll, sales, and property taxes applied to modeled population and wage profiles, but the figure is sensitive to the assumed undocumented population size, tax filing behavior, and counterfactuals about legalization or deportation ^{[1] [2] [3]}. Readers should treat headline dollar amounts as conditional summaries—not immutable facts—and consult methodology appendices to see which assumptions produced the result ^{[2] [4]}.