How much tax revenue do undocumented immigrants contribute to federal and state budgets?

Executive Summary — Quick Bottom Line for Policymakers and Reporters

A body of recent research converges on the finding that undocumented immigrants paid roughly $96–97 billion in federal, state, and local taxes in 2022, with most estimates allocating about $59.4 billion to the federal level and $37.3 billion to state and local governments, and researchers estimate that work authorization would boost those receipts by roughly $40.2 billion annually ^{[1] [2]}. These figures come from Institute on Taxation and Economic Policy analyses published in 2024 and reiterated in 2025 coverage; they are supported by complementary estimates about payroll and income tax compliance but remain sensitive to behavioral changes like those potentially triggered by the IRS–DHS data-sharing arrangement ^{[1] [2] [3]}.

1. Why the $96.7 Billion Number Keeps Showing Up — The Evidence Chain

Multiple independent summaries trace the same core estimate: a 2024 ITEP analysis reporting $96.7 billion in tax payments by undocumented immigrants in 2022, split roughly $59.4 billion federal and $37.3 billion state/local, with average per-capita tax payments and state-by-state tallies showing six states collect over $1 billion each ^{[1] [2]}. These reports emphasize that the tax mix is largely sales/excise and payroll taxes and that undocumented workers contribute to programs like Social Security and Medicare through payroll withholding despite being largely ineligible for benefits, which highlights a structural mismatch between revenue contribution and access to services ^[2]. The ITEP methodology combines demographic estimates, tax filing behaviors (including ITIN usage), and tax incidence models to produce the headline number ^[1].

2. What Changes If Work Authorization Is Granted — The $40.2 Billion Upside

Researchers consistently estimate that granting work authorization would increase tax revenue by about $40.2 billion a year, raising total annual tax contributions to roughly $136.9 billion; most of that increase is projected to flow to the federal government ($33.1 billion) with the remainder to states ($7.1 billion) ^{[1] [4]}. Analysts attribute the gain to higher reported earnings, formalization of employment, and increased use of tax-filing channels that capture additional income, as well as higher wage growth and mobility. These projections are modeled rather than observed outcomes, and they assume broad take-up of authorization and stable economic conditions; they therefore illustrate the direction and scale of potential fiscal effects rather than an exact forecast ^{[1] [2]}.

3. A Different Lens — Payroll Taxes, Benefit Access, and Net Fiscal Impact

The studies underscore that a substantial share of payments—particularly payroll taxes—go toward Social Security and Medicare even though many undocumented workers cannot claim those benefits, creating a one-way flow of funds in practice ^{[4] [1]}. Some reporting notes lifetime net fiscal gains for immigrants and their U.S.-born children under certain assumptions—one estimate cited a $200,000 net lifetime tax surplus for an immigrant arriving at age 25—while other work stresses that aggregate fiscal impacts vary by state, age structure, and program eligibility rules ^{[5] [2]}. The evidence therefore supports the claim that undocumented immigrants are net contributors to tax revenue at many levels but leaves open the scale of long-term net fiscal effects across all public services.

4. Risks to Revenue — Compliance, Policy Moves, and the IRS–DHS Factor

Recent analysis warns of material downside risks: a projected decline in compliance tied to the IRS–DHS Memorandum of Understanding could reduce undocumented immigrants’ willingness to file taxes, with one study modeling a potential federal revenue loss of $25 billion in 2026 and hundreds of billions over a decade under certain behavioral assumptions ^[3]. These projections are highly uncertain because they depend on how widely fear of immigration enforcement suppresses filing versus substitution into other tax channels. Reporting in 2025 highlights this trade-off: administrative cooperation intended for immigration enforcement could generate fiscal costs if it meaningfully reduces tax participation among this population ^{[3] [6]}.

5. Points of Consensus, Uncertainty, and What Policymakers Should Watch

There is broad agreement across recent sources that undocumented immigrants contribute tens of billions annually in taxes and that legalization would boost revenues materially ^{[1] [2] [4]}. Major uncertainties remain about the exact sizes—estimates for federal-only contributions vary (some work cites $66 billion in federal taxes in 2023), and long-term net fiscal impacts depend on demographic, labor-market, and policy shifts ^{[3] [2]}. The most actionable policy levers are those that affect reporting and formal employment (work authorization, ITIN access, and data-sharing rules); these determine whether current tax flows persist, grow, or retreat. Reporters and officials should therefore track new empirical audits of tax filings, changes to ITIN and EITC eligibility, and measurable shifts in compliance after any administrative agreements ^{[5] [3]}.