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Did illegal immigrants pay billions in taxes last year for working?
Executive Summary
Undocumented immigrants in the United States paid roughly $96.7 billion in combined federal, state and local taxes in 2022, according to repeated reporting of an Institute on Taxation and Economic Policy (ITEP) estimate; studies referenced here also show other estimates such as $66 billion in federal income and payroll taxes for 2023 in a separate analysis and warn that administrative shifts could reduce compliance and revenues [1] [2]. Analysts consistently find that granting work authorization would increase collected taxes by tens of billions per year, while methodological limits and policy changes mean the exact number is uncertain and contested [3] [4] [2].
1. Why the $96.7 billion headline keeps appearing — and what it actually measures
Multiple summaries point to the same ITEP figure that undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022; that total is broken down into $59.4 billion to the federal government and $37.3 billion to state and local governments, and the per-capita and state-by-state estimates are derived from American Community Survey profiles adjusted to effective tax rates [1] [3]. The ITEP analysis also highlights that undocumented taxpayers often face higher effective state and local tax rates than the top 1% in many states, reflecting reliance on regressive taxes such as sales and excise taxes; the study’s methodology uses tax incidence models and ITIN and ACS data, so its headline is an estimate built on several modeling choices rather than a direct count of receipts [3] [4].
2. Alternate tallies and why they differ — the $66 billion and IRS-ICE compliance concerns
A separate estimate cited shows $66 billion in federal income and payroll taxes in 2023, divided into roughly $43 billion in payroll taxes and $22 billion in individual income taxes, illustrating how different scopes (federal-only vs. federal+state+local) produce different headlines [2]. That same report raises a policy dynamic: proposed data-sharing agreements between IRS and immigration enforcement could reduce compliance by undocumented taxpayers, potentially costing billions in lost revenue over coming years; this underscores that tax totals are not only retrospective measures but are sensitive to enforcement and policy signals that affect whether undocumented workers file or employers report wages [2].
3. The impact of legalization on tax revenue — consistent direction, varied magnitudes
All summaries converge on the finding that work authorization would raise tax revenues substantially, with ITEP estimating an increase of $40.2 billion annually (from $96.7 billion to $136.9 billion), split into higher federal and state/local receipts [1] [3]. The mechanism is straightforward: authorization raises wages, formalizes employment, increases payroll and income tax withholding, and reduces use of informal cash transactions, thereby expanding taxable income. While precise magnitudes vary by model and assumptions about labor market effects, the direction of the effect is consistent across studies cited here: legalization is a net positive for reported tax collections [3] [4].
4. What the tax receipts do — payroll taxes vs. access to benefits
Reports emphasize that more than a third of undocumented immigrants’ tax dollars flow to payroll taxes tied to Social Security and Medicare, programs from which most undocumented workers are largely ineligible to claim benefits; this creates an asymmetric fiscal relationship where undocumented workers fund entitlements they cannot access, while still contributing to general revenue [3]. This detail complicates political narratives that frame undocumented taxpayers solely as beneficiaries of public services; they are net contributors to certain federal trust funds even while depending variably on state and local services, and the distribution of who benefits versus who pays varies by program and locale [1].
5. Limits, uncertainties and the political angles you should know
All cited analyses note methodological limits: reliance on ACS and ITIN data, modeled effective tax rates, assumptions about reporting behavior, and sensitivity to policy changes such as enforcement or legalization [4] [2]. Different outlets emphasize different implications—advocacy-minded summaries highlight contributions and the fiscal gains from legalization, while others focus on potential revenue losses from reduced compliance tied to enforcement policies; both portrayals can reflect policy agendas about immigration reform, enforcement, or taxation. The consistent fact across sources is that undocumented immigrants do pay billions in taxes, but the exact figure and long-term fiscal balance depend on definitional choices and future policy actions [1] [5].