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

1. Bold Claims on Big Tax Contributions — What the Reports Say

Multiple analyses in 2024–2025 converge on a similar headline: undocumented immigrants contribute roughly $90–$100 billion in combined federal, state, and local taxes in a recent year, typically reported for 2022 or 2023. The Institute on Taxation and Economic Policy (ITEP) produced estimates near $96.7 billion for 2022 and similar rounded figures appear across other organizations, underscoring a broad consensus on the order of magnitude even as precise methods differ ^{[1] [3] [4] [5]}.

2. How Those Taxes Are Actually Collected — The Mechanics Matter

Undocumented people pay through payroll withholding when employed, sales taxes on consumption, property taxes either directly or indirectly through rent, and income tax filings using ITINs (Individual Taxpayer Identification Numbers). Studies emphasize that many undocumented workers are integrated into formal payroll systems or consumer markets, so standard tax collection channels capture substantial revenue despite legal status. Reports note roughly 5.4 million active ITINs as an indicator of tax-filing activity ^{[5] [6]}.

3. Reconciling Differing Estimates — Why the Numbers Vary

Estimates vary because groups use different assumptions about population size, labor force participation, undocumented income levels, and tax incidence. Some reports focus on households, others on individual taxpayers; some include indirect taxes like sales tax while others emphasize direct income tax. Despite methodological variance, the central finding — near nine figures in annual tax payments — persists across independent studies, which lends credibility to the scale even as point estimates diverge ^{[1] [7] [2]}.

4. Where the Money Goes — Federal vs. State and Local Breakdowns

Analyses consistently show a split between federal and state/local receipts, with roughly $50–60 billion to the federal government and $30–40 billion to state and local governments in the cited years. Several states collect over $1 billion each from undocumented taxpayers, and some reports highlight that in many states the effective tax rate on undocumented households can exceed that paid by the top 1% of households, reflecting both income structure and consumption patterns ^{[1] [4] [3]}.

5. Bigger Picture: Economic Contributions Beyond Tax Receipts

Researchers also tie tax payments to broader economic impacts: undocumented households hold substantial spending power (e.g., $299 billion in one 2023 estimate) and their presence affects GDP and fiscal balances. Modeling exercises show that mass removal would lower GDP and shrink the tax base, illustrating that tax payments are only one measurable facet of a larger economic role that includes labor supply, consumption, and production ^{[2] [8]}.

6. Recent Policy Developments and Community Concerns — Data Sharing and Trust

Newer reporting highlights policy shifts—such as IRS–DHS data-sharing agreements—that affect trust and willingness to file taxes among immigrant communities, potentially altering future tax compliance and measured revenues. Community advocates and some analysts warn these arrangements could depress filings or increase underreporting, complicating straightforward projections of tax contributions if behavior changes in response to enforcement or data policies ^[6].

7. Geographic and Fiscal Stakes — States That Feel It Most

State-by-state analysis shows concentrated fiscal effects: a handful of states collect more than $1 billion from undocumented immigrants, and many states see higher effective tax rates from this population than from extreme high-income households. These localized patterns matter for budgeting and politics: states with larger undocumented populations both receive substantial revenues and face distinct debates about public expenditures, services, and enforcement trade-offs ^{[7] [3]}.

8. Limitations, Uncertainties, and How to Use These Numbers Responsibly

All studies carry uncertainties: population size estimates, underreporting, varying tax-incidence assumptions, and behavioral responses to policy can shift estimates materially. The near-$100 billion figure should be treated as a robust order-of-magnitude estimate rather than a precise ledger. Policymakers should pair these fiscal estimates with labor-market, demographic, and enforcement analyses when weighing immigration reform or enforcement policies, because tax contributions interact with broader economic and social outcomes ^{[1] [8]}.