Immigration reform could mean millions in new tax revenue in Michigan – more than enough to offset the modest additional health care costs that would result from reform.
Michigan is home to an estimated 65,600 undocumented families who already contribute an estimated $126 million a year in state and local taxes, a new report from the Institute on Taxation and Economic Policy finds. That’s expected to jump to $161 million a year should Congress finish its work on immigration reform, which has passed the U.S. Senate but is stalled in the U.S. House.
Like others living and working in the U.S., undocumented immigrants contribute a significant share of their income to state and local taxes. When they purchase goods and services, such as utilities, clothing and gasoline, they pay sales and excise taxes. They also pay property taxes directly on their homes or indirectly as renters. ITEP also reports that at least half are paying income taxes.
With legal status, their incomes will increase because it will be easier for them to bargain with their employers and more likely that they will invest in their own skill development. That means they’ll pay more in income taxes to the state. They’ll also pay more in income taxes because it will be straightforward for them to file income tax returns and report their wages. ITEP projects that the income taxes paid by undocumented immigrants in Michigan would climb from $26 million to $56 million after legalization. The sales, excise, and property taxes they pay would also rise a bit.
The nonpartisan Congressional Budget Office projects that immigration reform would result in some increased health care costs to states – about $2 billion per year for all the states combined — largely because reform would increase the flow of future legal immigration. (Most of the currently undocumented would have to wait 13 years under the Senate bill before having access to public health programs such as Medicaid and Children’s Health Insurance Program known as MIChild in Michigan.)
That extra cost doesn’t account for the revenues that immigrants with green cards would contribute nor the extra economic activity and jobs created through providing additional health services.
Still, some opponents of immigration reform have argued that this cost to healthcare will be too large for states to bear. But that’s not the case in Michigan. Based on data from the National Association of Budget Officers showing Michigan’s share of all state spending on Medicaid, we estimate that Michigan’s share of that $2 billion will amount to $29 million annually. That’s less than the $35 million in new taxes that ITEP projects that those awaiting legal status would contribute under immigration reform.
Immigration reform is a win-win for Michigan. It will mean higher wages for undocumented workers and all workers as well and tax revenues would rise faster than costs of services.
— Judy Putnam