Tax day 2018: Celebrating the contributions of all Michiganders

We at the League make no secret of the fact that we celebrate what tax dollars can do for our state. Schools, parks, bridges, safety services, roads and other important community resources are funded by taxes, so we certainly had plenty of reasons to cheer for taxpayers on April 17 (and April 18) and every day of the year. Among these taxpayers are thousands of undocumented Michiganders who filed their tax returns just as they do every year. As we celebrate all the good things taxes provide, we also honor our immigrant neighbors and community members whose invaluable contributions to Michigan’s culture and economy have helped revive our state in more ways than one.

tax day 2018 325x736Current rhetoric on immigration often overlooks the important contributions undocumented immigrants make to our communities as neighbors, workers and taxpayers. Research from the Institute on Taxation and Economic Policy highlights the significant contributions that undocumented immigrants make to our state and local economies by paying taxes. According to the report, undocumented immigrants across the United States collectively contribute $11.74 billion in state and local taxes. In the Great Lakes state, which is home to more than half a million foreign-born residents, about 130,000 undocumented immigrant residents contributed an estimated $86.6 million in state and local taxes in 2014 (the latest year for which data is available).

What are some of the ways undocumented Michiganders contribute to the tax base, you ask? Just like their fellow residents, undocumented Michiganders pay sales and excise taxes on things such as utilities, clothing and gasoline. They also pay property taxes, either directly on their homes or indirectly as renters. Furthermore, undocumented immigrants also pay state income taxes that help grow state investments in schools, infrastructure, healthcare and other important services.

Among residents who help strengthen our state are Dreamers—young undocumented immigrants whose futures continue to hang in the balance as Congress stalls action on the Dream Act. Dreamers contribute to our communities every single day, and they also contribute to our local and state economies as working professionals, consumers and entrepreneurs. As taxpayers, they contributed an estimated $13 million in Michigan in 2014. Yet, if Dreamers lose their DACA status, they will also lose their temporary work permits that enable them to work in good-paying jobs with benefits. The loss in tax revenue from this shift is equivalent to the cost of 220 teacher salaries in Michigan.1

Looking at the contributions of our immigrant neighbors in Michigan brings up an important question about fairness. Michigan’s tax system is upside down—it’s regressive. This means that Michiganders who have low and middle incomes pay a larger portion of their income in taxes than the top 20% of taxpayers. Unfortunately, undocumented taxpayers aren’t left out of this unbalanced system. When it comes to state and local taxes, the average effective tax rate (a measure of the share of total income paid in taxes) for undocumented immigrants is 8%, and 8.9% for Dreamers (young undocumented immigrants). This is striking when compared to the average nationwide effective tax rate among the richest taxpayers: 5.4%.

Policymakers can and must make wise choices that strengthen our communities and recognize the substantial contributions made by our immigrant neighbors. When it comes to immigration, state and national leaders have an opportunity to explore and enact sound public policies that promote economic growth and immigrant integration based on facts and reality rather than playing out the politics of fear and division.

  1. Fiscal Policy Institute (FIP) analysis of Institute on Taxation and Economic Policy (ITEP) tax revenue data and National Education Association (NEA) data on teacher salaries.

— Victoria Crouse