Undocumented Immigrants in Mich. Pay $126 M in State and Local Taxes;
Immigration Reform Would Boost State Revenues $35 Million
New 50-State Study From The Institute On Taxation And Economic Policy
Washington, DC – With fiscal costs and benefits figuring large in the immigration reform debate, a new analysis estimates that unauthorized immigrants are already paying $10.6 billion a year in state and local taxes nationwide, including the $126 million they pay in Michigan. The study also estimates that Michigan stands to gain $35 million in increased revenue should undocumented immigrants currently in the U.S. be allowed to work here legally. The analysis from the Institute on Taxation and Economic Policy (ITEP) assumes a newly legalized immigrant population of 150,000 in Michigan, and 11.2 million nationally, fully participating in the federal, state and local tax systems. The overall revenue gain for all states would be $2 billion a year.
Michigan and other states with an income tax would see the most significant revenue change since it is in the income tax where compliance will increase under reform; unauthorized immigrants currently pay approximately the same level of sales and property taxes as other U.S. residents in the same income brackets.
“We know that undocumented immigrants already pay six or seven percent of their income in state and local taxes, simply because they buy things and they rent or own homes, and sales and property taxes are paid automatically,” said Matthew Gardner, ITEP’s Executive Director. “With legalization, both wages and tax compliance will go up, resulting in substantial new revenues for states, especially from the income tax.”
A recent Congressional Budget Office (CBO) report concluded a similar effect on federal revenues.
“Immigrants contribute to the economy in so many ways as workers, business owners and consumers,’’ said Michigan League for Public Policy President & CEO Gilda Z. Jacobs. “This report reminds us that undocumented immigrants contribute as taxpayers as well, and that will grow if they are given legal status.’’
The study, Undocumented Immigrants’ State and Local Tax Contributions, finds:
-Michigan’s undocumented immigrants pay an effective tax rate of 6.5 percent, contributing an estimated $126 million a year.
-Allowing undocumented immigrants to work legally in Michigan will increase their state and local tax contributions to $161 million a year, with an effective tax rate of 7.5 percent.
-Undocumented immigrants in Michigan pay an estimated $85 million in sales and excise taxes; $26 million in state income taxes and $14.5 million in property taxes.
The report also provides:
-A breakdown of tax payments by category (sales, income, property) for each state, before and after immigration reform, including the effect of undocumented immigrants becoming newly eligible for state Earned Income Tax Credits.
-Key state-by-state data points on the immigrant population underlying the tax analysis.
-A complete methodology section and footnotes.
-The report and a clickable 50-state data map can be accessed at http://www.itep.org/immigration.
Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP’s mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. ITEP’s full body of research is available at www.itep.org.
The Michigan League for Public Policy, formerly the Michigan League for Human Services, is a nonprofit, nonpartisan research and advocacy organization dedicated to economic opportunity for all.