Undocumented immigrants: Reform increases their tax contributions

Added April 20th, 2015 by Alicia Guevara Warren | Email This Entry Email This Entry
Alicia Guevara Warren

Editor’s note: The original blog post and ITEP report incorrectly stated the effective tax rate for the top 1% of earners in Michigan. We apologize for this error, which has been corrected.

Undocumented immigrants already contribute a significant amount to our state’s tax system. Under President Obama’s 2012 and 2014 executive actions, the amount will increase and could be even more with comprehensive reform.

According to a new 50-state study, “Undocumented Immigrants’ State and Local Tax Contributions” by the Institute on Taxation and Economic Policy, the 100,000 undocumented immigrants living in Michigan contribute $86 million in state and local taxes. With the president’s executive actions, ITEP estimates that this will increase by $10.86 million when it is fully implemented to allow temporary reprieve to youth who have resided in the country for at least five years and parents of U.S. citizens or legal residents. If comprehensive reform were undertaken granting lawful permanent residence to all undocumented immigrants in Michigan, the gain would be about $26.4 million.

Figures represent national estimates on current state and local tax contributions of the 11.4 million undocumented immigrants living in the United States as of 2012.

The report includes a breakdown by different types of taxes, including personal income, sales and excise, and property taxes. Undocumented immigrants like everyone else in Michigan, pay sales tax on their purchases, property taxes either directly as a homeowner or indirectly as a renter, and they also pay state income taxes. ITEP estimates that the undocumented immigrants impacted by the president’s executive order contribute a total of $38.7 million in state and local taxes and that would rise to $49.57 million under the order.

ITEP found that undocumented immigrants in Michigan pay about 7% of their income in taxes and this is expected to rise to just over 8% with the president’s plan. To put this into context, the effective tax rate—or share of income paid in taxes—for the top 1% of earners in the state is 5.1%.

Immigration reform would bring so many more benefits to our communities besides increased tax contributions, including labor market growth and productivity, wage and economic growth, and increased diversity. Gov. Snyder has taken a lead in trying to make Michigan a more inviting place for immigrants with his Welcoming Michigan initiative. Through Welcoming Michigan, partnerships have been formed with cities and counties that support locally-driven efforts to create more welcoming, immigrant-friendly environments.

Undocumented immigrants are a part of our communities attending church with us and school with our kids. They are taxpayers who already contribute a significant amount to support investments in our state. The president’s executive actions are a first step, but comprehensive immigration reform is needed to truly enhance benefits, and with Welcoming Michigan, communities across the state could be ready.

— Alicia Guevara Warren



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