We know the old refrain about undocumented immigrants in the United States. There are currently 11 million of them living here, and they're often accused of paying little to no taxes while still reaping many of the benefits that come with living in America.
It turns out that isn't really true.
According to a recent study, these 11 million immigrants account for an estimated $11.64 billion in state and local taxes every year. Contributions vary from state to state, depending on the population, ranging from as little as $2.2 million in Montana to as much as $3.1 billion in California. While that's already a sizable sum, it could be a lot higher.
I recently spoke to Matthew Gardner, the executive director of the Institute on Taxation and Economic Policy (ITEP), a nonprofit, nonpartisan research organization that works on federal, state, and local tax policy issues. His work focuses on state and local tax systems and their impact on low- and middle-income taxpayers. Gardner is one of the authors of Who Pays: A Distributional Analysis of the Tax Systems in All 50 States (2003, 2009, 2013, and 2015 editions), and he has written a number of comprehensive studies on specific states' tax systems.
He explained that the current tax situation with undocumented workers in the U.S. is one where a great deal of taxes are already being paid, but it is just a fraction of what state and federal tax authorities would take in if these immigrants were integrated into the legal work force.
"It is a fact that undocumented workers have not fully participated in the state income tax. However, an initial finding of our report concludes that undocumented families are paying taxes in practically every other way, because they pay property taxes, sales tax, etc. However, on income taxes, generally, the compliance level is about half. By legally integrating these workers, we would bring them to the same level as everyone else, which is close to 100 percent.
"We also anticipate that wages would grow for these workers, because integrating them into the legal work force opens up avenues for training and other aspects that drive higher wages, while letting them compare wages with everyone else on the open market. If they make more, in turn, they'll pay more taxes."
Even though undocumented workers don't pay income tax right now, they do carry a heavier effective tax burden than the top-earners, relative to their percentage of income. The ITEP study says undocumented workers on average pay an estimated 8 percent of their incomes toward state and local taxes. The top 1 percent of taxpayers? They pay an average nationwide effective tax rate of just 5.4 percent.
"It's primarily because the documented families tend to be poorer than Americans overall," Gardner explained. "So really what it reflects is not the distribution by state, but the overall impact of state and local tax systems. In virtually every state, the income group that pays the most as a share of their income is the very poorest Americans, and the group that pays the least as a share of their income is the very top earners. Our finding on undocumented taxpayers is primarily a reflection of that."
So with these findings in mind, it invites the question: Where is the disconnect between this data and the 35 percent of Americans who, according to a 2015 Gallup poll, don't favor a path to U.S. citizenship for undocumented immigrants? Is the third of the country that is against citizenship aware of this potential revenue windfall? When asked, Gardner says it's very likely they're unaware of the benefits.
"I think it's very likely that lots of people are in the dark when it comes to the facts and that's a predictable product of the relentless rhetoric on this topic--this notion that undocumented immigrants aren't paying their fair share, or that they're not paying into the system at all," he concluded. "The hope is that, by getting these estimates out there, it will at least help suppress the uninformed rhetoric, but it takes a certain amount of data to counteract that."
That's no small task when you consider the highly politicized nature of this topic, and its seemingly constant visibility in the media spotlight these days. But if history is any guide, the only thing more reliable than political rhetoric is the unwavering desire of local and federal tax authorities to find new ways to increase tax revenue. Over time, that may prove to be a catalyst to change.