Who are undocumented immigrants?

Those who are in the United States are out of status; overstayed visas; walked across the border; smuggled in by human traffickers or have never been inspected by Customs and Border Patrol.

How do undocumented immigrants pay taxes?

  • Local taxes:
    1. sales taxes (buying goods at a store)
    2. property taxes (renting or buying a car)
  • State taxes:
    1. If undocumented immigrants receive a paycheck, then state taxes are paid using a SSN or Individual Tax ID number (ITIN) (see www.IRS.gov) for payroll.
    2. If undocumented immigrants receive cash, they file state income taxes with their SSN or ITIN.
  • Federal taxes:
    1. If undocumented immigrants receive a paycheck, then federal taxes are paid using a SSN or ITIN for payroll.
    2. If undocumented immigrants receive cash, they file federal income taxes with their ITIN or SSN.

In a recent report titled Undocumented Immigrants’ State & Local Tax Contributions, the Institute on Taxation and Economic Policy (ITEP) not only details the present tax contributions of undocumented immigrants, but how much those contributions would increase.

ITEP estimates the current and probable future tax contributions of undocumented immigrants at the state and local level:

  • Current contributions: Undocumented immigrants paid $11.6 billion in state and local taxes 2013. This ranged from roughly $2.2 million in Montana (home to only 4,000 undocumented immigrants) to $3.1 billion in California (with an undocumented population numbering over 3 million). The average effective state and local tax rate of undocumented immigrants in 2013 was 8 percent (compared to 5.4 percent for the top 1 percent of all taxpayers).
  • Executive Action: The Obama administration’s executive actions would grant a reprieve to millions of undocumented immigrants. The state and local tax contributions of this group of undocumented immigrants would increase by more than $800 million per year once the actions were fully in place. This would raise the effective state and local tax rate of this group .5 percent.

If we had immigration reform, and undocumented immigrants were given legal status, then they would be in a better paying job and pay more taxes. This is better for the US economy.

Article by:  Angela MW Thanyachareon, Attorney at Law

The Thanyachareon Law Firm, An Immigration Law Practice



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