Taxes Paid by Undocumented Immigrants Help Fill State and Local Coffers

John Reitmeyer | February 25, 2016 | More Issues
In New Jersey, revenues from sales, income and property taxes total more than half-billion dollars annually

undocumented workers
Undocumented immigrants living in New Jersey contribute nearly $600 million in state and local taxes, one of the highest totals for any U.S. state, according to a new nationwide study.

Those revenues flow into state and local coffers when undocumented immigrants pay property taxes, sales taxes and income taxes, the Institute on Economic Policy and Taxation reported in the study released yesterday.

The new figures on undocumented immigrant tax contributions were issued as a fierce national debate over federal immigration policy has erupted over the last few years, and as some candidates seeking the GOP’s 2016 presidential nomination have staked out hardline positions that call for a mass deportation of undocumented immigrants and much tighter control of the U.S. border with Mexico.

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President Obama has also waded into the conversation by issuing executive actions that would allow some children of undocumented immigrants and their parents to stay in the country. A legal challenge of his 2014 executive actions is pending before the U.S. Supreme Court.

New Jersey has approximately 509,000 undocumented immigrants, according to Washington, D.C.-based institute, paying a combined $273.7 million in property taxes, either directly or indirectly through rent.

Another $267.2 million is contributed by undocumented immigrants in the form of sales taxes.

The state also collects $49.4 million in income tax revenue, the institute found, sometimes from undocumented workers using fake Social Security numbers or tax identification numbers.

In all, the institute — using 2013 population figures – determined that the nation’s estimated 11 million undocumented immigrants pay a total of $11.64 billion in state and local taxes.

At $3.1 billion, California generated the most revenue from undocumented immigrants, while Montana, with $2.2 million, collected the least. New Jersey ranked fifth among all states with $590 million in tax revenue collected from undocumented immigrants.

The state’s overall immigrant population also ranks fifth in the nation.

The institute also estimated that New Jersey would take in another $24 million if a legal injunction blocking Obama’s executive actions were to be lifted by the U.S. Supreme Court, which could take up the issue this spring. The most significant portion of that additional revenue would come from income taxes, based on the assumption that the affected immigrants would be able to earn better wages and fully comply with the tax code, the institute’s study said.

Erika Nava, a policy analyst with New Jersey Policy Perspective, a liberal think tank based in Trenton, called the institute’s new report “essential in busting the myth that undocumented New Jerseyans don’t pay taxes or contribute to the state’s economy.”

“In fact, just like the rest of us they pay quite a lot already — and would pay more under common-sense reforms,” Nava said.

New Jersey Policy Perspective issued its own report last year on the potential impact of Obama’s executive actions, determining the state economy would get a $12 billion boost over the next 10 years and add 1,500 new jobs if the court authorized full implementation of the president’s orders.

The think tank also supports state policy changes that would make New Jersey more hospitable to undocumented immigrants, including letting them drive legally and allowing them to seek tuition aid at state colleges and universities.

[related]But Gov. Chris Christie last year joined a legal brief filed by roughly two dozen other states that challenged Obama’s executive orders on immigration. Christie said at the time that he favors comprehensive immigration reform enacted through federal legislation. He also characterized the filing of the legal brief with the other governors as sending a message to Obama to encourage compromise on the issue with Republicans who control Congress.

Christie – who recently dropped out of the GOP’s 2016 presidential primary – has faced criticism from some members of his own party for not being tough enough on the immigration issue.

For example, he signed a law in 2013 that extended in-state tuition rates at state colleges and universities to New Jersey’s undocumented students.

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The institute, in its new study, determined comprehensive immigration reform would increase the amount of state and local taxes paid by undocumented immigrants by $2.1 billion. The total haul for New Jersey would increase to $667.6 million.

Meg Wiehe, the institute’s state policy director, said getting out good data showing the tax contributions made by undocumented immigrants is crucial in light of the national debate and similar policy discussions in many states.

“Regardless of the politically contentious nature of immigration reform, the data show undocumented immigrants greatly contribute to our nation’s economy, not just in labor but also with tax dollars,” she said. “Accurate information about the tax contributions of undocumented immigrants is needed now more than ever.”