Debunking the Myth: Immigrants and taxes-what they pay, what they get in return.

It's "common knowledge" in anti-immigration circles that immigrants, particularly the undocumented, don't pay taxes nearly equal to the government services they receive. From politicians like Tom Tancredo (R-Co) to pundits like Pat Buchanan and Lou Dobbs the mantra is the same; "immigrants place a burden on all American tax-payers."

Unfortunately, despite vast amounts of evidence to the contrary, most Americans believe them. But unlike many of the other subjective or unfounded claims made by the anti-immigrant right, when it comes to taxation and public services received, it's relatively easy to prove that undocumented immigrants pay far more into the system than they receive...the government keeps records.


tags: immigration, taxes , undocumented immigrants public services , cost of undocumented immigrants, social security, immigrants education costs


This past May, Republican pollster and spin-doctor, Frank Luntz released his official Republican talking points on immigration: Respect for the Law & Economic Fairness: Illegal Immigration Prevention. His polling showed that 58% of respondents believed that immigrants use more in services than they paid in taxes, and his suggestion to Republican candidates running this fall was to not only play upon the misconceptions but to encourage them.

His suggested talking points revolved around reinforcing as many fallacies as possible.

WORDS THAT WORK
“A good day’s work for a good day’s pay is a basic American principle. Accepting and abiding by the rule of law is a basic American principle. Working as hard as you can, as hard as you want to and enjoying the fruits of that labor, that’s an American principle.

But having to pay more in taxes because other people are outside the system isn’t an American principle. And having to pay more in taxes to support social services that go to illegal immigrants who aren’t paying anything in taxes isn’t the American way.”

Respect for the Law & Economic Fairness: Illegal Immigration Prevention; pg.13

Unlike some of the more subjective claims made by the anti-immigrant right, when it comes to taxation and the receipt of services, there are records kept and analysis of those records has been done. Overwhelmingly that analysis proves unequivocally that immigrants, and the undocumented in particular, pay far more into the system than they will ever take out.

Perhaps the most comprehensive analysis of the available data was published in the Harvard Latino Law Review this past spring. The report titled "The Taxation of Undocumented Immigrants:Separate, Unequal, and Without Representation" by Francine J. Lipman of the Chapman University - School of Law in Orange Calf., analyzed most of the available studies and data and found that although "Many Americans believe that undocumented immigrants are exploiting the United States' economy (and) that illegal aliens cost more in government services than they contribute to the economy. This belief is undeniably false. [E]very empirical study of illegals' economic impact demonstrates the opposite . . .: undocumenteds actually contribute more to public coffers in taxes than they cost in social services."

Eighty-five percent of eminent economists surveyed have concluded that undocumented immigrants have had a positive (seventy-four percent) or neutral (eleven percent) impact on the U.S. economy.

Undocumented immigrants, like all U.S. citizens and residents, are required to pay taxes. Despite the historic and strong American opposition to taxation without representation, undocumented immigrants (except in rare and unusual cases) have not enjoyed the right to vote on any local, state or federal tax or other matter for almost eighty years. Nevertheless, each year undocumented immigrants add billions of dollars in sales, excise, property, income and payroll taxes, including Social Security, Medicare and unemployment taxes, to federal, state and local coffers. Hundreds of thousands of undocumented immigrants go out of their way to file annual federal and state income tax returns.

Yet undocumented immigrants are barred from almost all government benefits, including food stamps, Temporary Assistance for Needy Families, Medicaid, federal housing programs, Supplemental Security Income, Unemployment Insurance, Social Security, Medicare, and the earned income tax credit (EITC). Generally, the only benefits federally required for undocumented immigrants are emergency medical care, subject to financial and category eligibility, and elementary and secondary public education. Many undocumented immigrants will not even access these few critical government services because of their ever-present fear of government officials and deportation.

Undocumented immigrants living in the United States are subject to the same income tax laws as documented immigrants and U.S. citizens. However, because of their status most unauthorized workers pay a higher effective tax rate than similarly situated documented or U.S. citizens. Yet, these workers and their families use fewer government services than similarly situated documented immigrants or U.S. citizens. Moreover, unauthorized workers have been denied remedies by the U.S. Supreme Court under the National Labor Relations Act and may be challenged to receive protection under wage and hour, anti-discrimination and workers' compensation laws. As a result, undocumented immigrants provide a fiscal windfall and may be the most fiscally beneficial of all immigrants.

... Moreover, the high effective tax rate imposed on the poorest undocumented working families relative to their less unfortunate friends and neighbors is inconsistent with fundamental tax policy.

Abstract

While garden variety immigrant bashers like Pat Buchanan or the Minutemen stick firmly to their "death of the west" meme, stating that the nation has been flooded by hordes of mooching immigrants suckling on the government teat while not paying any taxes, more subtle and "respectable" anti-immigrant organizations like the Tanton group's, Center for Immigration Studies, have admitted that immigrants do in fact pay some taxes, at least at the federal level. But they are quick to point out that since many of the largest costs in social services such as education are incurred at the state and local level immigrants still do not pay their fair share.

Once again, the research does not bear out their assertions. Localized studies done in Florida, Washington DC, and New Mexico all come to the same conclusion; immigrants pay more than their fair share for the services they receive.

The Florida study, done by the University of Florida in 2002, showed that immigrants state-wide paid the same amount of taxes as native-born Americans, but paid substantially more in Social Security than natives. In Miami-Dade, the area with the largest immigrant population, they also paid more in taxes per capita than native-born residents.

The non-partisan Urban Institute looked at the same subject in the Washington DC area in their May 2006 study, "Civic Contributions: Taxes Paid by Immigrants in the Washington, DC, Metropolitan Area." They found that overall, Washington area immigrants carry their fair share of the tax burden. In 1999, the year studied, immigrants paid 17.7 percent of all taxes in the region -- a figure almost identical to their share of the total population, 17.4 percent.

The same is true in the study done in New Mexico. Released in May 2006 by the Mew Mexico Fiscal Policy Project, " Undocumented Immigrants in New Mexico: State Tax Contributions and Fiscal Concerns" looked at a broad spectrum of issues related to the taxation of immigrants and their cost to society, particularly in the area of education and found that "to assume that (immigrants) get a free ride in New Mexico is a mistake: they pay for the services they receive, and then some."

Contrary to popular belief, undocumented immigrants pay taxes and are not able to receive public benefits, except for K through 12 public education for their children and emergency health care. The taxes that these families pay through unavoidable sales and property taxes cover the state and local share of the public education costs.

In addition to paying their own way for education, undocumented immigrants often pay for Social Security
and Medicare when those taxes are deducted from their paychecks. Neither of these social programs is available
to them as they age, so in effect, they contribute to the costs of caring for the elderly who are citizens of this
country.

Undocumented Immigrants in New Mexico: State Tax Contributions and Fiscal Concerns; pg.6

Despite what the anti-immigrant right would have the American people believe, it is quite easy to document the tax contributions made by immigrants. According to a 2004 special report issued by the IRS, undocumented workers file nearly 6 million of the approximately 130 million individual tax returns filed each year.

There are 7.2 million illegal workers in the country, reports the Pew Hispanic Center, a research organization based in Washington, D.C. If the Pew numbers and the IRS numbers … are accurate, then about 83 percent of undocumented workers are filing tax returns every year.

The Social Security Administration last year estimated 75 percent of undocumented workers are paying Social Security withholding tax.

By law, anyone who makes enough money regardless of legal status must file a tax return. The IRS and the state Franchise Tax Board allow people without Social Security numbers, such as illegal immigrants, to file their taxes by providing them with a special nine-digit number. An Individual Taxpayer Identification Number (ITIN) is given to a range of people without Social Security numbers, such as foreigners who invest in U.S. stocks and people in the U.S. with work visas.

As of September 2005, the IRS reported it issued more than 8.6 million ITINs since the number was created in 1996. State tax officials have issued 3.9 million of their own taxpayer identification numbers since 1991.

Filers using ITINs have paid more than $48 billion in income taxes from 1996 to 2004, the IRS reported.

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When discussing undocumented immigrants' contributions to the tax base and subsequent public services they pay for, perhaps the greatest inequities arise in the Social Security system. Here the undocumented contribute millions of dollars they will never qualify to receive.

The Social Security Administration’s (SSA) chief actuary estimates that three quarters of undocumented immigrants pay Social Security tax, an estimate that makes undocumented workers responsible for about 1.5% of total wages reported to the SSA
.
Taxes paid by undocumented immigrants go into the SSA’s “suspense file,” when the Social Security number does not match SSA’s records. In 2002, the suspense file grew by $56 billion in reported earnings, with about $7 billion in Social Security tax and $1.5 billion in Medicare tax paid. This tax contribution represents about 10% of the current Social Security surplus—the difference between what is being collected in Social Security taxes and what is being paid out in benefits.

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As the election season heats up it's inevitable that we hear an ever increasing amount of misinformation from those wishing to use immigration as an election year wedge issue. They will undoubtedly fall back on familiar themes of fear and ignorance, hoping to distract the electorate from the pressing issues of war, corruption and incompetence. As we have seen already, their rhetoric, controlled by spin doctors and party bosses in Washington, doesn't have to rely on truth, it just has to inflame the base and get them into the voting booth. If that means spreading misinformation and fueling the flames of racism and bigotry …so be it in their minds. It's all about retaining power at any cost.