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New Study Indicates Undocumented Immigrants Already Pay Billions in State and Local Taxes

capitol.jpgWhile Congress continues to debate the merits of immigration reform, the evidence that legalization would boost the U.S. economy is mounting. A new report by the Institute on Taxation and Economic Policy shows that not only would providing legal status to undocumented immigrants raise more than $2 billion in local and state taxes each year, but that these workers already contributed almost $10.6 billion in taxes in 2010.

As an immigration and family law attorney in Texas, I recognize how much local communities could benefit from added economic stimulus. If this study is accurate then providing some form of legalized standing to undocumented aliens would provide more funds for state and local governments throughout the country.

The study by ITEP details how these immigrants currently pay a variety of taxes. Immigrants pay sales and excise taxes on almost all their basic needs purchases, and they also contribute property taxes through home payments or rent. ITEP also suggests that almost half of undocumented immigrants are paying income taxes.

ITEP estimates that $8.1 billion is paid in sales and excise taxes, $1.2 billion in income taxes, and $1.2 billion in property taxes by undocumented aliens currently. If these immigrants were provided citizenship or residency, they would probably contribute $8.5 billion in excise and sales taxes, $2.8 billion in income taxes, and $1.3 billion in property taxes.

The Institute of Taxation and Economic Policy also argues that legal status would raise taxes because incomes would rise. Without the threat of criminal charges or deportation, more immigrant employees would be free to apply to higher paying jobs or petition for increased wages. The augmented bargaining power would increase wages and promote spending which would further benefit state and local economies.

ITEP is a nonpartisan, nonprofit research group that analyzes federal, local and state tax policies. Founded in 1980, ITEP currently provides advice and information to Congressional members, government agencies and the media.

A study by the Heritage Foundation, however, argues that although initially local and state government would receive additional taxes during the thirteen year interim phase, the costs associated with supporting additional households would far outweigh any tax gains. The Heritage study suggests that almost $2,000 per household each year would need to be paid by local or state governments, far outweighing the approximately $1,000 in additional taxes received each year. These costs are attributable to population based services, earned income tax credits and Obamacare.

As an immigration attorney, I recognize that neither of these studies can be entirely conclusive because they make assumptions that must be borne out by realities following any reform implementation. Whether Congress ultimately decides to pass immigration reform or not, it remains an undeniable fact that many of these communities already pay a significant amount in taxes.

The Lyttle Law Firm, PLLC, is committed to providing legal services in a variety of immigration and family law fields. If you would like to discuss your case, please contact us at (512) 215-5225.