Federal Budget Bill Harms Immigrant Families and Children, Targeting Essential Workers and Community Members

Sophie Shea, Policy Analyst

Despite undocumented immigrants’ essential contributions to federal, state, and local revenue coffers, the Federal House Reconciliation Bill—officially titled the “One Big Beautiful Bill Act” (OBBBA)—would create a separate, harsher tax code for immigrants and their families, who are often of mixed status and include people with lawful status and citizenship, along with family members without documentation. Nationally, undocumented immigrants contributed $96.7 billion in federal, state, and local taxes in 2022. In Colorado and 39 other states, undocumented immigrants pay higher state and local tax rates than the top 1 percent of households living within their borders.

Furthermore, the OBBBA excludes immigrants with lawful status from essential programs like healthcare and food assistance. The bill also disqualifies lawfully present and citizen children from receiving the Child Tax Credit (CTC) if either parent files taxes with an ITIN, or Individual Tax Identification Number, instead of a SSN (Social Security Number).

Currently, without the OBBBA, immigrants without documentation do not have access to food support through the Supplemental Nutrition Assistance Program (SNAP) or healthcare resources through Medicare or their state’s Affordable Care Act (ACA) healthcare marketplace. However, the OBBBA would further restrict access to healthcare for those with lawful status, including people granted asylum; refugees; special immigrant juveniles who have been abused, abandoned, or neglected by a parent; Temporary Protected Status (TPS) holders; those granted humanitarian parole (based on a determination that their urgent humanitarian needs cannot be met in their home countries); and certain victims of domestic violence, labor, or sex trafficking.

The OBBBA also threatens to levy severe penalties of additional federal funding cuts to states that have adopted the Medicaid expansion under the ACA if the state provides certain categories of immigrants (including many who have lawful immigration statuses) with access to comprehensive health coverage, regardless of the source of funding for that coverage. These penalties would compound the average of $70 billion in annual cuts to Medicaid that are already built into OBBBA. These cuts will kick an estimated 15 million people—most of whom hold citizenship status—off of healthcare coverage, while lining the pockets of the ultra-wealthy with record-breaking tax cuts.

To maintain the current level of healthcare provision in Colorado, these Federal Medicaid funding cuts shift costs to the state. Keeping current state Medicaid policies in place, these Federal healthcare cuts would shift $2.3 billion in costs that Colorado would need to find some way to fund, or cut people off Medicaid coverage. In Colorado, Federal funding cuts are uniquely threatening because the Taxpayer’s Bill of Rights (TABOR) requires a vote of the people to be able to raise revenue to backfill these federal cuts. TABOR restricts our state legislators such that they are not able to fix this revenue problem without winning a statewide vote to raise revenue.

Additionally, the OBBBA excludes lawfully present immigrants from accessing food resources like SNAP. In Colorado, an estimated 4,000 previously qualified lawful immigrants include refugees, people approved for asylum, and other people living in the state lawfully will no longer be eligible for food assistance. 

It is important to note that while these harmful restrictions to critical programs are happening, the Trump Administration is taking steps to terminate lawful status for hundreds of thousands of people granted humanitarian parole, Temporary Protected Status (TPS) holders, and others who have sought refuge in this country.

The bill would strip 4.5 million children who are U.S. citizens or lawful permanent residents of eligibility for the CTC if even one of their parents files taxes without a Social Security number (SSN). Around 1 million children are already denied eligibility for the CTC under current law because they do not have an SSN. The bill would go much further by denying the credit to children who are U.S. citizens and lawful permanent residents who live in immigrant families. Children in low-income families that receive income supports like the CTC have better health and educational outcomes during childhood, as well as higher earnings as adults.

The House Budget Bill also makes the Federal tax code even harsher for immigrant filers. Already, many immigrant tax filers are ineligible for the CTC, Earned Income Tax Credit (EITC), and Premium Tax Credit. However, the OBBBA creates a Federal tax code that would also consider a filer’s immigration status to determine eligibility for exclusions, exemptions, and deductions.

The singling out of immigrant taxpayers for harsher treatment also raises a more foundational concern of whether this shift in policy could be the start of an effort to use the tax code to punish politically disfavored persons in general. Furthermore, the exclusion of lawfully present immigrants from healthcare and food assistance and the Trump Administration’s growing effort to remove lawful status from refugees and TPS holders—in conjunction with gutting Medicare, Medicaid, and SNAP across the board to pay for record-breaking tax cuts to the wealthiest Americans—clearly illustrates that the Trump Administration is posing immigrants as the scapegoats. The reality is, these draconian federal funding cuts harm everyone.