Immigration policies have taken center stage in public debates this year, but much of the conversation has been driven by emotion, not data. A new in-depth national study from the Institute on Taxation and Economic Policy aims to help change that by quantifying how much undocumented immigrants pay in taxes – both nationally and in each state.

Here in Colorado, undocumented immigrants contributed $436.5 million in state and local taxes in 2022 – a number that would rise to $537.8 million if these taxpayers were granted work authorization, according to the study.

Other key findings:

• Nationally, undocumented immigrants contributed $96.7 billion in federal, state, and local taxes in 2022. Of this, $37.3 billion went to state and local governments.
• For every 1 million undocumented immigrants who reside in the country, public services receive $8.9 billion in additional tax revenue. On the flip side, for every 1 million undocumented immigrants who are deported, public services stand to lose $8.9 billion in tax revenue.   
• Nationally, providing access to work authorization to all current undocumented immigrants would increase their tax contributions by $40.2 billion per year, to $136.9 billion.
• More than a third of the tax dollars paid by undocumented immigrants are toward payroll taxes dedicated to funding programs – like Social Security and Medicare – that these workers are barred from accessing.
• Similarly, income tax payments by undocumented immigrants are affected by laws that require them to pay more than otherwise similarly situated U.S. citizens; as one example, they are often barred from receiving meaningful tax credits like the Child Tax Credit or Earned Income Tax Credit. However, many states have made their versions of these credits more immigrant-inclusive in recent years.
• 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. In Colorado, undocumented immigrants pay an effective tax rate of 7.8 percent, which is almost a full percent more than the top 1 percent income earners, who pay a 7 percent effective tax rate.

“This study is the most comprehensive look at how much undocumented immigrants pay in taxes. And what it shows is that they pay quite a lot, to the tune of nearly $100 billion a year,” said Marco Guzman, ITEP Senior Policy Analyst and co-author of the study. “The bottom line here is that regardless of immigration status, we all contribute by paying our taxes.”  

In Colorado, 42 percent of the tax contributions are through sales and excise taxes, while 33 percent are through property taxes, and 24 percent are through personal or business income taxes.

“Immigrants are integral members of Colorado communities and play a pivotal role across state and local economies,” said Colorado Fiscal Institute Policy Analyst Sophie Shea. “In Colorado, immigrants generate 10 percent, or about $49.1 billion, of our state’s economic output, and new research finds that undocumented immigrants pay a higher effective tax rate than the top 1 income earners in this state. Colorado’s diverse economy does not run without immigrant workers. Coloradans benefit from the state’s investment towards welcoming and integrating immigrants, and modernizing and expanding the work authorization process is essential.”

While this study is the most comprehensive analysis of taxes paid by undocumented immigrants, it is worth noting that it does not attempt to quantify broader impacts that flow from the increased economic activity created by these individuals. Taking those economic ripple effects into account would likely reveal undocumented immigrants to have an even larger significance to public revenues than is documented here.

This study is another reminder that undocumented immigrants are contributing to our economies and our shared public services, and that immigration policy choices made in the years ahead will have significant consequences for public revenues.

Contact: Hannah Morris at CFI (morris@coloradofiscal.org) or Jon Whiten at ITEP (jon@itep.org or 917-655-3313)