New Jersey’s Undocumented Immigrants Pay Nearly Half a Billion Dollars a Year in State and Local Taxes; Immigration Reform Would Boost These Revenues by $81 Million

July 10th, 2013  |  by  |  Published in Economic Opportunity, NJPP Blog: As a Matter of Fact ..., Press Releases

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FOR IMMEDIATE RELEASE: July 10, 2013
Contact: Jon Whiten (NJPP): 917-655-3313 or whiten@njpp.org and Anne Singer (ITEP): 202-299-1066 ext. 27 or anne@itep.org

New Jersey’s Undocumented Immigrants Pay Nearly Half a Billion Dollars a Year in State and Local Taxes; Immigration Reform Would Boost These Revenues by $81 Million

New 50-State Study Helps Shape Fiscal Side of Immigration Debate

NJ's Undocumented Immigrants Pay TaxesWith fiscal costs and benefits figuring large in the immigration reform debate, a new analysis estimates that unauthorized immigrants are already paying $10.6 billion a year in state and local taxes nationwide, including $476 million in New Jersey. The study, released today by the Institute on Taxation and Economic Policy (ITEP), also estimates that New Jersey stands to gain $81 million in increased revenue if undocumented immigrants currently in the U.S. were to be allowed to work here legally. The overall revenue gain for all states would be $2 billion a year.

“This report gives yet another reason for enacting sensible immigration policies,” says New Jersey Policy Perspective president Gordon MacInnes. “The contributions of presently undocumented residents are already significant. Granting them legal status to work would only increase those contributions.”

States like New Jersey with a progressive income tax would see the most significant revenue change since it is in the income tax where compliance will increase under reform; unauthorized immigrants currently pay approximately the same level of sales and property taxes as other U.S. residents in the same income brackets. The study estimates that state income taxes paid by undocumented workers would more than double in New Jersey under immigration reform, rising to $117 million a year from the current level of $58 million.

“We know that undocumented immigrants already pay six or seven percent of their income in state and local taxes, simply because they buy things and they rent or own homes, and sales and property taxes are paid automatically,” says Matthew Gardner, ITEP’s Executive Director. “With legalization, both wages and tax compliance will go up, resulting in substantial new revenues for states, especially from the income tax.” A recent Congressional Budget Office (CBO) report concluded a similar effect on federal revenues.

“Given the very clear contributions of undocumented immigrants nationally and particularly in New Jersey, it is imperative that we create a path to citizenship that is fast, affordable, and accessible, rather than punitive,” says Amy Gottlieb, the director of the American Friends Service Committee’s Immigrant Rights Program in Newark.

The study, Undocumented Immigrants’ State and Local Tax Contributions, finds:

• New Jersey’s undocumented immigrants currently contribute a collective estimated $476.4 million in state and local taxes each year and are paying an average effective tax rate of 5.1 percent; nationally those figures are $10.6 billion in taxes paid, at an average effective rate of 6.4 percent.

• Allowing New Jersey’s undocumented immigrants to work legally will increase their state and local tax contributions by an estimated $81.2 million and raise their effective tax rate to 5.4 percent; nationally those figures are $2 billion in increased taxes annually, and a new effective rate of 7 percent.

• New Jersey’s undocumented immigrants currently pay $58 million in personal income taxes, $95.1 million in property taxes and $323 million in sales and excise taxes. Nationally, undocumented immigrants currently pay an estimated total of $1.2 billion in personal income taxes, $1.2 billion in property and $8 billion in sales and excise taxes.

The report also provides:

• A breakdown of tax payments by category (sales, income, property) for each state, before and after immigration reform, including the effect of undocumented immigrants becoming newly eligible for state Earned Income Tax Credits.

• Key state-by-state data points on the immigrant population underlying the tax analysis.

• A complete methodology section and footnotes.

• The report and a clickable 50-state data map can be accessed at http://www.itep.org/immigration.


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