MEDIA RELEASE: Undocumented Immigrants in NC Pay $253 Million Annually in State and Local Taxes

Immigration Reform Would Boost NC’s State Revenues By $83 Million Per Year, New Study Finds

WASHINGTON, DC (July 10, 2013) – With fiscal costs and benefits figuring large in the immigration reform debate, a new analysis estimates that undocumented immigrants are already paying $10.6 billion a year in state and local taxes nationwide, including the $253 million they pay each year in North Carolina.

The study also estimates that North Carolina stands to gain $83 million in increased revenue should undocumented immigrants currently in the U.S. be allowed to work here legally. The analysis from the Institute on Taxation and Economic Policy (ITEP) assumes a newly legalized immigrant population of 325,000 in North Carolina, 11.2 million nationally, fully participating in the federal, state and local tax systems.

The overall revenue gain for all states would be $2 billion a year.

States like North Carolina, with progressive tax systems that include an income tax, would see the most significant revenue change since it is in the income tax where compliance will increase under reform. Undocumented immigrants currently pay approximately the same level of sales and property taxes as other U.S. residents in the same income brackets. However, with the current discussions at the General Assembly over reducing the progressivity of the income tax and shifting to greater reliance on the sales tax, the ability of North Carolina to reap the full benefits of federal immigration reform could be muted.

“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,” said 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.

The study, Undocumented Immigrants’ State and Local Tax Contributions, available at www.itep.org/immigration, finds:

  • Undocumented immigrants currently contribute a collective estimated $10.6 billion in state and local taxes each year and are paying an average effective tax rate of 6.4 percent.
  • Providing work authorization for immigrants will increase their state and local tax contributions by an estimated $2 billion each year and raise their effective tax rate to 7 percent.
  • Undocumented immigrants currently pay $1.2 billion in personal income taxes, $1.2 billion in property and $8 billion in sales and excise taxes.

Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP's mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. ITEP’s full body of research is available at www.itep.org.

FOR MORE INFORMATION, CONTACT: Anne Singer, ITEP, 202-299-1066, ext 27 or anne@itep.org; Jeff Shaw, director of communications, NC Justice Center, 503.551.3615 mobile or jeff@ncjustice.org.