Immigrants Contributions to US Tax Revenue Crucial Amid Declining Birth Rates and Rising Retirees

Immigrants are essential to US tax revenue, particularly as the nation faces a declining birth rate and an increasing number of retirees.

Programs that Americans depend on, such as Social Security and Medicare, are supported by tax revenue from both documented and undocumented workers. However, individuals living in the US illegally are ineligible for these benefits.

This situation has raised concerns among policymakers regarding President Donald Trump's promise to deport millions of undocumented immigrants. Although those without legal status do not possess Social Security numbers, the IRS issues individual taxpayer identification numbers (ITINs) that enable them to pay taxes. Establishing a tax payment history can be beneficial in pursuing citizenship.

It is important to note that ITINs do not confer legal immigration status, work authorization, or access to federal benefit programs. Many who work illegally in the US adhere to IRS regulations to minimize the risk of deportation for themselves or family members. Cecilia Menjívar, a sociology professor at UCLA who focuses on immigration policy, states that paying taxes with ITINs helps establish a work history and demonstrate moral character, which is advantageous in immigration proceedings.

The Social Security Administration recently informed Business Insider that Trump's deportation strategies could lead to a $20 billion annual decline in tax revenue. This poses a serious concern as Social Security payments may diminish in just over a decade due to insufficient funds.

According to the Institute on Taxation and Economic Policy, immigrants living in the US illegally contributed approximately $96.7 billion in taxes in 2022, with more than half directed to the federal government and the remaining portion to state and local authorities.

A portion of this tax revenue also supports welfare programs such as SNAP, Supplemental Security Income, unemployment, and housing assistance, areas in which undocumented immigrants are ineligible.

As of July 2023, the most current data shows over 11 million undocumented immigrants residing in the US, with more than 8 million participating in the workforce, according to the Center for Migration Studies. The declining birth rate and the growing number of retirees utilizing Social Security highlight the critical role immigrants play in the workforce and in maintaining government revenue.

The US tax system has long acknowledged immigrant contributions. The ITIN system was introduced in the 1990s, allowing foreign nationals to fulfill tax obligations. Some ITIN holders may be undocumented, while others include student visa holders and the families of employment visa holders.

While many immigrants have ITINs, the IRS cannot share this information with other government bodies, and these numbers cannot be utilized by employers or the government to determine an individual's immigration status.

An ITIN may also be counted retroactively towards a person's Social Security benefits if they later become a citizen, according to the American Immigration Council. Additionally, individuals can use ITINs to open bank accounts or secure driver's licenses.

It is critical to understand that obtaining citizenship does not automatically grant immigrants access to retirement or welfare benefits. A law enacted in 1996 stipulates that newly naturalized citizens must wait five years before qualifying for certain assistance.

Menjívar asserts that immigrants, irrespective of their citizenship status, contribute significantly more in taxes than they receive in benefits. As Trump's deportation strategies unfold, she anticipates substantial economic repercussions due to the removal of millions of tax contributors from local economies.

“If several million people who contribute taxes and support their local economies through sales and property taxes are removed, it will have a broad impact,” she stated.