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April 16, 2015

Math that Works for All of Us

Immigration, especially the role unauthorized immigrants play in our economy and communities and how public policy should respond to their presence, is a hot topic right now. Newly released data sheds important light on some of the benefits that unauthorized immigrants bring to the economy and the financial health of communities, as well as how that might change if the president’s executive actions that provide increased stability for some immigrant families are upheld by the courts.

Undocumented immigrants, like everyone else, pay state and local taxes. This includes paying sales and excise taxes when buying groceries, gasoline, and virtually everything else; paying property taxes (either directly as homeowners or indirectly when paying their rent to their landlord, who pays property taxes); and often paying state income tax.

All told, undocumented Virginians currently pay $240.4 million a year in taxes to Virginia and its localities. That’s a 6.5 percent effective tax rate for the typical undocumented immigrant household. By comparison, the highest-income 1 percent of Virginia households pay an effective tax rate of just 5.1 percent. But the amount of taxes that could be collected would be even higher if more immigrants were protected from deportation.

Providing permanent legal residence status for all undocumented immigrants currently living in Virginia would boost state and local tax collections by $76.7 million a year, creating an effective tax rate of 7.8 percent, according to estimates in the same report. The more limited relief from deportation for some undocumented immigrants allowed by the president’s executive actions would boost state and local tax revenue in Virginia by $26 million a year, a smaller but still noticeable boost for state and local budgets.

Taxes paid by immigrants would increase for two reasons: immigrants would work and earn more if they had legal immigration status, and income tax compliance by immigrant workers and their employers would improve if more had legal status. Most undocumented immigrant workers already pay income taxes, via either an individual tax identification number or a false social security number, but with more legal status almost all would pay income taxes on their earnings.

Immigrants—both documented or undocumented—are already a part of Virginia’s economy and communities. And they’re already paying a significant amount in taxes to Virginia’s counties, cities, and state. But providing protection from deportation for additional immigrants would help all immigrant workers reach their full economic potential while also boosting Virginia’s state and local tax revenue. That’s the kind of math that works for all of us.

–Laura Goren, Senior Policy Analyst

The Commonwealth Institute

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