Experts: Obama’s Action Should Increase Tax Collections

November 21, 2014. The Arizona Republic ran a story about President Obama’s administrative action on immigration that cites the Fiscal Policy Institute’s work, as well as our partners at the Institute on Taxation and Economic Policy:

 

Undocumented immigrants who qualify for President Barack Obama’s executive action, announced Thursday, will pay far more in new taxes than they will gain in credits, providing a significant boost to state and federal coffers, tax researchers predicted Friday.

Legalizing millions of workers also will tend to push up wages for both immigrants and U.S. citizens, researchers said.

Undocumented immigrants who qualify for deferral will be able to get work permits and Social Security numbers. They also must pay all relevant state and federal income and payroll taxes.

Under the executive action, they will be eligible for child and earned-income tax credits, but will not be eligible for other government benefits, according to White House officials.

“The net of that is undoubtedly going to be positive and pretty substantial,” both at the state and federal level, said David Dyssengaard Kallick, a senior fellow at the Fiscal Policy Institute, a nonpartisan New York think tank.

“While estimates are obviously imprecise, about half of undocumented immigrants pay payroll taxes already, and about half file income-tax returns,” Kallick said.

Elaine Maag, a senior researcher at the Tax Policy Center, a Washington-based nonpartisan think tank, said undocumented parents of children who are U.S. citizens or legal permanent residents already qualify for child tax credits under current federal law.

“More people will claim that credit, but overall, you’ll see revenue go up,” Maag said.

And, a little further on:

Both Arizona’s Department of Revenue and the Joint Legislative Budget Committee said they have not estimated the tax and revenue impact of Obama’s executive action. However, the Institute on Taxation and Economic Policy, a Washington-based think tank, estimated last year that undocumented immigrants currently pay about $10.6 billion a year in state and local taxes around the country and more than $374 million a year in Arizona.

“Most of those are sales, excise and property taxes — taxes that don’t depend on citizenship status,” said Matt Gardner, the institute’s executive director.

The institute estimated that providing a legal presence to all the estimated 11 million undocumented immigrants in the country would boost state and local tax revenues by $2 billion a year and increase tax revenue in Arizona by about $54 million, most from gains in state income tax.

Although Obama’s executive action will allow 3.8 million to 4.3 million additional people to work legally, the basic dynamic is the same, and there would be a proportional gain in revenue, Gardner said.

“There’s absolutely going to be a wage boost; there will be in increase in income-tax compliance, and more will pay income taxes regularly,” he said. “That’s a win-win for states.”

 

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