Walk into any busy kitchen in Chicago or a construction site in Texas, and you’ll see the backbone of the American service economy. It’s gritty. It’s loud. And, despite what you might hear on a 24-hour news loop, it’s heavily taxed.
So, do illegal immigrants pay taxes in the US?
Yeah, they do. A lot.
According to the Institute on Taxation and Economic Policy (ITEP), undocumented immigrants contribute roughly $96.7 billion in federal, state, and local taxes annually. This isn't just about sales tax on a gallon of milk or a pair of work boots. We’re talking about cold, hard income tax withheld from paychecks for benefits these workers will likely never see.
It’s a weird paradox. You have a massive group of people essentially funding a system that officially says they shouldn't be here. It’s messy, politically charged, and honestly, a bit of a head-scratcher if you look at the raw data versus the public rhetoric.
The ITIN: How the IRS collects billions from non-citizens
The Internal Revenue Service (IRS) doesn't care about your visa status. They care about the money.
Back in 1996, the IRS created the Individual Taxpayer Identification Number, or ITIN. It was designed specifically so people who aren't eligible for a Social Security number—including undocumented immigrants—could still file their tax returns. For the IRS, it’s a "don't ask, don't tell" policy that generates billions.
If you’re working a "W-2 job" using a fake Social Security number or a valid ITIN, your employer is legally required to withhold taxes. That money goes straight to the Treasury. By the time the worker realizes they can’t claim a refund without a legal status, the money is already gone. It stays in the system.
Stephen Goss, the Chief Actuary of the Social Security Administration, has pointed out that undocumented workers contribute about $13 billion a year into the Social Security Trust Fund. They take out $0.
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Think about that for a second. That’s a massive subsidy for the retirement of legal US citizens. It keeps the fund solvent for a few more years than it would be otherwise. Without this "phantom" workforce, the Social Security deficit would look a whole lot uglier.
Why would someone pay taxes if they are "undocumented"?
You might be wondering why someone would voluntarily raise their hand to the federal government when they are technically in the country illegally. It seems risky, right?
Actually, it’s about the long game.
Most immigration attorneys will tell their clients to pay their taxes religiously. Why? Because "good moral character" is a primary requirement for almost every path to legal status or citizenship. If a pathway to residency ever opens up—like DACA or a potential reform bill—the first thing the government asks for is tax records.
Paying taxes is a paper trail. It proves you’ve been in the country. It proves you’ve been working. It proves you aren't a "public charge."
Plus, many workers just want to follow the rules. There’s a psychological comfort in having that stamped 1040 form. It feels like a shield, even if it’s a thin one.
Consumption taxes don't care about your passport
Even if an undocumented immigrant works "under the table" for cash, they still can't escape the tax man.
Every time they fill up a gas tank, they pay the federal and state excise tax. When they buy clothes for their kids at a local Target, they pay sales tax. When they pay rent, a portion of that money goes toward the landlord’s property taxes.
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In states like Texas or Florida, which have no state income tax, the government relies heavily on sales and property taxes. In these regions, undocumented immigrants often contribute a higher percentage of their income toward state revenues than the wealthiest residents do. ITEP data suggests that in 40 states, undocumented immigrants pay higher effective tax rates than the top 1% of households in those same states.
It’s an uncomfortable reality for many. The very people often accused of "draining the system" are actually paying a higher share of their meager earnings into it than some billionaires.
The "drain on resources" myth vs. the balance sheet
It’s fair to ask about the other side of the ledger. Critics often point to the cost of public schools and emergency room visits. Those are real costs.
Public schools must enroll every child regardless of status. Emergency rooms must stabilize every patient. These are local and state expenses that can be heavy in border states or "sanctuary" cities.
However, a study by the National Academies of Sciences, Engineering, and Medicine found that while first-generation immigrants might cost more at the state and local level, their children (the second generation) are among the strongest fiscal contributors in the country.
The federal government is the big winner here. They take the bulk of the payroll taxes but provide almost zero services to undocumented adults. No SNAP (food stamps). No Medicaid. No Social Security checks. The "profit" at the federal level often offsets the "loss" at the local level, though that doesn't always help the local school district in El Paso or Queens.
Property taxes and the housing market
Property taxes are the lifeblood of local infrastructure. They pay for the police, the fire department, and the local roads.
If an undocumented immigrant rents an apartment, they are paying property tax. It’s baked into the rent. If the landlord’s tax bill goes up, the rent goes up.
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Interestingly, a surprising number of undocumented immigrants actually own homes. They use their ITIN to get specialized mortgages. When they do, they pay property taxes directly to the county. They are literally funding the schools their neighbors' children attend.
The complexity of the "under the table" economy
Not everyone is on a formal payroll. Day laborers at a Home Depot parking lot or house cleaners paid in cash aren't having federal taxes withheld on Friday afternoon.
But even here, the money recirculates. That cash is spent at local businesses, creating more taxable revenue and supporting local jobs. Economists call this the "multiplier effect."
When we ask do illegal immigrants pay taxes in the US, we have to look past the W-2. We have to look at the total economic footprint. If you removed 11 million people from the economy tomorrow, you wouldn't just lose their labor; you’d lose billions in immediate tax revenue and consumer spending that keeps thousands of small businesses alive.
What experts say about the future
Researchers like those at the Center for Migration Studies (CMS) argue that providing a pathway to legal status would actually increase tax revenue.
When people have legal status, their wages tend to rise because they have more bargaining power. Higher wages mean higher tax brackets. ITEP estimates that granting work authorization to the current undocumented population would increase their tax contributions by another $40 billion annually.
It’s a massive "tax gap" that exists simply because of legal status.
Actionable insights for the taxpayer
Understanding the fiscal reality of immigration is different from debating the ethics of it. Here is what you should know to navigate the conversation:
- Check the SSA data: Look at the "Earnings Suspense File" from the Social Security Administration. This tracks wages where the name and SSN don't match—it’s essentially a record of billions of dollars in taxes paid by people who will never get the benefits.
- Understand ITIN vs. SSN: If you see a business accepting an ITIN, they are helping the IRS collect revenue from non-citizens. It’s a legal and encouraged practice by the Treasury.
- Look at local impact: If your local school district is struggling, the issue is often how property taxes are distributed, not necessarily the presence of immigrant families who are contributing to that tax base via rent.
- Acknowledge the imbalance: The federal government receives the most benefit from undocumented labor, while local municipalities often carry the cost of services. This "fiscal mismatch" is the real source of much of the political tension.
The reality is that the US tax system is incredibly efficient at taking money from anyone who works, regardless of their right to be here. Whether it's through a payroll deduction, a grocery receipt, or a monthly rent check, the contribution is happening. The math is clear: the US economy depends on these tax dollars far more than most people are willing to admit.