Do undocumented workers pay taxes? Answer: Most do today.
The Congressional Budget Office addressed this question in a December, 2007 report. It appears that among undocumented workers, which the CBO estimates t 7.2 million, between 50% and 75% pay income, Social Security and Medicare taxes.
A 2005 New York Times article estimates that undocumented workers are “generating $6 billion to $7 billion in Social Security tax revenue and about $1.5 billion in Medicare taxes.”
From the CBO report:
First, how many undocumented workers are there? Using data from the Census Bureau’s March 2005 Current Population Survey (CPS), Pew analysts found that of the approximately 11 million unauthorized immigrants living in the United States in 2005, 5.4 million were adult males, 3.9 million were adult females, and 1.8 million were children under 18 years of age. An additional 3.1 million children of unauthorized immigrants were U.S. citizens, Pew estimated. The unauthorized population included 7.2 million workers, typically employed in lower-wage occupations in the agricultural, construction, and service industries.
Data from the Social Security Administration (SSA) and the Internal Revenue Service (IRS) suggest that some unauthorized immigrants use false or fraudulently obtained Social Security numbers (SSNs) to satisfy paperwork requirements during the hiring process and that employers use those numbers to withhold federal, state, and local income and payroll taxes for employees. Workers who do not qualify for SSNs can use Individual Tax Identification Numbers issued by the IRS to file tax returns, make payments, and apply for refunds. Although there are no reliable data on unauthorized immigrants’ rate of compliance with tax laws, the IRS estimates that about 6 million unauthorized immigrants file individual income tax returns each year.23 Other researchers estimate that between 50 percent and 75 percent of unauthorized immigrants pay federal, state, and local taxes.
The SSA assumes that about half of unauthorized immigrants pay Social Security taxes.
Several of the states whose estimates CBO reviewed used a model developed by the Institute for Taxation and Economic Policy (ITEP) to determine state and local taxes paid by unauthorized immigrants. ITEP assumes a 50 percent compliance rate for income and payroll taxes.
Researchers from the Urban Institute, the Migration Policy Institute, the Pew Hispanic Center, and the Center for Immigration Studies have assumed a 55 percent compliance rate for income, Social Security, and Medicare taxes.
As part of a larger study on migration, the Center for Comparative Immigration Studies at the University of California at San Diego conducted a survey of unauthorized immigrants and found that, in 2006, 75 percent had taxes withheld from their paychecks, filed tax returns, or both.