Maryland Immigrants Pay Millions into State Revenue System and Contributions Increase Post Immigration Reform
Undocumented workers already pay many local and state taxes, particularly the sale tax and property tax. Two recent executive actions might dramatically increase payment of personal income taxes.
Yesterday we celebrated Tax Day and what our investments bring us in Maryland. Quality education and healthcare and renewed investments in transportation and infrastructure are a few of the key items that make Maryland a great place to live and raise a family.
Maryland may see a boost to its economy in the coming months, when legal status is granted to qualifying immigrants through President Obama’s executive orders. This would allow more immigrants to fully contribute to our economy, increase state revenue, and boost our ability to invest in Maryland’s future.
President Obama’s two executive orders, Deferred Action for Childhood Arrivals (DACA) and Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA) , would require undocumented immigrants to comply with current tax law. Currently, the best research suggest personal income tax compliance hovers between 50 and 75 percent.
In Maryland state and local revenue would increase by $25.5 million under the two executive orders, according to a new report by the Institute for Taxation and Economic Policy (ITEP). Maryland would see an increase in tax revenue of around $376 million if Congress allowed all undocumented immigrants to become legal residents, according to the report.
We have previously highlighted that low and moderate income Marylanders—and persons of color—pay a larger share of their income in state and local taxes than the wealthiest in our state. This higher-taxed group includes undocumented immigrants, who pay a current effective state and local tax rate of 8.6 percent compared to the wealthy’s 6.7 percent.
The executive actions also make it harder for employers to cheat eligible undocumented workers out of lawful wages and dodge payroll taxes. Undocumented employees are often victims of wage theft, either from not being paid a fair wage or by having their wages withheld, with little to no recourse. This, in turn, limits the amount the government can collect in taxes, the amount these workers have to support their families, and how much they can spend in the local economy. Immigration reform also benefits reputable business owners by protecting them from unsavory competitors who knowingly under-pay employees and under-report taxes.
While local economies will get a boost from increased tax revenue, schools and other public services will not see additional strain. Due to a Supreme Court ruling (Plyler v. Doe), all children (except children in detention centers) have the right to an education, regardless of their immigration status. Students affected by President Obama’s executive order already attend public schools.
Granting legal status to parents and children would create a stronger economy in Maryland and allow the state to continue to invest in what has made our state great.