Undocumented Immigrants Pay Hundreds of Millions in State Taxes; Full Citizenship Would Benefit the State Even More
By Mark Scott
Undocumented immigrants are an important part Maryland’s economy. They make a significant contribution to the state’s public finances by paying hundreds of millions of dollars each year in state and local taxes, which support schools, roads, and other vital public investments in Maryland’s future.
Collectively, undocumented immigrants in Maryland pay an estimated $308 million in state and local taxes per year. As impressive as that is, the amount would be even higher if they were granted a path to citizenship.
If the federal government extended some form of legal status to all undocumented immigrants across the country, as President Obama has attempted to do through executive actions for people who meet certain criteria, the state and local tax contributions from Marylanders would increase by more than $85 million annually.
Undocumented immigrants living and working in Maryland contribute to our state’s tax revenue in a variety of ways. They pay sales and excise taxes when they purchase goods and services (for example, on utilities, clothing and gasoline). They pay property taxes on their homes, or indirectly as renters.
And a large number of undocumented immigrants also pay state income taxes. The best evidence suggests that at least 50 percent of undocumented immigrant households file income tax returns using Individual Tax Identification Numbers, and many who do not file income tax returns still have taxes deducted from their paychecks. Undocumented immigrants are more likely to work part-time or temporary jobs that pay them in cash, which makes it more difficult for them to pay taxes. Granting legal status would ensure they pay taxes and could allow them to get better-paying jobs.
On average, undocumented immigrants actually pay a greater percentage of their household income in state and local taxes than wealthy U.S. citizens living in Maryland do. That’s because the state’s highest-income households pay a lower percentage of their yearly earnings in state and local taxes than do middle-class and low-income households.
In Maryland, undocumented immigrants pay on average about 8.3 percent of their incomes in state and local taxes. This percentage, which is already significantly greater than what wealthy households pay, would increase to 9.7 percent if all undocumented immigrants in the state of Maryland were granted full legal status. To put this in perspective, the top 1 percent of taxpayers in Maryland pay an average effective tax rate of just 6.7 percent.
Maryland has the 11th largest undocumented immigrant state population in the country, around 233,000. Given that they already provide local economies a tremendous benefit, granting legal status to parents and children would create a stronger economy in Maryland and enable the state to expand public investment in what has made our state great.