Study: Immigration Reform Would Boost Tax Revenues

Study shows immigrants help, not hurt the economy.

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Mexican immigrants work on a housing development in Denver, Colorado. Immigrants who entered the country illegally could generate around $10.6 billion in tax revenue, a new study finds.

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The economic impact of legalizing 11 million immigrants who entered the country illegally is one of the main stumbling blocks keeping some fiscally conservative lawmakers from backing any path to citizenship.

A new study by the Institute on Taxation and Economic Policy, however, shows the economic impact of legalizing immigrants is a positive one, not the financial drain some have claimed.

[READ: Does the House GOP Have Anything to Lose by Voting Against Immigration Reform?]

The report finds that giving immigrants a chance to work legally in the U.S. could help boost state and local revenues by $2 billion a year. State income tax profits would increase by an estimated $1.6 billion, sales tax contributions would increase by $420 million and immigrants would pay an additional $76 million in property taxes. A few states with relatively low immigrant populations but no sales tax have the most to gain from legalizing the 11.2 million immigrants living in the shadows. In Montana, for example, immigration reform could add a 50 percent increase in the amount of taxes immigrants pay.

The tax group also shows that despite assumptions that immigrants enter the country illegally and drain government resources without contributing, many immigrants are already paying a large share of tax revenues. The study found immigrants paid an average 6.4 percent effective tax rate and contributed $10.6 billion in 2010 through a combination of income, property and sales taxes.

[ALSO: On the Border, Fear of More Security Grows]

"From the rhetoric of a lot of anti-immigration reform policy makers, you would think that the tax benefit would be a net zero and this report shows that is absolutely not true," says Matthew Gardner, the executive director of the Institute on Taxation and Economic Policy. "Bringing these taxpayers into the system is absolutely going to be a revenue raiser for states."

The study is consistent with a Congressional Budget Office analysis of the Senate's immigration overhaul that found over the next 10 years, the Senate plan would reduce the country's deficit and add an additional $450 billion in federal tax revenues.

But Derrick Morgan, vice president of domestic and economic policy at the Heritage Foundation, says the study is incomplete and misleading.

"We would generally agree that after amnesty, you would see state and local tax revenues go up, but this study doesn't look at all into the spending side," he says. "If you are looking at someone's effect on the local coffers, you cannot just look on the tax side."

[RELATED: Heritage Foundation Says Immigration Reform Will Cost $6.3 Trillion]

A controversial study from the Heritage Foundation released in May estimated that over a 50-year period, the cost of legalizing the country's 11 million immigrants would be $6.3 trillion. The Heritage Foundation took into consideration everything from the estimated cost of immigrants accessing welfare programs like food stamps, which they are not eligible to do for 13 years, to the cost of providing health care and education for immigrants and their children.

The ITEP study could make waves as Republicans meet Wednesday to discuss the future of immigration reform within their caucus. Some lawmakers like Rep. Steve King, R-Iowa, have said they cannot support anything that would help the country's 11 million immigrants get legalized because of the cost, while House Budget Committee Chairman Paul Ryan, R-Wis., has urged members to look at the economic benefits of immigration reform.

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