Illegals Pay up to $300 Million in State-Local Taxes. In the Final Analysis, So What?

Illegal aliens? We don't have no stinkin' illegal aliens.

We come in peace.

by James A. Bacon

There are an estimated 260,000 to 290,000 illegal aliens (“undocumented workers” to those inclined to politically correct thinking) in Virginia. Each year, they pay between $200 million and $300 million in state and local taxes, according to a new report by the Commonwealth Institute. That constitutes between 6.6% to 7% of their household income.

Illegals pay many taxes because they are impossible to avoid, observe authors Aaron Williams and Michael Cassidy. If someone buys grapefruits or gasoline, sales tax is collected regardless of his or her immigration status. Illegals, they say, pay between $106 million and $135 million from this source each year.

Similarly, property taxes cannot be ducked. If an illegal purchases a house, he pays a real estate tax the same as everyone else. If he rents instead, his landlord still pays the tax. While some illegals work off the books, the Commonwealth Institute estimates that between 67% and 75% work for employers who withhold state income taxes from their paychecks. (These pay federal taxes as well, despite being ineligible for Social Security and Medicare benefits.)

Conclude Williams and Cassidy:

The bottom line is that undocumented immigrants make significant contributions to the Virginia economy and tax rolls despite being ineligible for many of the services and benefits they contribute to. In order to develop policies that promote the prosperity of all Virginians, it is essential that debate about immigration broaden to include these important contributions.

Bacon’s bottom line: The Commonwealth Institute provides an important reminder that undocumented workers may be here illegally but they do pay taxes, undercutting the notion that they constitute a fiscal drain on state and local government. In a similar vein, other studies have shown that illegal immigrants are less likely to commit crimes than native-born Americans. There are legitimate reasons for opposing illegal immigration, and there are illegitimate reasons. The notion that illegals don’t pay taxes is not a legitimate reason.

We should not demonize people who are just trying to better their lives. I would not go as far as Jeb Bush as to say that illegal immigrants are performing “an act of love” by slipping illegally into the country, but I find it hard to fault someone for looking for an opportunity to work.

However, the fact that the motives of illegals are sympathetic does not make it OK for them to be here. The biggest problem, to my mind, is that they compete for jobs with native-born Americans, especially lower-income Americans. If I were a meat packer or construction worker who found his wages depressed by a glut of immigrants who think $8.00 an hour is pretty good money, I would be fully justified in getting up in arms.

The idea that there are “some jobs that Americans just won’t do” is a lot of hooey. There may be some jobs that Americans won’t do at $8 an hour, but Americans will do them for $10 or $12 an hour. Unless someone repealed the law of supply and demand while I wasn’t looking, illegal immigrants put downward pressure on wage levels in lower-income jobs. If you’re looking for inexpensive landscaping or domestic help, that’s a good thing. If you are the landscaper or domestic help, it’s a bad thing.

Where I depart from the Commonwealth Institute analysis is the proposition that we should develop policies to promote the prosperity of “all Americans” — illegals included. No, regardless of how much they pay in taxes, illegals are not our responsibility. Our prime responsibility is to hundreds of thousands of low-income, native-born Americans. Our responsibility is to find ways to raise the wages of Virginians at the bottom of the income ladder without resorting to gimmicks like minimum wage that distort the labor market.

Yes, we should help illegal immigrants but we should do it by encouraging their countries of origin to adopt economic policies that support job creation and wage growth. Mexico has done so well in this regard that there is a net flow of immigrants from the U.S. back to Mexico today. Central American countries are much bigger net contributor of illegals these days. Not surprisingly, Honduras, Guatemala and El Salvador are dysfunctional societies. The preferable solution is to help those countries achieve political and economic stability, not accommodate ourselves to a continued outflow of illegal migrants.

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22 responses to “Illegals Pay up to $300 Million in State-Local Taxes. In the Final Analysis, So What?

  1. Well said, Jim. I would only add that they put pressure on the rental market for apartments and other multi-family housing, especially, which also hurts the lower end of workers. So, in addition to dropping wages by working for less, and taking jobs from Americans, they compete for housing. The schmaltzy pro-immigration rhetoric is mainly cover for those who benefit economically from their presence, or with the Democrats, hope to get their votes and keep teachers and social workers at work with crowded schools and Head Start programs. Immigration is a racket, among other things for certain professions, investors, and industries. So, ultimately, it is not so much being “anti-immigrant”, but “anti-immitraTION racket.” Stop messing with supply and demand by importing more people.

    Sincerely,

    Andrew
    (Fairfax)

  2. wait!! we’re going to spend taxes on teaching other countries how to run their economies?

    whoa!!!!

    re: working for cheap…

    how about Americans working for cheap and not getting tax benefits like earned income and other credits and no access to health care?

    Finally – in terms of supply/demand/free market etc… would the folks who are concerned about immigration also be in favor of not allowing cheap imports from countries who pay their workers less than our workers for making “stuff”?

    if our workers can make TVs but they cost more should we not allow cheaper wage imports that displace their jobs?

    or how about slave labor used to produce imported shrimp?

    should we outlaw imports like that?

    • “Wait! we’re going to spend taxes on teaching other countries how to run their economies?”

      Yes. It’s called foreign policy.

      • we’re going to spend more money than now to ADD this task to our foreign policy?

        this is what the anti-immigration folks will propose as a fix?

        you know – I’m not considered a Conservative here in BR but this sounds a lot like pouring money down a rathole trying to do something that we’re not done before with any success at all…

        you Conservative types kill me!!!! you grab these off the wall “ideas” that have virtually no connection to past or present realities what-so-ever!!!!

        so … from the anti-immigration folks – we get this cacophony of cockamamie “ideas” that they cannot as a group – agree on any of them – so their basic position is – do nothing – and stop all other efforts… also…

        used to be – Conservatives made pragmatic compromises – choices they agreed on – to move the issue – these days – it’s the Lawrence Welk “idea” bubble machine – and not a whole heck of a lot more!!!

        I can give you one excellent idea that does work. Put severe sanctions on those who employe illegals. No, if , ands, or buts – put their butts in jail and fine them 50,000 dollars and see how quick things change.

    • Larry, I’m pretty sure we do all of those things already – promote stable governments, promote market economies, and we’re supposed to be (note careful choice of words) working towards more balanced trade.

      We do those for our own selfish interests.

      It’s not something new – it’s something our government is already tasked to do.

  3. It’s interesting to me, Andrew, that we so readily make the case for tight borders when it comes to workers crossing them. But not when it comes to businesses or goods crossing them. Or intellectual property crossing them. Or air pollution, water-borne trash, and CO2.

    Why are we in a One-World world for some purposes but build fences for others?

    Of course, we owe a higher duty to our own citizens, including for education, health and other safety net purposes. But employment? We owe our own citizens a decent economy; but do we really help the US economy overall or hurt it by “messing with supply and demand by importing more people”? I think there’s a good case that we help the economy.

    • Dear Acbar,

      You are working from an “econometric” viewpoint that cannot be reconciled with a “concrete” culture, like Virginia, the South, or America. It is Enlightenment rationalism which views money and the goods that can be bought with it, as ends in themselves. Most people do not think in these terms. There is nothing I can say to you or those who hold to such a view that will dissuade them from having the worldview of King Midas. My earlier comments were addressed to the specific issue of why immigrants are welcomed by certain and economic and professional groups: To depress the wages of labor and increase the rents of capital, and to increase the clout of political and ethnic factions. “The economy” as a single entity is an abstraction of living realities. It cannot be separated from those realities except to damage them. Being “logically consistent” is not necessarily a sign of sound mental health, when applied to human beings. Things have to be assessed both qualitatively and quantitatively, like women in combat, for example.

      Sincerely,

      Andrew

    • Acbar, people are not goods. How you define “the economy” matters. If you look at GDP, sure, immigration increases it. If you look at individual people already living here, sometimes immigration hurts and sometimes it helps. That is also, BTW, true with trade, something that economists are finally starting to admit (see http://www.bloombergview.com/articles/2015-10-07/free-trade-is-no-longer-a-no-brainer-for-economists)

      The idea with immigration helping the economy is that it pushes down wages, and people currently here move into complimentary positions, increasing their productivity and thus income and wealth, and increasing demand.

      Problems with that are – (1) low wage people get benefits, often more than they pay in taxes – just paying taxes doesn’t mean you’re paying for yourself – and if you’re not, other taxpayers have to pick up the slack, (2) increased demand means prices for things like housing tend to go up, and (3) workers have proven to have more difficulty moving into complementary positions than the happy-talk theoretical model suggests. This last is true for trade as well as response to immigration.

      When the model says everything’s peachy, and the truth on the ground differs, generally people believe their lying eyes. No serious person wants to stop immigration, but we are not short of low skill workers – and we don’t have a generalized shortage of highly skilled workers, either. Exceptional talent – whose visas are essentially unlimited – is pretty much always a benefit unless they can’t pass the background check.

      The trick is distinguishing actual needs from big business desires to push down wages, and tailoring levels accordingly.

      • “We don’t have a generalized shortage of highly skilled worker.”

        Very true. Indeed, a recurrent refrain on this blog and in the comments is that with automation and AI, unskilled workers are going to find it even more difficult finding decently paying job in the future. The last thing we need to be doing is importing more unskilled labor and making the problem even more acute.

  4. I agree. It’s totally inconsistent to make the argument that low wage “illegals” in the US hurts US workers then not be just as resolute on low wage imports that take American jobs.

    what’s our consistent policy?

    • Donald Trump probably would agree with you, Larry. He’s against illegal immigration, and he’s against liberalizing trade.

      As for me, the primary point is the rule of law. Does a nation state have the power and authority to decide who and what enters the country and then the will to enforce its laws, or does it not?

      • We have international organizations that decides these days. How many cases of trade rigging has the US lost at the WTO and other bodies? It’s a whole new world out there. National identity and sovereignty has nothing to do with it when Developed nations take a legal back seat to the disadvantaged nation states.

  5. Without taking sides on Donald Trump, let me throw out there that I agree with Andrew, “Things have to be assessed both qualitatively and quantitatively.” But qualitatively does not mean ideologically, rigidly, despite any harm done quantitatively. There’s a balance to be found between economic arguments and “the abstraction of living realities” that is “the Economy.”

  6. Dear Acbar,

    Of course, I agree with your phraseology that it is both-and, not either-or. To reject reason and cost is ideological, too. Both extremes are bad.

    Sincerely,

    Andrew

  7. Last year, Fairfax County Public Schools told the public that one of the reasons operating costs continue to increase at levels above inflation was the arrival of many unaccompanied minors from Central America and other Hispanic areas. Costs were expected to be much higher because many of these students were older, did not speak English, and often had little formal education in their home countries.

    One needs to look at costs as well as revenues. Even the WaPo should be able to comprehend that.

    • That’s also what I noticed – it notes taxes paid, but not services received. In general, my understanding is low-income residents pay less in taxes than they and their family consume in benefits.

      Gas taxes are supposed to cover costs of highway maintenance – so you’re getting the benefit back on that – if you’re buying gas, you’re presumably using the service. So whatever amount that is should not be included in the total.

      In particular, costs include things like public education for kids, emergency medical care, and public benefits for children born here. If Virginia’s average per student per year is a bit over 10.5K (please correct me if I’m mistaken), and if each person here illegally has, on average, one kid, then the costs to educate those kids are greater than the total taxes paid.

      That’s with just one benefit – it doesn’t include costs of Medicaid for those kids, or cost of emergency room care for the parents, etc. And that’s without backing out the gas taxes paid.

      • The new FCPS budget shows the Division spends an average of $13K plus on each student. Kids that don’t speak English, especially ones that are not in K-3, are very expensive to educate. So how many households, much less illegal immigrant households, pay $13 K in real estate and sales taxes that go to Fairfax County?

        I’m not for tossing everyone who entered the country illegally, but why do our Presidents refuse to close the borders and prosecute employers of workers without authorization?

  8. re: first it was taking jobs from us then it was “rule of law”.

    what “rule of law” do we have when employers of illegals are not held accountable for providing the jobs that brings illegals here in the first place?

    what “rule of law” are we speaking of ?

    • Employers should be held accountable for hiring illegal aliens.

      Of course, that will drive the illegals into the underground economy, and we’ll lose the income tax revenue from them. But as a general principle, yes, rules against hiring illegals should be enforced.

      • I agree about the underground economy but you can’t have it both ways and you certainly can’t be talking about rule of law for illegals if you don’t FIRST deal with illegal employment…

        it’s a farce to talk about rule of law for illegals if we don’t deal with employers first…

        legislators and anti-immigration folks who focus on the illegals rather than the employers are not truly serious about the issue IMHO.

        • I agree. If Congress really wanted to address the issue, it would allow any taxpayer to sue any business hiring any employee, even on a short-term basis, that has not complied with the E-Verify requirements and collect attorney fees when successful. Within two years, hiring of unauthorized workers would drop substantially.

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