Young undocumented immigrants’ tax contributions would drop by nearly half if DACA protections were rescinded

June 23, 2017
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A report from the Institute on Taxation and Economic Policy examined the state and local tax contributions of young immigrants eligible for DACA (deferred action for childhood arrivals) and found that, collectively, they annually contribute $2 billion in state and local taxes, but this number would drop by nearly half without DACA protection. The Trump Administration has sent mixed signals on whether it intends to honor the DACA executive order in the long term.

In Colorado, DACA-eligible individuals now pay nearly $34 million in state and local taxes, a number that would be nearly cut in half if DACA protections are lost.

Nationally, the 1.3 million DACA-eligible population pays an average effective tax rate of 8.9 percent, which is on par with the state and local tax rate paid by the middle 20 percent of Americans. The report (State and Local Tax Contributions of Young Undocumented Immigrants) analyzed taxes paid by working immigrants eligible for and receiving DACA (852,000 people), as well as taxes paid by those eligible for but not receiving DACA (453,000 people).

“Within the last year, immigration policy has become a far more divisive political issue with public discourse often overlooking the tremendous economic, fiscal and societal contributions of immigrants, and in particular young immigrants,” said Meg Wiehe, deputy director of ITEP. “We produced this report and our larger report on undocumented immigrants’ tax contributions to help ensure the debate is more fact-driven.

“The fact is that the overwhelming majority of young, undocumented immigrants are working or pursuing education,” Wiehe said. “They also are contributing to their communities and paying state and local taxes.”

Since 2013, ITEP has produced regular analyses examining the state and local tax contributions of the nation’s estimated 11 million undocumented immigrants.

DACA recipients’ state and local tax contributions increase substantially in part because they can legally work and are required to file income taxes using the Social Security number granted by their DACA enrollment.

The report notes that employment rates go up for young immigrants receiving DACA protection (from 51 percent to 87 percent), and they experience increased wages. The report estimates that young immigrants’ state and local tax contributions would drop from $2 billion to $1.2 billion without DACA protection. Further, the report finds their collective tax contributions would increase by $504 million if they were granted full citizenship.

The report concludes: “If the Trump administration fails to protect this population from deportation, the nation risks forcing them back into the shadows and losing the economic and societal contributions these engaged young people are making in their communities.”

Colorado State and Local Tax Contributions of DACA-eligible individuals

  • Current state and local taxes: $33,977,000 (7.8% effective tax rate)
  • Taxes if all eligible receiving: $37,631,000
    • Change if all eligible are receiving: +$3,654,000
    • New effective tax rate: 7.9%
  • Taxes if all eligible granted citizenship: $38,845,000
    • Change if all granted citizenship: +$4,868,000
    • New effective tax rate: 7.9%
  • Taxes if DACA protections lost: $17,479,000
    • Change if DACA protections are lost: -$16,498,000
    • New effective tax rate: 6.7%
  • Estimated Population in Colorado Immediately Eligible for DACA: 23,000
  • Estimated Population in Colorado Enrolled in DACA: 18,830
  • Estimated Population in Colorado Eligible for DACA but not Enrolled: 4,170
  • Share of Est. Undocumented Immigrant Population: 14%
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