Compare the tax contributions made by illegal immigrants in Iowa to those made by citizens. Although paying between $40 million and $62 million in total in state and local property, sales and excise, and income taxes each year, illegal immigrant households pay less in state taxes than legal families with comparable earnings, according to the report. This implies that even illegal households that send remittances but do not pay state income taxes nonetheless contribute more than $1,300 annually to the state budget. Undocumented immigrant families in Iowa are entitled to substantially fewer state and federal services than legally resident families in Iowa, even though their tax contributions are around 80% of those made by legal families with comparable earnings.
Studies that estimate the cost of services used by undocumented immigrants should also take into account the taxes they pay. Comparisons between the fiscal impacts of undocumented immigrants and documented state residents will be more accurate if they include these tax estimates, compare undocumented immigrants to a documented family of similar income characteristics, and consider how the cost of each family’s accessed services is dependent on eligibility criteria for these services.
Finding measures to raise the rate and amount of state tax payments made by illegal immigrants is the greatest state-level policy solution to the financial problems caused by unauthorized immigration. Possible legislative measures might include enforcing employer withholding of income tax more strictly or boosting the amount of income taxes that are collected from illegal workers by providing “dummy” taxpayer identity numbers. By raising the minimum wage or offering more educational opportunities to help undocumented immigrants develop their abilities, policies may also aim to raise the average income of illegal immigrants in Iowa in order to raise more money through sales, excise, and income taxes.
The fiscal effect of delivering and paying state services will be more correctly reflected by an analytical paradigm that views the relationship between the state and taxpayers in terms of investments as opposed to net surpluses or deficits. Increasing the rate and amount of state tax payments made by undocumented immigrants could be a workable state-level policy response to the fiscal problems caused by undocumented immigration, even though solutions to undocumented immigration will likely have to be developed at the federal rather than state level.
This report’s findings highlight the complexity of the issue of undocumented immigration and the need to approach it from a variety of angles. While undocumented immigrants do not have the same access to state and federal services as legal residents, they still contribute significantly to the state’s tax revenue. As such, policies that seek to increase the tax contributions of undocumented immigrants could be a promising approach to addressing the fiscal challenges associated with undocumented immigration. At the same time, it is important to recognize that solutions to this issue will ultimately need to be developed at the federal level and that a comprehensive approach that takes into account the contributions of all immigrants to the economy and society will be necessary to ensure a just and equitable outcome for all.