OKPOLICY.ORG
One of the most deeply ingrained myths about immigrants who are undocumented is that they don’t pay taxes. In reality, immigrants without documentation pay taxes in multiple ways and contribute more to the U.S. and state economy than they receive in return. A recent report from the American Immigration Council found that undocumented immigrants in Oklahoma pay $133.7 million annually in federal, state and local taxes. At the federal level, these tax dollars helped fund public programs like Social Security and Medicare that don’t provide benefits to undocumented immigrants.The billions of dollars that immigrants contributed nationwide helped these important programs keep their solvency. In short, all Oklahomans pay taxes and help fund our most vital public services. It is time we acknowledge the contributions of undocumented immigrants and move towards more inclusive state and federal policies that can bolster their participation in the economy.
Tax returns aren’t the only way to pay taxes
Just like everyone who lives in the U.S., undocumented immigrants pay taxes in various ways. They pay state and local taxes. They pay sales and excise taxes on everyday purchases like gasoline and groceries. They pay property taxes directly on homes they own or indirectly as renters. Many undocumented immigrants also pay state income taxes using Individual Tax Identification Numbers (ITINs), and regardless of whether they use ITINs, all workers have taxes deducted from their paychecks.
In 2017, the Institute on Taxation and Economic Policy (ITEP) produced a report that looked at the state and local tax contributions of people without a documented immigration status. ITEP calculated the total tax contributions of these individuals in three tax categories: sales and excise, personal income, and property tax. Delving into each of these categories gives further insight into just how much our undocumented friends and neighbors pay in taxes to fund vital state functions and reveal that in a time when many states are facing worker and revenue shortages, proposals to remove hard working immigrants would leave the state ill-served.
Undocumented Oklahomans contribute millions to our state
Undocumented immigrants in Oklahoma paid $84.7 million in state and local taxes in 2017, according to the ITEP report. About 2 in 3 people who are undocumented have lived in the U.S for over 10 years, meaning they have worked in our communities, contributed to our economy, and raised families here for more than a decade. In fact, 38 percent of undocumented immigrants in Oklahoma are homeowners. Undocumented immigrants who don’t own a home pay property taxes indirectly through rent, meaning that undocumented immigrants pay almost $16.2 million annually in property taxes in Oklahoma.
The Oklahoma Tax Commission estimates about 33,000 immigrants also pay state personal income taxes every year with ITIN, which is a tax processing number issued by the Internal Revenue Service. It is important to note that ITINs are issued to immigrants with a variety of immigration statuses and are not used solely by undocumented immigrants. In Oklahoma, immigrants with ITIN pay around $26 million in personal state income taxes, according to data from the Oklahoma Tax Commission.
The most significant tax contributions, however, come from sales and excise taxes. Everyone pays these small fees on most purchases, and in Oklahoma, sales taxes account for the largest source of revenue for state and local governments in Oklahoma. All Oklahomans, including undocumented immigrants, pay sales and excise taxes any time they make a purchase, making these taxes a continuous form of state and local revenue. According to calculations from ITEP, undocumented Oklahomans paid more than $57.6 million in sales and excise taxes in 2017, the most recent year for which data is available.
All told, the effective tax rate for undocumented immigrants is 7.8 percent compared to the 4.3 percent that the top 1 percent effective tax rate for all taxpayers, according to the 2017 ITEP report. This means that undocumented immigrants pay a higher share of their income in taxes than the richest individuals in Oklahoma, directly challenging the misconception that immigrants don’t pay taxes.
| Sales & Excise Tax | Personal Income Tax | Property Tax | Total State & Local Taxes | Undocumented Immigrant Effective Tax Rate | Top 1% Effective Tax Rate (All Taxpayers) | |
| Current | $57,647,000 | $10,935,000 | $16,183,000 | $84,765,000 | 7.8% | 4.3% |
| Full Legal Status | $63,411,000 | $23,436,000 | $17,801,000 | $104,648,000 | 8.7% |
Source: Institute on Taxation and Economic Policy
A pathway to citizenship and state solutions would increase tax revenue for all of us
As impressive as these tax contributions are, Oklahoma lawmakers could increase contributions of currently undocumented people by supporting a pathway to citizenship at the federal level. ITEP estimates that full citizenship status would bring immigrant tax contributions in Oklahoma up by more than 23 percent to an estimated $104.6 million annually. This influx of tax dollars would put more money towards public education, health care, social services, and infrastructure — things in our society that we all use and benefit from. Immigrants bolster economic output at local, state, and national levels; ITEP calculates that people who are undocumented pay more than $11 billion in taxes each year. Federal lawmakers can increase these tax contributions by working collaboratively across the aisle to modernize pathways to citizenship.
At the state level, our lawmakers can strengthen our economy by passing a variety of economically sound laws that generate broad economic gains, such as supporting immigrant entrepreneurs and developing programs and initiatives that increase immigrants’ economic contributions. Oklahoma immigrants also represent a broad tax base that can contribute even more to our state if we pass inclusive laws that boost their participation in the economy like expanded driver’s licenses that allow more immigrants to get to and from their jobs and expanding access to tax credits that promote work.
Undocumented immigrants pay for our public goods and services
Despite continuously providing their labor and tax dollars to the state, people who are undocumented receive little in return. Undocumented immigrants work hard and pay taxes, yet the hard work and perseverance these families put in just to raise their families and make a living are consistently diminished by myths that say undocumented immigrants don’t pay taxes. When in fact, undocumented immigrants in Oklahoma pay more than $133 million annually in federal, state, and local taxes each year. It’s past time for Oklahoma to acknowledge the elephant in the room: immigrants of all statuses, including undocumented immigrants, pay taxes and make our state stronger.
