Millions of immigrants living in the United States illegally contribute significantly to Social Security, Medicare, and other tax-funded programs—despite not being eligible to receive these benefits. While they lack Social Security numbers, they pay taxes through Individual Taxpayer Identification Numbers (ITINs), which the Internal Revenue Service (IRS) provides to ensure tax compliance.
With a declining birth rate and an increasing number of retirees, the US relies on tax revenue from both documented and undocumented workers. However, former President Donald Trump’s proposed mass deportation plan has sparked concerns among policymakers about the economic consequences of removing millions of contributing workers from the system.
How Immigrants Pay Taxes Without Legal Status
Although immigrants living in the US illegally cannot receive Social Security, Medicare, or other federal benefits, they still pay into these systems. The IRS introduced ITINs in the 1990s to allow foreign nationals—both legal and undocumented—to comply with tax laws. Many use ITINs to establish a work history, demonstrate moral character, and improve their chances of gaining legal status in the future.
Despite these contributions, ITINs do not grant legal work authorization, immigration status, or eligibility for government assistance programs. Immigrants often comply with tax regulations to avoid drawing attention to their immigration status, as noncompliance could lead to increased risks of deportation for themselves and their families.
The Financial Impact of Immigrant Workers on Social Security and Medicare
The Social Security Administration has estimated that deporting millions of undocumented workers could result in a loss of $20 billion annually in tax revenue. This concern is particularly pressing as Social Security funds are projected to shrink within the next decade, potentially reducing benefits for American retirees.
In 2022 alone, immigrants living in the US illegally paid approximately $96.7 billion in taxes, according to the Institute on Taxation and Economic Policy. Over half of this amount went to the federal government, while the remainder funded state and local programs. This revenue supports essential public services, including schools, infrastructure, and emergency healthcare.
The Role of Immigrants in the Workforce and Tax System
The US is facing a demographic shift with a declining birth rate and an ageing population. This shift means fewer workers are paying into Social Security while more retirees are drawing from the system. Immigrants, including those living in the country illegally, play a crucial role in sustaining workforce growth and supporting public finances.
As of July 2023, the Center for Migration Studies estimated that over 11 million immigrants were living in the US without legal status, with more than 8 million actively participating in the workforce. Their contributions to sales taxes, property taxes, and Social Security provide essential funding for federal and state programs.
The ITIN System and Its Limitations
The ITIN system allows taxpayers to comply with federal laws while protecting their personal information. The IRS is prohibited from sharing ITIN data with other government agencies, meaning the number cannot be used to determine an individual’s legal status. However, ITIN holders can use the number to open bank accounts, obtain driver’s licenses in some states, and even build Social Security benefits retroactively if they later become citizens.
Despite paying into the system, immigrants who gain legal status still face barriers to accessing benefits. A law enacted in 1996 prevents newly documented immigrants from receiving certain federal aid for at least five years after obtaining citizenship. This policy means that, for many immigrants, the taxes they have paid over the years provide little to no direct financial return.
The Economic Ripple Effect of Mass Deportations
The potential impact of mass deportations extends beyond lost tax revenue. Removing millions of immigrant workers would have widespread economic consequences, particularly for industries reliant on immigrant labour, such as agriculture, construction, and hospitality.
Cecilia Menjívar, a sociology professor at the University of California, Los Angeles, specializing in immigration policy, emphasized that immigrants consistently contribute more to taxes than they receive in benefits. She warns that removing a large portion of the workforce could disrupt local economies by reducing consumer spending, decreasing tax revenue, and straining businesses that depend on immigrant labour.
“If you remove several million people from contributing taxes and supporting local economies where they live through sales taxes and property taxes, it’s all going to be affected,” Menjívar stated.
Conclusion
Undocumented immigrants in the US make substantial contributions to Social Security, Medicare, and local tax revenues despite being ineligible for most government benefits. With the US facing economic challenges, including an ageing population and a shrinking workforce, immigrant labour remains a crucial element in sustaining public programs.
As policymakers debate immigration reforms and enforcement strategies, it is essential to recognize the broader economic impact of these workers. Their contributions help fund programs that benefit millions of Americans, making them an integral part of the nation’s financial landscape.
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Benjamin Ford is a dedicated local journalist passionate about reporting on community news, events, politics, crime, and finance. With a sharp eye for detail and a commitment to uncovering impactful stories, he provides in-depth analysis and timely updates on issues that matter to the local audience. Benjamin enjoys engaging with the community and staying informed on emerging trends when he’s not covering the latest developments.
