In the
last presidential debate between Hillary Clinton and Donald Trump, Clinton said that
“half of all” illegal immigrants in the U.S. “actually pay federal income
tax.” PolitiFact,
a Pulitzer Prize-winning fact check organization, investigated Clinton’s claim
and reported: “While there is no official figure, experts estimate
that about half of all undocumented workers pay federal income taxes, if not
more.”
In
reality, the polar opposite is true. Federal government data shows that while
roughly half of illegal immigrants file federal tax returns, the vast majority
of them don’t pay any federal income taxes. Instead, they use these returns to
claim refundable tax credits, which are a form of cash welfare. In
other words, illegal immigrants mainly use the federal income tax code to
collect money from U.S. citizens.
Reliable
Data on Illegal Immigrants Is Scarce
Federal
law generally prohibits illegal immigrants from earning
income in the U.S., but many of them do so by working for cash and by
fraudulently using Social Security numbers. A 2013 report by
the Social Security Administration notes that illegal immigrants get Social
Security numbers by using counterfeit birth certificates, usurping other
people’s numbers, and reusing numbers that they received to work temporarily in
the U.S.
Because
illegal immigration is often covert, reliable data on it is scarce. In the
words of the Congressional Budget Office, figures for the number of illegal
immigrants in the U.S. “are subject to considerable uncertainty.” This applies
to most data on illegal immigration, but various federal agencies have produced
estimates that shed degrees of light on these issues.
Individual
Taxpayer Identification Numbers
One of the
most reliable sources of data concerning the federal income taxes of illegal
immigrants comes from an IRS program that gives them “Individual Taxpayer
Identification Numbers” or ITINs. These numbers are “issued regardless of an
individual’s immigration status,” and they allow illegal immigrants and foreign
investors to file tax returns without a Social Security number.
Obtaining
an ITIN also allows illegal immigrants to claim the federal Child Tax Credit,
which can provide them with a cash benefit of up to $1,000 per child per year.
According to the latest IRS data, 72 percent of all tax returns filed with
ITINs in 2010 claimed child tax credits to receive cash payments from the
federal government.
It is important
to note that illegal immigrants likely received higher child tax credits in
2010 than in other years. This is because the American Recovery and
Reinvestment Act (“the Obama stimulus”) enabled more people to claim child tax credits or to
claim greater amounts in 2010. Furthermore, the U.S. was still in the early
stages of recovering from the Great Recession, and incomes were down. Since child tax credits generally increase
as income falls, these payments should have been higher in 2010 than most other
years.
Nonetheless,
the contrast between tax returns filed with and without ITINs in 2010 is
enlightening. As documented above, 72 percent of ITIN filers paid no income tax
and received cash payments through child tax credits. In comparison, only 14 percent of people who filed regular tax returns
(with a Social Security number instead of an ITIN) paid no income tax and
received these payments.
The monetary totals of ITIN returns are also instructive. In
2010, ITIN filers paid a total of $0.9 billion in income taxes and received
cash payments of $4.9 billion. In other words, ITIN filers received 5.4 times
more cash than they paid in income taxes. Most of this cash—$4.0 billion of
it—came through child tax credits. Since these figures include foreign
investors who are not eligible for child tax credits, it is possible that
little-to-none of the taxes paid came from illegal immigrants.
PolitiFact
claimed that illegal immigrants use ITINs to “pay income taxes,” but the truth
of the matter is that illegal immigrants mainly use ITINs to get cash from U.S.
taxpayers. As explained by the IRS Taxpayer Advocate Service, the federal tax
code has provisions “designed to assist low income populations,” and the “IRS
no longer is just a revenue collection agency but is also a benefits
administrator.”
In 2013 and 2015, a number of Republican congressman cosponsored bills
that would restrict illegal immigrants from obtaining refundable child tax
credits. However, Congress did not vote on
either of these bills.
