With fiscal costs and benefits figuring large in the immigration reform debate, a new analysis estimates that undocumented immigrants are already paying $10.6 billion a year in state and local taxes nationwide, including the $72.4 million they pay in Arkansas. The study also estimates that Arkansas stands to gain $16.4 million in increased revenue should undocumented immigrants currently in the U.S. be allowed to work here legally.
The analysis from the Institute on Taxation and Economic Policy (ITEP) assumes a newly legalized immigrant population of 55,000 in Arkansas, 11.2 million nationally, fully participating in the federal, state, and local tax systems. The overall revenue gain for all states would be $2 billion a year.
Undocumented immigrants already pay state and local taxes, including sales, property and income taxes. But because wages and tax compliance would increase under reform, Arkansas would see the most significant revenue change in income tax collection.
“We know that undocumented immigrants already pay over eight percent of their income in state and local taxes, simply because they buy things and they rent or own homes, and sales and property taxes are paid automatically,” said Rich Huddleston, executive director of Arkansas Advocates for Children and Families. “With reform, both wage and tax compliance will go up, resulting in substantial new revenues for Arkansas, especially from the income tax.”
A recent Congressional Budget Office (CBO) report concluded a similar effect on federal revenues. A recent Winthrop Rockefeller Foundation study found that Arkansas ranked fourth among states in immigrant population growth between 2000 and 2010. The foreign-born population in the state grew by 82 percent in that time frame.
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