Undocumented Immigrants: Net Contributors, Not a Net Drain

Every year, millions of undocumented immigrants pay into a tax system that largely excludes them from the benefits it funds. In 2022, the Institute on Taxation and Economic Policy (ITEP) found that undocumented immigrants paid $96.7 billion in combined federal, state, and local taxes — $59.4 billion to the federal government and $37.3 billion to state and local governments. That works out to an average of $8,889 per person annually. They accomplish this through Individual Taxpayer Identification Numbers (ITINs), which the IRS created specifically so that people without Social Security numbers can still file and pay taxes. In 2022 alone, approximately 3.8 million ITIN-based tax returns were filed.

The most striking piece of the fiscal picture is payroll taxes. In 2022, undocumented workers paid $25.7 billion in Social Security taxes, $6.4 billion in Medicare taxes, and $1.8 billion in unemployment insurance taxes — a combined $33.9 billion in contributions to social insurance programs they are legally barred from using. The Social Security Administration's own Office of the Chief Actuary has stated that the presence of unauthorized workers in the United States 'has, on average, a positive effect on the financial status of the Social Security program.' The SSA's actuarial analyses confirm that undocumented workers contribute more in payroll taxes than they will ever withdraw, effectively subsidizing the retirement and health security of eligible recipients.

By law, undocumented immigrants cannot access the federal benefit programs most often cited in political debates. The Personal Responsibility and Work Opportunity Reconciliation Act of 1996 explicitly bars undocumented immigrants from receiving SNAP (food stamps), federal Medicaid, Social Security, Supplemental Security Income (SSI), and most other federal assistance programs. The only exception is Emergency Medicaid, which covers life-threatening situations that hospitals are legally obligated to treat regardless of immigration status. Spending on Emergency Medicaid for undocumented immigrants amounted to $3.8 billion in FY 2023 — approximately 0.4% of total Medicaid expenditures. The Cato Institute, a libertarian think tank not known for pro-immigration advocacy, found that noncitizen immigrants consumed 53% less welfare per capita than native-born Americans ($5,041 vs. $10,772) and constituted just 3.2% of all welfare recipients despite being 7.5% of the population.

The macroeconomic contribution extends well beyond tax receipts. The 2016 National Academies of Sciences report 'The Economic and Fiscal Consequences of Immigration' — a landmark 508-page synthesis of decades of economic research — concluded that immigration is 'integral to the nation's economic growth' and that, when measured over a 75-year horizon, fiscal impacts at the federal level are 'generally positive.' The study found that first-generation immigrants impose some costs at the state and local level, primarily through public education for their children, but that second-generation immigrants become among 'the strongest economic and fiscal contributors in the U.S. population.' The report calculated that an additional immigrant in the U.S. represents a positive fiscal contribution with a net present value of $259,000 over the long run, assuming realistic projections about government spending on public goods.

The broader immigrant population — including both documented and undocumented workers — underpins significant portions of the U.S. economy. Immigrants founded approximately 45–46% of Fortune 500 companies or are children of founders, with those companies generating $8.6 trillion in revenue in 2024 and employing over 15 million people. Immigrants founded 55% of U.S. startups valued at $1 billion or more. Undocumented workers in particular fill critical roles in agriculture, construction, food processing, and elder care — sectors where labor shortages would directly increase consumer prices and slow domestic output. If undocumented immigrants were granted legal work authorization, ITEP estimates their total tax contributions would rise by $40.2 billion annually to $136.9 billion — demonstrating that the current system is actively leaving tax revenue on the table.