Study: Immigrants Pay Tax Share
No Gap With U.S.-Born Residents Seen in Area, but Those Here Illegally Account for Less

By Karin Brulliard
Washington Post Staff Writer
Monday, June 5, 2006

The taxes paid by immigrant households in the Washington region are on par with those paid by native-born Americans, although immigrants here illegally pay less, according to a study being released today.

Overall, area immigrants pay nearly one-third of their income to the government -- at least $10 billion a year -- but those here illegally pay less than $1 of every $5 they earn in taxes, the report says. That is partly because they earn less but also because many are paid off the books and escape payroll taxes.

The study, by the nonpartisan Urban Institute, provides the most detailed snapshot yet of tax payments by the region's immigrant population, which the report says shot up from 870,000 in 2000 to 1.2 million in 2004. The income and tax landscape it reveals is unique to the Washington area, where the foreign-born population -- much of it drawn by think tanks, embassies and the high-tech industry -- is more diverse and wealthy than it is nationwide, the authors say. Here, relatively large populations of Asians, Middle Easterners and Europeans pay more taxes than most native-born Americans, helping offset the low tax payments of illegal and poor immigrants, the study found.

Overall, Washington area immigrants carry their share of the tax burden, the report says. In 1999, the year studied by the authors, foreign-born households accounted for 17.7 percent of all taxes paid by the region's residents -- a figure almost identical to their share of the total population in 2000: 17.4 percent.

The average household of illegal immigrants and those with temporary protected status paid less than 2 percent of the region's taxes, even though they made up more than 4 percent of households.

The report is being released as Congress debates immigration reform, a topic that has inspired intense public discussion, in part over whether immigrants benefit or burden the U.S. economy and taxpayers. Using census data, the report details the local, state and federal taxes paid by legal and illegal immigrant households from 1999 to 2000, an approach that some observers call flawed because it does not attempt to weigh those payments against the cost of social services, education and other expenses linked to immigration.

"It doesn't answer the question that's on everyone's minds: Is it a good deal for American taxpayers?" said Steven Camarota, research director at the Center for Immigration Studies, which favors less immigration. "It's not irrelevant, but it's kind of half the equation, really."

The authors said the report is just one piece of the regional economic portrait of immigration that intends to respond to public perception that the foreign-born often escape taxation. In a recent nationwide survey by the Pew Hispanic Center, 56 percent said they believe that most recent immigrants do not pay their fair share of taxes, while 33 percent said they do. In the Washington region, those figures were 46 percent and 41 percent.

"So much of the conversation around immigration right now is focusing on undocumented immigrants and immigrants from Latin America," said Randolph Capps, an Urban Institute demographer who co-authored the study. "That's only a small piece of the puzzle compared to the larger story of the diverse population of immigrants that we have and the significant amount they contribute to the governments in this area."

The controversy over immigrants and taxes generally centers on illegal immigrants. Reliable numbers are hard to find, but researchers generally agree that 50 to 60 percent of illegal immigrants nationwide work for employers who withhold income taxes and Social Security and Medicare payments from their paychecks. The authors of the Urban Institute study assumed 55 percent do. To get jobs, many of those immigrants use false Social Security numbers. That means they pay into the Social Security system for benefits they will never receive and pay income taxes without ever filing a return to determine whether they have overpaid.

The other 40 to 50 percent of illegal immigrants are paid under the table, researchers say.

But that does not mean that all illegal immigrants -- even those with fake documents -- avoid taxation. Together with immigrants who hold temporary protected status, illegal immigrants in the region paid about $1 billion in taxes in 1999, the study found. That is because there are other taxes unrelated to income: All buyers pay sales tax on new television sets, and tenants generally pay property tax in their rent.

"There's sales tax, there's property tax, there's consumption taxes on alcohol, on cars, on gasoline, on utilities," said Jeffrey S. Passel, a demographer at the Pew Hispanic Center who co-authored the report.

Montgomery County Council member Tom Perez (D-Silver Spring) said the study demonstrates the economic importance of immigrants to the region and provides elected officials data that lend context to the immigration debate.

"We're invariably asked the question, 'Why are you spending $130,000 in Gaithersburg to fund a day-labor center? You're giving money to people who supply no services to people and who pay no taxes,' " Perez said. "That is a factually incorrect assertion."

In 1999, immigrant households in the region earned $29.5 billion, or 19 percent of the area's total income. Their average income was $78,000, compared with native household incomes of $88,000. Immigrant households paid 28 percent of their income in taxes while natives paid 31 percent, the report says.

Of the taxes immigrants paid, nearly three-quarters went to the federal government, 17 percent to the state and 12 percent to localities, amounts similar to those of native-born taxpayers, the report states.

More than half of all immigrant tax contributions were paid by naturalized citizens, whose households earned an average of $91,000. Legal permanent residents made $78,000. Like natives, both groups paid nearly one-third of their income in taxes.

Households of illegal immigrants -- who constituted 22 percent of the immigrant population in 2000 -- and those with temporary protected status earned an average of $53,000 and paid 19 percent in taxes.

Immigrants with good English skills, advanced education and legal status make the most money and pay the most taxes among non-native born people, the study found. Michael Fix, vice president and director of studies at the nonpartisan Migration Policy Institute and a co-author, said that shows better integration -- learning English and getting legal status, for example -- leads to higher salaries and tax payments.

"It's a dog-bites-man story," Fix said. "But it's one that isn't often heard."

It is one reason the Washington region's immigrant tax base is strong, the report suggests. According to a 2003 Brookings Institution study, the Washington region has the highest percentage of foreign-born English speakers and lowest immigrant poverty rate among the 10 U.S. metropolitan areas with the largest international populations.

The study recommends publicly funded English and adult education for immigrants, which it says would boost incomes and tax payments. It also advises granting work permits to illegal immigrants as a way to increase payroll tax contributions.

Some experts, including Camarota, disagree. Although legalizing those immigrants -- of whom many have low incomes -- would certainly result in more people filing taxes, it might also qualify them for more public services whose costs outweigh their tax payments, they say.

The study was underwritten by the Washington Area Partnership for Immigrants, a funding collaborative of the Community Foundation.

Staff writer Neil Irwin contributed to this report.

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