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Yes, Illegal Immigrants Do Pay Taxes- This Is How

Submitted by on January 3, 2014 – 1:19 pm7 Comments

The case of Sergio Garcia has reignited debate- and misconceptions- over undocumented immigrants in the US. One of the most common criticisms is that “illegals don’t pay taxes,” and therefore should not have any access to any services or benefits provided by the government. Among other failings, this argument ignores the fact that millions of undocumented workers do in fact pay taxes, even without a Social Security Number, while not receiving any of the benefits that this usually brings.

Garcia’s father is now a legal US resident, and Garcia himself has been on the waiting list for legal status and a green card for years. He has worked his way through college and law school, and passed the California bar exam on his first try. But the state’s Supreme Court withheld his licensing, as it considered whether the law prohibited an undocumented immigrant from practicing law.

After new legislation was overwhelmingly approved by the state legislature and signed by the governor, the Obama administration withdrew its objections and Garcia was approved to practice law, though his employment opportunities are still extremely limited by his immigration status.

Among critics of the decision, a frequent refrain was that undocumented immigrants don’t pay taxes, and therefore should get any benefits- like being licensed to practice law.

But many immigrants pay the federal payroll taxes that are automatically withheld from all paychecks. Contrary to popular opinion, many undocumented workers are on formal payrolls- in 2005, an IRS official estimated that it was 75% of that population. These workers use fake SSNs, which are easily obtainable on the street. But fake SSNs will not allow the users to actually collect benefits, meaning the workers are paying into Social Security and Medicare, but not taking from it. Others pay taxes using Individual Tax Payer Identification Numbers (ITINs), which were created by the IRS in 1996 for workers required to file in the US, but unable to get SSNs.

Many undocumented immigrants do not file federal tax returns, for fear of being discovered (even though the IRS never discloses immigration statuses to enforcement agencies). But this most likely hurts the immigrants themselves: their low incomes mean they are probably entitled to a large refund of the automatically withheld payroll taxes, but they will never actually seek this payment, meaning it remains with the government.

Admittedly, some undocumented workers are paid in cash, and should (but probably don’t) pay taxes on this income. However, as noted, this is a much smaller percentage of undocumented workers than is normally thought; and this non-reporting of cash income is true of many legal US residents and workers, including those who work for tips.

Also, undocumented workers pay sales tax on all purchases, and local property taxes (indirectly in the case of renting). These taxes are often overlooked in general by those who argue about some Americans “not paying any taxes.”

[via Roy Germano]

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