Here at the League, we admit that we like taxes. Taxes support necessary programs, services and investments that all residents benefit from. Plus, there are ways to make Michigan’s tax structure, in particular, even more effective in generating critical revenue for our state, like by adopting a graduated income tax.
As we file this year—a few months past the typical ‘ides of April’—it is worth remembering that although our country’s tax system is not always equitable, its base is broad–and includes undocumented immigrants.
We know that undocumented immigrants–that is, immigrants who are not lawful permanent residents and are not in the country through another type of visa–have, unfortunately, been used as scapegoats to drive a wedge between not only minority racial groups as well as within the working class. But, we also know that immigrants, including our undocumented neighbors, make myriad contributions to our communities and economy every day, including as business owners, organizers and farmers.
The focus here is specifically on economic contributions in the form of federal taxes and state and local taxes (SALT), so I will start by reiterating that yes, in Michigan and across the country, undocumented residents are paying taxes this April er, July, too. In Michigan specifically, undocumented immigrants contributed approximately $86.6 million in SALT in 2018, and $13.4 million of that was from individuals less than 30 years old.
Undocumented immigrants had the courage to leave home countries, often in the face of violence and threats, and have made Michigan their home; like other residents, they follow the laws in their communities (perhaps even better than their citizen counterparts). Paying income taxes annually is another law American residents must follow and for many who are undocumented, it can be a means of demonstrating monetary contributions in this country. Given the divisive rhetoric I described earlier, having concrete examples of continued payments and rule-following can not only combat this narrative but also create a record of “good moral character” if applicable to a future adjustment to one’s immigration status.
If someone does not have Social Security Number (SSN), the Internal Revenue Service (IRS) can issue an Individual Tax Identification Number (ITIN) with which they can file their taxes and potentially receive the Child Tax Credit, if the child has an SSN. Many immigrants use ITINs, like foreign national students or workers with visas, in addition to undocumented individuals.
But here’s the rub. Those who use ITIN numbers to file their taxes (as self-employed workers) also pay into entitlement programs like Social Security and Medicare, benefits they will never reap in the future. The same is true for individuals who are hired by other employers, often with an invalid SSN, and make Social Security and Medicare contributions with each paycheck they earn. In 2014, undocumented workers in Michigan contributed approximately $200 million to Social Security and Medicare–nearly 10% of all immigrant contributions–which are funds that benefit only their citizen (native-born or naturalized) and lawfully present neighbors.
When tax time rolls around each year, particularly at a time when immigration policy regularly makes headlines, this tension emerges anew: The IRS along with state and local governments encourage and benefit from a broad tax base that includes undocumented residents, but federal immigration laws encourage stricter enforcement of anyone who is here without documentation. Short of large-scale immigration reform that could create more viable pathways to lawful residence or citizenship for undocumented people, inclusive policies benefit our economy and are create safer environments for immigrants; examples include safe zone policies, allowing all Michigan residents the ability to obtain a driver’s licenses and the expansion of the Earned Income Tax Credit (EITC) to those who file their taxes using an ITIN. When we make it easier for all residents to participate fully in our economy, we will see not only the return on these policy investments but also measurable improvement in Michigan immigrants’ lives.