You’ve probably heard the arguments at a backyard BBQ or seen the heated threads on social media. One side claims people here without papers are "draining the system," while the other side insists they are the backbone of the economy. It’s messy. It’s loud. But if you actually look at the ledger—the cold, hard math from the IRS and the Social Security Administration—the reality is way more interesting than a political soundbite.
The short answer is yes.
Honestly, they pay a lot. We are talking billions of dollars every single year. They pay for schools they might not always feel safe sending their kids to and for Social Security benefits they will literally never be allowed to collect. It’s a weird, paradoxical quirk of the American tax system that the government is perfectly happy to take money from people it technically says shouldn't be here.
The ITIN: How the IRS Collects Money Without a Social Security Number
How does someone even file taxes without a Social Security number? Meet the Individual Taxpayer Identification Number, or ITIN.
The IRS created the ITIN back in 1996. Why? Because the tax code doesn't care about your immigration status. It only cares if you made money on U.S. soil. The IRS is basically the most "business-first" agency in the world; they figured out pretty early on that billions were being left on the table because people wanted to pay their share but lacked the nine-digit number to do it.
Many people apply for an ITIN because they hope that showing a history of tax compliance will help them if there’s ever a path to legal residency. It’s a paper trail of "good moral character." According to the American Immigration Council, more than 4 million people file tax returns using an ITIN every year.
But here is the kicker.
When you file with an ITIN, you aren't just paying income tax. You’re also paying into a system that is rigged against you. Unlike a citizen, an ITIN filer can't claim the Earned Income Tax Credit (EITC). They are essentially paying full price for a club they aren't allowed to join.
🔗 Read more: How Many People Did the Germans Kill: The Reality of the Nazi Era Statistics
The $13 Billion Windfall for Social Security
This is the part that usually shocks people.
If you work "under the table," you might be dodging taxes. But a huge percentage of unauthorized immigrants work using "ghost" Social Security numbers or numbers that don't match their names. When this happens, the employer still withholds payroll taxes. That money—billions of it—goes into the Earnings Suspense File at the Social Security Administration.
Stephen Goss, the Chief Actuary of the Social Security Administration, has been tracking this for years. He estimated that unauthorized immigrants contribute roughly $13 billion to Social Security annually while only taking out about $1 billion in related benefits.
Think about that for a second.
The Social Security system is currently facing a massive funding gap as Baby Boomers retire. Without the billions poured in by people who will never receive a retirement check, the system's "depletion date" would actually arrive sooner. They are essentially subsidizing the retirement of American citizens. It’s a massive, unintended donation to the U.S. Treasury.
Sales Taxes, Property Taxes, and the "Hidden" Contributions
Even if an immigrant is working entirely for cash and never touches an ITIN or a payroll check, they still pay taxes.
You can't buy a pair of jeans in Texas, a gallon of milk in Florida, or a used car in California without paying sales tax. It’s unavoidable. The Institute on Taxation and Economic Policy (ITEP) released a massive study showing that unauthorized immigrants pay approximately $11.6 billion in state and local taxes every year.
- Sales Taxes: About $7 billion.
- Property Taxes: Roughly $3.6 billion.
Wait, property taxes? Yes. Even if you rent, you’re paying property tax. Your landlord isn't a charity; they bake the cost of those taxes directly into your monthly rent. Whether it’s an apartment in Queens or a trailer in rural Iowa, that money is flowing into local coffers to pay for police, fire departments, and public parks.
The Myth of the "Tax Drain"
People often point to the "cost" of undocumented immigration—mostly healthcare and education. It’s true that public schools must educate every child regardless of status (thanks to the 1982 Supreme Court case Plyer v. Doe). And yes, emergency rooms have to stabilize everyone.
But the math isn't one-sided.
Most economists, including those at the Cato Institute (a libertarian think tank), argue that the labor provided by this demographic keeps food prices lower and boosts the GDP. When you add the direct tax contributions to the indirect economic growth, the "drain" starts to look more like a net gain in many jurisdictions.
Also, it's worth noting that most federal welfare programs—like SNAP (food stamps), Medicaid, and Section 8 housing—are strictly off-limits to unauthorized immigrants. They pay the premiums but can't use the insurance.
Why Do They Do It?
You might wonder why anyone would voluntarily hand over money to a government that might deport them.
It’s partly about fear, and partly about hope. Many are advised by lawyers that paying taxes is the best way to prove they are contributing members of society. If a reform bill ever passes Congress, "proof of tax payment" is almost guaranteed to be a requirement for any kind of legal status.
🔗 Read more: Lake Winterset Fight Video: What Really Happened at the Point
It's also about the employers. Major industries—construction, agriculture, hospitality—often use E-Verify, but many others simply process the paperwork provided. If a worker provides a Social Security number that looks valid, the employer runs the payroll. The taxes vanish from the paycheck before the worker ever sees them. In that sense, the tax payment isn't even a choice; it’s an automatic deduction of living in the American economy.
Real-World Impact: State by State
The numbers change depending on where you live. In California, the ITEP estimates unauthorized immigrants pay over $3 billion in state and local taxes. In a smaller state like South Carolina, it’s closer to $60 million.
The point is, the contribution is everywhere. From the gas tax paid at a Murphy USA station to the excise tax on a cell phone bill, the financial footprint is massive and deeply embedded in the U.S. economy.
Practical Insights for Navigating the Conversation
If you’re looking to understand the fiscal reality of immigration without the political theater, here is the bottom line:
- Look at the ITIN data. The IRS gets billions in revenue from people without Social Security numbers. This is public record.
- Acknowledge the Social Security "Gift." Understand that the Earnings Suspense File is a massive net positive for the federal budget because the payers aren't eligible for the payout.
- Differentiate between Federal and Local. While the federal government gets the lion's share of payroll taxes, local municipalities feel the "cost" of services more acutely. This imbalance is often where the political friction actually lives.
- Verify the source. When you see a "study" claiming immigrants pay zero taxes, check if they are accounting for sales and property taxes. If they aren't, the study is fundamentally flawed.
The reality of do unauthorized immigrants pay taxes is that they are deeply integrated into the American fiscal machine. They are taxpayers, even if they aren't yet "taxpayers" in the eyes of the law.
Next Steps for Research
To get a granular look at how this impacts your specific area, check the ITEP State-by-State Data for the most recent fiscal year. You can also review the Social Security Administration’s annual report on the Earnings Suspense File to see the total amount of un-matched wages currently being held by the government. Understanding these specific data points moves the conversation from emotional rhetoric to factual accounting.