A Misleading Article on Illegal Aliens and Income Tax Payments

By David North, April 24, 2011

For advocates of the illegal alien population the headline seemed to be a winner. It said:

Study estimates that illegal immigrants paid $11.2 B in taxes last year, unlike GE, which paid zero

The news story was by Albor Ruiz and appeared in the New York Daily News on April 20.

While I will be the first to admit that our corporate tax laws are much too generous to fat-cat companies like General Electric – which had profits of $5 billion last year – the article's perspective on the payment rates of illegal aliens was misleading. Of course, some eight million illegal alien workers paid more taxes than a single pampered corporation, but is that the comparison we should focus upon?

Ruiz's article was based on a study released by a liberal think tank, the Institute for Taxation and Economic Policy, but the study itself did not appear to be available, a day or so ago, when I checked that entity's website.

I would be interested in reading the fine print of how they came to estimate the total income taxes collected by illegals, but lacking that opportunity let's just accept the $11.2 billion figure and compare it to something more useful – if less dramatic – than GE's remarkable tax avoidance success last year. (GE has a well-paid staff of some 1,000 people hired just to reduce – or eliminate – GE's tax bill.)

Yes, at first blush, $11.2 billion sounds like a lot of money, but how does that relate to the bigger picture, which was outlined in a CIS Backgrounder last year on aliens and taxes?

The Congressional Budget Office, whose estimates are widely trusted, has said that there would be $946 billion in federal individual income tax receipts in 2010. Now 11.2 billion is just 1.18 percent of the total. Thus, of America's income tax revenue, 98.82 percent came from people who were not illegal aliens.

When you examine the size of the individual payments by illegals, their economic utility becomes even less impressive. The U.S. Census Bureau reported that there were 139 million income tax returns in 2009, the last year for which this number is available. It is generally believed that there are something like eight million illegal aliens working in the country, almost all of whom should be filing income tax returns; eight million is 5.8 percent of 139 million.

So, we have 1.2 percent of the nation's income tax revenues coming from what appears to be 5.8 percent of the filers, meaning that, on average, the illegal's taxes are about 21 percent of those of the average worker; put it another way, they are 79 percent below the average tax payment. It would not be expected that the illegals, on average, would be paying as much taxes as others, as the illegals are both supposed to be excluded from jobs and have much lower than average levels of education, but 79 percent below par?

How much of that gap represents low incomes and how much relates to non-filing, or filing the 1040 (the form for residents) when illegal aliens here for less than five years should be filing the 1040 NR (NR for non-resident) form? The former has many more tax breaks than the latter. Nobody knows.

The Daily News article, however, does not ask these depressing questions or make these comparisons; it makes only the easy and politically correct comparison to GE's perhaps one-year stand as a 100 percent non-payer of corporate income taxes.

Nevertheless, count on the mass migration people talking for months about how the nation's illegals paid more taxes than GE.