(UNITED STATES) — The Cato Institute revived debate over immigrants’ role in the nation’s balance sheet by reporting that immigrants paid “higher-than-average taxes” relative to the benefits and services they received from 1994 through 2023.
The study found immigrants generated a $14.5 trillion fiscal surplus in 2024 dollars over that period by contributing 14% of tax revenue while accounting for 7% of government spending.
Immigrant tax contributions have become a recurring point in immigration and budget arguments, with advocates and critics pointing to competing estimates of what immigrants pay and what governments spend. Several research groups broadly agree the answer depends on definitions, time windows and assumptions, and that different immigrant groups show different tax-and-benefit patterns.
Cato’s estimate uses long-run fiscal accounting, a method that compares taxes paid with the cost of public benefits and services received. Its framing emphasizes totals across multiple decades and adjusts the headline surplus figure into 2024 dollars.
That “net fiscal impact” approach typically counts federal, state and local taxes on one side and spending on benefits and public services on the other. Results can shift depending on projections about future earnings, demographic profiles, eligibility rules and how public costs get allocated.
Cato reported the net impact stayed positive each year it studied, and it also found differences in benefit use across groups. Immigrants used 24% fewer welfare benefits per person than native-born citizens, and noncitizens, including undocumented immigrants, used 53% less.
Researchers often separate “all immigrants” from first-generation immigrants and from U.S.-born children of immigrants, because fiscal studies can look different depending on whether they allocate public education and other costs across households or generations. The way income growth and tax payments evolve over a lifetime also affects whether a study shows a surplus or a deficit in a given window.
Cato’s study also highlighted how much of its long-run surplus came from noncitizens, who it said drove 44% of the immigrant surplus, or $6.3 trillion. Cato’s analysis found undocumented immigrants reduced deficits by at least $1.7 trillion, a figure the group ties partly to benefit limits.
Other recent estimates focus less on multi-decade accounting and more on a snapshot of annual tax flows and spending power. Those snapshots can be useful in state debates over tax bases, consumer spending and local public services, even when they do not attempt Cato’s lifetime-style ledger.
Undocumented immigrants occupy a distinct place in these calculations because benefit eligibility differs sharply by program and immigration status, even as tax collection often occurs through routine payroll withholding and sales taxes. That eligibility gap, and how researchers model it, helps explain why fiscal ledgers can diverge.
Undocumented workers can pay federal income and payroll taxes when employers withhold from paychecks, including when workers use Individual Taxpayer Identification Numbers to file returns. They also contribute through sales and excise taxes paid at the cash register, and through property taxes that can be paid directly by homeowners or indirectly through rent.
In 2022, undocumented immigrants paid $96.7 billion in total federal, state and local taxes, including $37.3 billion to state and local governments, from $290 billion in household income. The same set of estimates put their spending power at $254.8 billion.
Studies also differ on how much tax revenue could change if federal policy expanded work authorization. One estimate said work authorization could boost undocumented immigrants’ tax contributions by $40.2 billion annually to $136.9 billion, reflecting expectations of higher reported wages and higher compliance.
Separate estimates underscored that these totals can vary even when researchers examine similar populations. For 2023, the American Immigration Council put total taxes paid by undocumented immigrants at $90 billion, while the Yale Budget Lab estimated $66 billion in federal taxes from workers.
State-level tax systems add another layer of variation, because the balance of sales taxes, property taxes and income taxes determines how much revenue shows up in state and local tallies. A state that relies heavily on sales and excise taxes can collect substantial revenue from residents regardless of immigration status, while income-tax-heavy states can show different patterns depending on wage reporting and enforcement.
North Carolina offers a detailed example of how a state’s tax mix shapes these estimates. In 2022, undocumented immigrants in North Carolina paid $692.2 million in state and local taxes, a figure that rises to $843.6 million with work authorization, and the estimate broke that total into 53% from sales and excise taxes, 24% from property taxes and 22% from income and business taxes.
Some studies also compare current totals with older baselines to show how immigrant tax contributions have changed over time alongside population, wages and inflation. A 2014 baseline estimate put taxes paid by all immigrants at $328.2 billion total, including $223.6 billion in federal taxes and $104.6 billion in state and local taxes.
Even within the same year, state comparisons can yield eye-catching snapshots that feed local political arguments. For 2022, one estimate put Illinois’ share of taxes paid by undocumented immigrants at $1.5 billion of the national total.
Researchers who focus on tax incidence also highlight how undocumented immigrants can face effective tax rates that look high relative to top earners, especially in states that rely on consumption taxes. One estimate said that in 40+ states, including North Carolina, undocumented immigrants pay higher state and local effective tax rates than the top 1% of households.
Marco Guzman, ITEP Senior Policy Analyst and co-author of the 2024 ITEP study, argued that annual tax totals deserve attention in the broader immigration debate. “This study is the most comprehensive look at how much undocumented immigrants pay in taxes. And what it shows is that they pay quite a lot, to the tune of nearly $100 billion a year,” Guzman said.
Cato, which reported the $14.5 trillion fiscal surplus, also pointed to payroll taxes and benefit rules as central to its net figures for noncitizens and undocumented immigrants. David Bier of Cato noted undocumented immigrants’ $1.7 trillion net benefit stems from exclusion from Social Security and Medicare despite payroll contributions.
Eligibility gaps extend beyond retirement programs and also reach tax credits and state policies, shaping what researchers count as benefits received. Undocumented immigrants are barred from benefits like the Earned Income Tax Credit and the Child Tax Credit, and the estimates cited restrictions on in-state tuition in 26 states, alongside limits on major programs.
Those differences help explain why fiscal claims can sound similar while relying on different math. A multi-decade fiscal ledger that nets taxes against modeled government costs can produce a large fiscal surplus, while an annual snapshot can emphasize tax totals, spending power and the short-term flow of revenue into specific levels of government.
Policy debates now often treat these studies as competing scorecards for proposals that range from enforcement to legalization to changes in benefit rules. Work authorization, in particular, sits at the center of arguments about taxable wages, payroll withholding and whether more work moves into formal reporting systems.
Tax administration questions also come into play, because much of the tax system does not require immigration status checks at the point of collection. Sales taxes apply broadly, property taxes attach to housing, and payroll withholding can occur regardless of whether a worker later qualifies for a benefit tied to those contributions.
With lawmakers weighing how to pay for spending and how to shape future eligibility, the studies offer a set of numbers that different sides can cite for different purposes. The next flashpoints are likely to turn on definitions of who counts in the fiscal ledger, how long the accounting window runs, and whether policy changes alter who pays in and who can claim benefits back.
Cato Institute Finds Fiscal Surplus as Undocumented Immigrants Pay Higher Taxes
The Cato Institute reports that immigrants generated a $14.5 trillion fiscal surplus over three decades, paying significantly more in taxes than they received in benefits. The study emphasizes that undocumented immigrants contribute nearly $100 billion annually to the economy. These findings suggest that immigration status and benefit eligibility gaps lead to a net positive impact on federal and state budgets, contrary to common misconceptions about public spending.
