Illegal Immigrants Pay Taxes--Who Knew

At least the EdWeek article alludes to a fact many Americans consider unthinkable. Many, many illegal immigrants pay taxes. Furthermore, they pay at higher rates than citizens or legal immigrants. Because of Social Security and Medicare withholding, they pay a flat tax of 7.5%, taken right off the top. Even if they end up at the lowest 10% bracket, they are paying a full 17%. In addition, because they do not have valid Social Security numbers, they do not qualify for tax credits citizens take for granted.

They will never be able to claim Social Security or Medicare benefits because they do not have Social Security cards. “Estimates for 2010 are that ITIN tax filers paid $9 billion in payroll taxes to support Social Security and Medicare, according to NCLR.” Say 'thank you” to illegal immigrants who contribute so much to the rest of us.

Illegal immigrants have never been eligible for the refundable Child Tax Credit on the same basis as the rest us. Their credit is limited by the amount Social Security and Medicare withholding. Presuming they have three qualifying children, someone making $30,000 as cited in the article would not be eligible for the full $3000, but only for $2250 (7.5% of $30,000). Problem is, although they may have children, their non-citizen children do not qualify them for the Child Tax Credit. The payroll tax cut reduces their Child Tax Credit because it reduces Social Security and Medicare withholding. Instead of $2250, this past year the maximum Child Tax Credit for a family making $30,000 with three qualifying children was $1650. Extending the payroll tax cut means this is the second year the potential Child Tax Credit for those filing with ITINS will be reduced.

Illegal immigrants also completely lose the Earned Income Credit, again effectively raising the amount of tax they pay relative to citizens and legal immigrants. At the 10% tax bracket illegal many immigrants pay what is effectively a 17.5% flat tax, higher than Warren Buffet and his secretary.

The article conflates legal and illegal immigrants. It also conflates Child Tax Credit with Child Care Credit, a completely different credit unlinked to Social Security and Medicare Withholding. Again, many ITIN filers, even though they have children, may not qualify for the Child Care Credit.

Furthermore, while it is true that every illegal immigrant will use an ITIN to file a tax return, it is definitely not true that every taxpayer using an ITIN is illegal.