Immigrants Pay Above-Average Taxes

A higher employment rate leads to more income generated and taxes paid.

Cato’s recent study on the fiscal effects of immigrants details how much immigrants increase government revenues. From 1994 to 2023, immigrants generated roughly $100,000 more in taxes per capita than the average US-born person—about 17 percent more over the entire period. In 2023 alone, immigrants paid $1.3 trillion in taxes while receiving $761 billion in benefits—a net fiscal surplus of over half a trillion dollars in a single year.

America’s tax revenues would suffer severely from banning immigration (as President Trump is attempting to do). The primary reason that immigrants pay more in taxes than the average person is that they are far more likely to be employed than the average person. This means that even though they earn lower hourly wages, they work more total hours, so an immigrant’s per-capita earned income is higher than an American’s.

That’s why in the image below, you can see immigrants’ share of the workforce far above their share of the population. Their share of income is in the middle because they earn below-average wages per worker. However, their share of taxes and income remains disproportionate to their share of the population because there are so many more immigrant workers per capita.

In the table below, you can observe the amount of taxes paid cumulatively over 30 years by type of tax. Immigrants generated more per capita than the US-born for every type of government revenue except federal and state nontax revenues and supplemental medical insurance payments, which are tied to participation in Medicare, which immigrants use at a much lower rate.

Most taxes and other revenues (about 75 percent) generated by immigrants and the US-born are not federal, state, and local income taxes. A very significant portion of taxes is never directly paid by the person on whom the tax incidence ultimately falls. For instance, the employer portion of the payroll tax doesn’t show up on your paycheck, but it still reduces your earnings.

What about illegal immigrants? Illegal immigrants also pay taxes, directly or indirectly. We estimate that, at least before President Trump’s mass deportation campaign, illegal immigrants were complying with income taxes at about 75 percent of the rate of the average person, which was 80 percent of the required amount. This is because illegal immigrants often work with borrowed, fake, or stolen identities under which employers still withhold their taxes about half the time. They also file for refunds at much lower rates. The result is that illegal immigrants have paid about $3 trillion in taxes over the last 30 years.

All of our estimates about the tax effects of immigrants are conservative because—unlike the Congressional Budget Office (CBO)—we do not include any of the indirect effects that immigrants have on the productivity of US workers, which increases their income and tax payments. In its 2024 study, CBO found that about one-third of the revenue effect of recent illegal immigrants, other humanitarian immigrants, and their children came from these indirect effects. The CBO found that President Trump’s early 2025 immigration policy changes have already put the federal government on a trajectory toward adding $500 billion more in deficits over 10 years—primarily by lowering tax receipts.

Of course, taxes are just one side of the fiscal ledger. In our full study, we analyze how immigrants also receive fewer government benefits. The net result after accounting for benefits received is $14.5 trillion in debt reduction from immigrants, $7.9 trillion when we include the entire 2nd generation, and $1.7 trillion from illegal immigrants. To get America’s fiscal house in order, governments must address spending for US-born Americans.

It is important to note that the net effect on the government budget is an indirect consequence of the much larger economic benefits from immigration: the goods and services that they provide to Americans through their work, innovation, and entrepreneurship. If immigrants did increase the deficit, as some subset certainly does, the best solution is to further wall off the welfare state, not the country, so that Americans could still realize these economic benefits without the costs.

You can read the full study and methodology here.