The immigration debate in the US is reaching new levels. From immigrants taking away jobs from American workers to them being a drain on the economy, the reasons cited by the MAGA community are numerous.
Supported by three decades of data, a recent report by the Cato Institute, one of the top policy research organizations in America, presents an entirely different picture.
Immigrants Pay More Taxes Than the Average American
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. That is not a small difference. That is a structural, sustained fiscal contribution that has been building for thirty years, says the Cato Institute study.
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.
Why Do Immigrants Pay More?
The answer is straightforward. 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.
What about illegal immigrants?
This is where the study gets particularly interesting. Illegal immigrants also pay taxes, directly or indirectly. According to other estimates, undocumented immigrants pay nearly $12 billion in annual state, local sales, excise, income and property taxes.
The Cato study estimates 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.
2026 Tax Filings
There have been instances reported during the tax filing season 2026 when several undocumented immigrants did not turn up to file their tax returns. Many immigrants who are not legally authorized to work in the United States choose to use the federal individual taxpayer identification number (ITIN) that is available to people who don’t have Social Security numbers to get into the tax system.
The risk of getting identified and revealing their address is keeping such immigrants away from filing a tax return. The Yale Budget Lab projects that the IRS will lose between $147 billion and $479 billion over the next decade as migration to the U.S. drops and deportations increase.
The Cost of Cutting Immigration
The Cato study also shows is that America’s tax revenues would suffer severely from banning immigration. The Congressional Budget Office 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. Simply put, fewer immigrants means less tax revenue — and a bigger hole in the federal budget.
The Bigger Picture
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.
The Cato study makes a pointed conclusion: if the goal is to fix America’s fiscal problems, the data suggests the government 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.
The Takeaway
The findings of this study cut through much of the noise in the immigration debate. Immigrants, both documented and undocumented, do not tax the US fiscal system. The data show that they are net contributors. As the US government considers a tighter immigration policy, the Cato report serves as a warning that the economic ramifications of those decisions will eventually show up in the federal budget.
Disclaimer: The fiscal data and projections cited in this article are sourced from the Cato Institute and the Yale Budget Lab. Findings reflect the methodologies and assumptions of the respective studies and may not represent the full range of academic or policy opinion on immigration economics. Tax contribution and benefit figures are estimates based on modelling and historical data, and actual outcomes may vary. This article is intended for informational purposes only and does not constitute financial, legal, or policy advice.