Rodricks: Thousands of undocumented workers pay state taxes

Filing income tax returns a requirement of Maryland Dream Act

October 15, 2012|Dan Rodricks

Under the Maryland Dream Act, students who want to attend our community colleges or public universities at the in-state tuition rate must have attended a Maryland high school for at least three years. They must prove that their families filed state income tax returns during that time, and they or their families must file returns each year that the student attends college.

Because the Dream Act was written for illegal immigrants, you might be wondering how this can be. Since when do such people pay income taxes? Opponents of the Dream Act tell us that "illegals" just suck money out of the U.S. economy and become burdens to taxpayers.

I've addressed this issue a few times over the years. But with the election just three weeks away, and the Dream Act up for a vote, I'll share what I've learned about it.

First stop: The Maryland tax collector's office in Annapolis. According to Joseph Shapiro, spokesman for state Comptroller Peter Franchot, thousands of undocumented workers obtain an Individual Taxpayer Identification Number (ITIN) from the Internal Revenue Service. The ITINs, in lieu of Social Security numbers, have been available since the 1990s.

Once they have the ITIN," says Shapiro, "their wages can be withheld by employers for Social Security taxes and they can file with the state for income tax. To file a tax return in Maryland, you must have a Social Security number or an ITIN.  We have no way of knowing if an ITIN taxpayer is here illegally or not, and it's not our job.

"The only tax that our office can directly attribute to ITIN taxpayers is the personal income tax. Obviously, we have no idea how much they pay in sales taxes or really any other tax or fee."

From 2008 to 2010, about 20,000 ITIN workers a year reported taxable income in Maryland, and they paid around $11 million each year in state income taxes. Final figures for last year are incomplete, but the comptroller expects about $12 million in taxes on 2011 ITIN wages.

I reported earlier that, since ITINs were first made available in 1996, the vast majority have been snapped up by undocumented immigrants. So Franchot's numbers give us some idea about the amount of taxes being paid by this workforce.

And we can assume that some of these workers are parents of children who have been educated in Maryland public schools and who now seek to attend college while paying the same affordable in-state tuition that their citizen-peers pay.

But the state numbers only provide part of the picture.

At the federal level, tax revenues from undocumented workers are counted in billions, not millions. Some background, worth repeating:

In 2001, then-Federal Reserve Chairman Alan Greenspan estimated that undocumented immigrants paid about $70 billion annually in taxes and received about $43 billion in government services — a net benefit to American taxpayers that smashed one of the common nativist myths.

In 2005, The New York Times reported that undocumented workers contributed about $7 billion to the Social Security Administration. While ITINs are available, so are many phony Social Security numbers. With them, undocumented workers pay billions into the SSA and Medicare systems, though the many workers who leave, either of their own will or through deportation, never will collect retirement or health benefits.

By 2007, the Social Security trust fund had received a net benefit of upwards of $240 billion from "unauthorized immigrants." Two years ago, Stephen Goss, chief actuary of the SSA, told The Washington Post: "If we had not had other-than-legal immigrants in the country over the past, then these numbers suggest that we would have entered persistent shortfall of tax revenue to cover [payouts] starting [in] 2009."

Notes Sen. Bill Ferguson, a Baltimore Democrat and sponsor of the Dream Act in the Maryland General Assembly: "Because the IRS doesn't communicate with other federal agencies — Immigration and Customs Enforcement, the Department of Homeland Security — there's no risk to immigrants of being deported simply because they chose to do the right thing and pay their taxes."

Memorably, a Sun reader groused about this in an email, arguing that the IRS and state comptroller had no business taking tax revenue from "illegal immigrants" who shouldn't be in the country to begin with.

Fine, but would this same person be agreeable to paying more in taxes to make up for the loss in revenue?

Such is one of the great hypocrisies of Americans who favor unrealistic mass deportation and who oppose any kind of benefit to the undocumented, even a break on college tuition for their kids.

Less strident Maryland voters should see Question 4 as one of fairness: If they did the right thing and finished high school, if their parents did the right thing and filed state tax returns, do we really want to do the wrong thing and deny Dream Act kids the same reasonable benefit their classmates get?

drodricks@baltsun.com

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