West Virginia could gain $1.2 million in state and local tax revenue each year if Congress passes immigration reform, allowing undocumented immigrants now living in the United States to live here legally, according to a new report from the Institute on Taxation and Economic Policy. While the likelihood of immigration reform is currently up in the air in Congress, passing a comprehensive reform bill would provide a much needed boost to the state’s revenues.
West Virginia is home to an estimated 2,180 undocumented families. These families earn an estimated average of $28,800 per year, and pay an estimated total of $3.8 million in state and local taxes, giving them an effective tax rate of 6.3%. In comparison, the typical West Virginia household pays an effective state and local tax rate of 8.6% at that income level. Legalizing these families will increase their tax contribution to $5.0 million, as both wages and tax compliance increase bringing their effective tax rates closer in line with the rest of the state.
Most of the increase in tax revenue gained through legalizing undocumented families would be through the income tax. Most undocumented workers pay sales and excise taxes on the goods they purchase, and they often pay property taxes, either directly on their homes or indirectly as renters. But only half of undocumented workers pay income taxes, because of their lack of legal status. Legalizing these workers who already are living and working in the state would increase the number of families paying income taxes, increasing that revenue source from an estimated $715,000 to $1.7 million.
At a time when the state is facing harmful budget cuts, such as those to higher education, the annual boost in revenue that could come from immigration reform would be a welcome development for the state.
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