Study Examines the Value of Immigration Reform

Fifty-State Study Shows Immigration Reform Would Boost Kentucky Revenues $23.2 Million

Immigration Reform Would Boost Kentucky Revenues By $23 Million

Immigration Reform Would Boost Kentucky Revenues By $23.2 Million

New Report: ”Undocumented Immigrants’ State and Local Tax Contributions”

Undocumented Immigrants in Kentucky Pay $58.8 Million Annually in State and Local Taxes; Immigration Reform Would Boost State Revenues $23.2 Million

New 50-State Study From The Institute On Taxation And Economic Policy

With fiscal costs and benefits figuring large in the immigration reform debate, a new analysis from the Institute on Taxation and Economic Policy (ITEP) estimates that unauthorized immigrants are already paying $10.6 billion a year in state and local taxes nationwide, including $58.8 million in Kentucky. The study also estimates that Kentucky stands to gain $23.2 million in increased revenue should undocumented immigrants currently in the U.S. be allowed to work here legally. The analysis assumes a newly legalized immigrant population of 80,000 in Kentucky, 11.2 million nationally, fully participating in the federal, state and local tax systems. The overall revenue gain for all states would be $2 billion a year.

“We know that undocumented immigrants already pay six or seven percent of their income in state and local taxes, simply because they buy things and they rent or own homes, and sales and property taxes are paid automatically,” said Matthew Gardner, ITEP’s Executive Director. “With legalization, both wages and tax compliance will go up, resulting in substantial new revenues for states, especially from the income tax.” A recent Congressional Budget Office (CBO) report concluded a similar effect on federal revenues.

States like Kentucky which include an income tax would see the most significant revenue change since it is in the income tax where compliance will increase under reform; unauthorized immigrants currently pay approximately the same level of sales and property taxes as other U.S. residents in the same income brackets.

“At least 50 percent of undocumented immigrants already pay income taxes,” said Anna Baumann, Research and Policy Associate with the Kentucky Center for Economic Policy, “but immigration reform would increase revenues by boosting wages and creating legal channels for full compliance with the income tax. Immigration reform would be good for Kentucky’s immigrant and non-immigrant households, and also for our fiscal health and economy.”

The full study finds:

  • Undocumented immigrants in Kentucky currently contribute a collective estimated $58.8 million in state and local taxes each year, for a 7.1 percent average effective tax rate. Nationwide, they pay $10.6 billion in state and local taxes for an average effective tax rate of 6.4 percent.
  • Allowing undocumented immigrants to work legally will increase their state and local tax contributions by an estimated $23 million in Kentucky, raising their effective tax rate to 9.0 percent. Nationally, contributions would increase by $2 billion each year, raising the effective tax rate to 7 percent.
  • Kentucky’s undocumented immigrants currently pay $15.3 million in personal income taxes, $4.8 million in property taxes and $38.8 in sales and excise taxes. Nationally, they pay $1.2 billion in personal income taxes, $1.2 billion in property and $8 billion in sales and excise taxes.

The report also provides:

  • A breakdown of tax payments by category (sales, income, property) for each state, before and after immigration reform, including the effect of undocumented immigrants becoming newly eligible for state Earned Income Tax Credits.
  • Key state-by-state data points on the immigrant population underlying the tax analysis.
  • A complete methodology section and footnotes.

The report and a clickable 50-state data map can be accessed at http://www.itep.org/immigration.

###

Founded in 1980, the Institute on Taxation and Economic Policy (ITEP) is a non-profit, non-partisan research organization, based in Washington, DC, that focuses on federal and state tax policy. ITEP’s mission is to inform policymakers and the public of the effects of current and proposed tax policies on tax fairness, government budgets, and sound economic policy. ITEP’s full body of research is available at www.itep.org.

The Kentucky Center for Economic Policy is a non-profit, non-partisan initiative that conducts research, analysis and education on important policy issues facing the Commonwealth. Launched in 2011, the Center is a project of the Mountain Association for Community Economic Development (MACED). 

Earned Income Tax Credits Help Kentucky’s Military Families

Working Family Tax Credits Help Kentucky’s Military Families

MilitaryFamilies_Kentucky

 

New Report from the Center on Budget and Policy Priorities

 

Working Family Tax Credits Help Kentucky’s Military Families

 

About 28,000 veteran and active-duty military families in Kentucky receive the federal Earned Income Tax Credit (EITC) or the low-income component of the Child Tax Credit (CTC), according to a new report from the Washington, DC-based Center on Budget and Policy Priorities.

“Every year when we get our credits, we pay off our outstanding debt,” said Jessica Deis, a Kentucky mother of three whose husband, a veteran of the Marine Corps, works two jobs. “With the credits, I’m able to stay on top of our finances for at least six months.”

Nationally, roughly 1.5 million military families, which include about 3 million children under age 18, received one or both of the credits. The credits make a major difference to their economic security:

  • The EITC and CTC together keep more than 140,000 military families — with nearly 300,000 children and 600,000 total family members — from falling below the poverty line, based on the federal government’s Supplemental Poverty Measure, which counts income from tax credits.
  • These credits reduce the severity of poverty for about another 800,000 members of military families.
  • The credits also help working families with incomes modestly above the poverty line who still struggle with basic expenses like housing, school clothes, car repairs, and groceries.

The tax credits can also increase opportunity for children in military families. Recent rigorous research demonstrates that EITC receipt is linked to improved performance (including better test scores) by children in school — and to increased employment and earnings when the children reach adulthood.

Jessica Dies’s family is more financially secure today than she was growing up with her aunt. “I remember what a relief it was for her to get the earned income credit at the beginning of the year. The lights wouldn’t be turned off and we could have a big dinner. It kept us from getting evicted.”

Only people who are working can claim the credits, which were modestly expanded in recent years to provide more help to more families. On average the credit amounts to $1,000 per household from the low-income portion of the Child Tax Credit in 2011 and $2,650 from the EITC.

“There’s a lot at stake for Kentucky’s military families when it comes to the Earned Income Tax Credit and Child Tax Credit,” said Anna Baumann, Research and Policy Associate at the Kentucky Center for Economic Policy (KCEP). “It is very important that Congress supports our military families by protecting these tax credits including the improvements made in recent years like the EITC expansion for families with three or more children.”

Kentucky could further support these families by enacting a state-level EITC, which about half of states already provide. The Governor’s 2012 Blue Ribbon Commission on Tax Reform included in its recommendations that Kentucky enact an EITC at 15 percent of the federal credit.

###

The Center on Budget and Policy Priorities’ full report, Working-Family Tax Credits Help Over One Million Military Families can be found at: http://www.cbpp.org/cms/index.cfm?fa=view&id=3986.

The Kentucky Center for Economic Policy is a non-profit, non-partisan initiative that conducts research, analysis and education on important policy issues facing the Commonwealth. Launched in 2011, the Center is a project of the Mountain Association for Community Economic Development (MACED).