The Trump administration's aggressive immigration crackdown has carried a significant human toll, at times targeting people with no criminal records despite early promises to focus on the "worst of the worst."
Now, tax experts warn the mass deportation of undocumented immigrants living in the United States could also carry a steep financial cost, with the country potentially losing up to $479 billion in tax revenue over the next decade. One major factor, experts say, is growing fear among undocumented workers about filing taxes.
As reported by The Guardian, tax professionals who spoke to the outlet said data-sharing agreements between the Internal Revenue System with immigration authorities have made filing taxes riskier for people without legal status. They also pointed to the loss of tax benefits for some immigrant parents, reducing incentives to file returns.
Daisy Schmidt, a tax adviser, told the outlet she has lost as much as 75% of her clientele because many are afraid filing taxes could expose them to deportation.
"Our target is the Latino community, and many people didn't file taxes because of fear of ICE," Schmidt told the outlet. "They said: 'If they can deport me, what am I filing taxes for?'"
Research from Yale's The Budget Lab cited by The Guardian found that fewer undocumented immigrants filing taxes could result in major losses for the IRS. Experts estimate the losses could range from $147 billion to $479 billion over the next 10 years.
While there is no official federal data measuring the current impact, the IRS has estimated that a 1% drop in voluntary tax compliance would result in roughly $46 billion in lost federal tax revenue.
According to data from the nonprofit Institute on Taxation and Economic Policy, about half of undocumented immigrant households file income tax returns. In 2022 alone, undocumented immigrants paid an estimated $96.7 billion in taxes despite being ineligible for most deductions and tax benefits.
Based on that research, it was estimated that for every 1 million undocumented immigrants in the U.S., public services receive $8.9 billion in additional tax revenue.
Edgar Villacorta, a tax adviser serving Latino communities in Maryland and Virginia, said 30% to 40% of his clients did not file taxes this year.
"They see that it isn't giving them any benefit," Villacorta said, referring to the loss of the child tax credit for some parents without legal status, even when their children are U.S. citizens. He added that some colleagues reported as many as half of their clients did not file taxes this year.
One factor behind the loss of the child tax credit was the administration's argument that immigrants place a strain on the U.S. welfare system. But a recent study from the Cato Institute found that immigrants paid more in taxes than they received in government benefits every year from 1994 through 2023, generating nearly $10.6 trillion more in federal, state and local tax revenue than they received in government spending.
The study concluded that immigrants produced a fiscal surplus despite being more likely than U.S.-born residents to earn lower incomes. According to the study, that is partly because immigrants participate in the workforce at higher rates, are more likely to be of working age, and rely less on age-related government benefits than the U.S.-born population.
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