Border battles are brewing fiscal headaches that could drain America’s tax reserves. Immigrants paid $651.9B in taxes in 2023, but with rising anxiety around deportation threats, that large contribution could soon drop — leaving a gaping hole in government revenues. That’s because the IRS is reportedly considering a data-sharing agreement with immigration authorities, potentially deterring tax compliance and driving some undocumented taxpayers underground.

• Undocumented immigrants alone paid a total of $96.7B in federal, state, and local taxes in 2022, with experts warning that increased deportation fears could slash their tax compliance rate from the current 60% to as low as 30% — potentially costing over $28B annually.
• Washington state’s immigrant population contributed nearly $23B in taxes in 2023 — with undocumented immigrants accounting for ~$3B of that total despite being ineligible for many government benefits, including unemployment insurance.

Budget battlegrounds ahead: The fiscal implications couldn’t come at a worse time, with House Republicans pushing to extend their 2017 tax law provisions — which could cost over $4.5T through 2034. Treasury Department analysis shows these extensions would primarily benefit the wealthy, with households earning over $743K receiving average tax cuts of $62K, compared with just $400 for those in the bottom 60% of earners. Rather than addressing the revenue shortfall, the plan doubles down on tax cuts that failed to deliver promised economic growth and worker benefits, relying on what the Committee for a Responsible Federal Budget has called “fantasy math” in its financial projections. With immigrants making up substantial portions of crucial workforces nationwide, the economic stakes of immigration enforcement decisions have never been higher.