Summary: Estimated economic contributions including federal taxes, state and local taxes and spending power by immigration status. Spending power is defined as income minus taxes. Immigration status is estimated based on an approach developed by the Equity Research Institute.
Data Source(s): Integrated Public Use Microdata Series, IPUMS USA, University of Minnesota, www.ipums.org, 2019 American Community Survey 5-year sample; Congressional Budget Office (CBO), https://www.cbo.gov/publication/55413, The Distribution of Household Income, 2018, released August 2021; Institute on Taxation and Economic Policy (ITEP), https://itep.sfo2.digitaloceanspaces.com/whopays-ITEP-2018.pdf.
Universe: All tax filing units.
Methods: Economic contributions including federal taxes, state and local taxes and spending power were estimated for all tax filing units by immigration status for each geography. Tax filing units are defined as families living in the same household (and subfamilies, if present) as well as individuals age 16 or older who are unrelated to anyone in the household as identified in the IPUMS USA microdata.
Total income for each tax filing unit was calculated by summing individual income from the year prior to the survey. The sample was then reduced to tax filing unit “heads” who were identified as the householder or the individual with the lowest person ID (PERNUM) within the tax filing unit.
Federal tax rates reported by the CBO by type of tax (individual income tax, payroll tax, corporate income tax and excise tax) were matched in by age of tax filing unit head and presence of children (elderly with no children, non-elderly with no children and any age with children) and by income bracket, with income brackets defined as quintiles of the national income distribution, but with the top quintile further broken out into the 81st to 90th percentile, the 91st to 95th percentile, the 96th to 99th percentiles, and the 100th percentile. State and local tax rates overall and for property taxes for non-elderly taxpayers reported by ITEP were matched in by income bracket, with income brackets defined as quintiles of the statewide income distribution for California, but with the top quintile further broken out into the 81st to 95th percentile, the 96th to 99th percentile, and the 100th percentile.
The immigration status of tax filing units was determined based on the individual tagged as the tax filing unit head, and adjustments were made to reduce the estimated income taxes paid by undocumented tax filing units, as well as the estimated property taxes paid by all immigrants. Specifically, we assumed that only 75 percent of undocumented tax filing units pay income taxes (both state and federal) using an Individual Taxpayer Identification Number (ITIN). This is consistent with an estimate reportedly made by the Social Security Administration’s chief actuary in 2005. To implement this adjustment, state and local personal income tax rates were set to zero for a randomly selected 25 percent of tax filing unit heads.
Estimated property taxes were reduced for immigrants due to generally lower rates of homeownership. To implement the adjustment, home ownership rates were calculated by state income bracket (using ranges reported above) and immigration status (all, undocumented, lawful permanent resident, and naturalized U.S. citizen tax filing units). The ratio of the homeownership rate for each group of immigrants by status to the overall rate for all tax filing units was calculated, by income bracket, and multiplied by the property tax rate that was previously matched in to derive an adjusted property tax rate, and the overall state and local tax rate was also adjusted to be consistent.
Finally, all the tax rates (and adjusted rates) were multiplied by total income for each tax filing unit, and the result was aggregated by immigration status for each geography. Spending power was then calculated as total income minus all estimated taxes. See the methodology page for other relevant notes.
- Spending power is defined as income minus taxes.
- Immigration status is defined based on the tax filing unit “head.”
- Data represent a 2015-2019 average.
- Immigration status is estimated using a probability model (not self-reported). See here for details.