The Social Security Administration receives billions in free money each year from an unlikely source: undocumented immigrants.
According to a recent report, the group paid $25.7 billion in Social Security taxes in 2022. Analysis From the Institute on Taxation and Economic Policy, a left-leaning tax research group. Because unauthorized workers cannot collect retirement and other Social Security benefits without changing their immigration status, the billions of dollars they pour into the program would effectively serve as a subsidy for American beneficiaries. are
President-elect Donald J. Trump has vowed to implement the nation’s largest mass deportation program to date and limit legal immigration pathways. It is difficult to predict whether the incoming administration will be able to follow through on its most aggressive promises, among them send home Estimation 11 million Undocumented workers currently in the United States.
But if the White House follows through, economists offer a broader plan. drag But The economy — and that could cost Social Security about $20 billion a year in cash flow, according to actuaries for the Social Security Administration, which Benefits Up to 68 million Americans per month, $1.5 trillion last year.
Social Security has faced funding shortfalls for years, in part because of demographic changes. to fall Birth rate That means fewer people are paying into the program, thousands of baby boomers are retiring every day, and retirees are collecting benefits for longer.
“America’s demographic realities are increasingly challenging the funding of programs like Social Security,” said Shai Akabas, executive director of the economic policy program at the nonprofit Bipartisan Policy Center. “Net immigration into the country is one factor that has pushed positively against this trend and helped fill the gap left by an aging workforce.”
A trust fund that pays Social Security retiree benefits. expected to dry up in 2033, when tax revenue will be sufficient to pay 79 percent of scheduled benefits. That means if Congress does nothing, checks for beneficiaries will be reduced by 21 percent. (Legislators are expected to do something, though the debate is ongoing. The best way to get the program going.)
Major changes in immigration policy can have implications for social security. According to a 2024 report, net immigration rates were projected to outpace population growth — and account for all population growth starting in 2040 because the U.S. fertility rate is so low. Congressional Budget Office.
“If the immigrant workforce declines, it will likely worsen Social Security’s fiscal picture in the near term and require more significant reforms elsewhere,” Mr. Akabas said. , of the Bipartisan Policy Center. Recently studied The issue “That said, broader questions of immigration policy and border security require careful thought beyond their impact on the Social Security program.”
To understand how different levels of immigration — legal and otherwise — could change the program’s finances over the long term, we can look at the Social Security Administration’s latest annual report. Report of the Trusteeswhich predicts the financial health of the joint trust fund for retiree and disability benefits over a 75-year period beginning in 2024. (for payroll taxes, the program’s dedicated funding source.)
Trustees Assumes best estimate. 1.24 million net immigrant population per year. At that rate, the program needs an additional 3.5 percent of its taxable payroll to become fully solvent. But if annual net immigration fell to 829,000 (a low estimate), the program’s long-term financing shortfall would be about 10 percent (from 3.5 percent to 3.9 percent of taxable payroll.)
But if net immigrants increase to about 1.7 million annually, the financing shortfall will improve to 10 percent (to 3.1 percent of payroll.)
In other words, for every 100,000 net immigrants per year, the fiscal gap is improved by 0.09 percent of taxable payroll.
“Most of them are individuals. Earlier in his career and start contributing to Social Security immediately, even though they won’t claim benefits until years into the future, if ever,” a Bipartisan Policy Center report said. “This would be a net positive for the Social Security system. creates an effect.”
Undocumented workers are still required to pay taxes on any income earned in the United States, and it is estimated that at least half of them file federal tax returns. But even if they’ve contributed payroll taxes, they’re not allowed to collect Social Security benefits and many other credits, including Earned Income Tax Creditwhich requires that all tax filers and their dependents have valid Social Security numbers.
Employers are generally required to identify potential workers and verify their ability to work. I-9 formand submitting documents as evidence. Since people in general Need Social Security? Numbers To get a job, undocumented workers who receive paychecks — instead of cash payments, for example — can use makeup Social Security numbers, someone else’s number or a number that is a work permit. It was correct at the time.
But when they file their tax returns, they use another number: the Individual Taxpayer Identification Number, also a nine-digit number and known as ITINs The Internal Revenue Service created them in 1996 to make it possible for people who are ineligible or don’t have Social Security numbers to legally file tax returns and comply with tax laws.
While undocumented workers may fear that obtaining an ITIN could be used to deport them, there are protections that prevent the IRS from sharing taxpayer information with other federal agencies. Congress would need to pass legislation to change that.
Undocumented workers often file tax returns to demonstrate good character, which can help them later in any immigration case, whether it’s related to deportation or putting them on a path to citizenship. .
“They want to integrate into American society, and this is an important way to do that,” said Sarah Laura, an associate clinical professor at Lewis & Clark Law School and director of its low-income taxpayer clinic. are “There’s almost a respect for the tax system,” he said, referring to the attitudes of undocumented taxpayers who have helped with returns.
Institute on Taxation and Economic Policy Estimation That undocumented workers paid a total of $96.7 billion in federal, state and local taxes in 2022, one-third of which went to payroll taxes dedicated to paying for social insurance programs, including Social Security, Medicare and unemployment. Tax.
“It’s well established that undocumented workers contribute to the bottom line of large social insurance programs through their tax contributions,” said Carl Davis, research director at the Institute on Taxation and Economic Policy.