Turning IRS Agents to Deportation Will Reduce Public Revenues
February 11, 2025
February 11, 2025
The Trump Administration’s plan to turn IRS agents into deportation agents will result in lower tax collections in addition to the harm done to the families and communities directly affected by deportations. Here are three reasons why.
Reduced Tax Compliance
First, it should surprise no one that weaponizing IRS agents to become involved in deportations would make many undocumented immigrants fearful and suspicious of the tax collection agency. If any of the many millions of undocumented immigrants who pay taxes decide instead to remain in the shadows and try to avoid paying taxes, public revenues would take a hit.
What’s more, if we demolish confidence in the idea that the IRS will stay out of immigration enforcement, that trust can’t be put back together and we can anticipate lower tax compliance in the immigrant community over the long term.
For every 10-percentage point drop in tax compliance among the undocumented population, we find that tax revenues would decrease by $9.5 billion annually—with $8.6 billion of that coming from federal coffers and another $900 million from states and localities.
Potential Tax Revenue Loss from Reduced Income Tax Compliance Among Undocumented Immigrants
| Percentage Point Decline in Compliance Rate | ||||||
| 10% | 20% | 30% | 40% | 50% | 60% | |
| U.S. Total | -$9,500,000,000 | -$19,000,000,000 | -$28,500,000,000 | -$38,100,000,000 | -$47,600,000,000 | -$57,100,000,000 |
| Federal Taxes | -$8,600,000,000 | -$17,300,000,000 | -$25,900,000,000 | -$34,500,000,000 | -$43,200,000,000 | -$51,800,000,000 |
| State & Local Taxes | -$900,000,000 | -$1,800,000,000 | -$2,600,000,000 | -$3,500,000,000 | -$4,400,000,000 | -$5,300,000,000 |
| Alabama | -$5,500,000 | -$11,000,000 | -$16,400,000 | -$21,900,000 | -$27,400,000 | -$32,900,000 |
| Alaska | $0 | $0 | $0 | $0 | $0 | $0 |
| Arizona | -$10,200,000 | -$20,400,000 | -$30,600,000 | -$40,700,000 | -$50,900,000 | -$61,100,000 |
| Arkansas | -$4,200,000 | -$8,500,000 | -$12,700,000 | -$17,000,000 | -$21,200,000 | -$25,400,000 |
| California | -$221,700,000 | -$443,500,000 | -$665,200,000 | -$886,900,000 | -$1,108,600,000 | -$1,330,400,000 |
| Colorado | -$13,400,000 | -$26,800,000 | -$40,200,000 | -$53,500,000 | -$66,900,000 | -$80,300,000 |
| Connecticut | -$15,200,000 | -$30,300,000 | -$45,500,000 | -$60,700,000 | -$75,900,000 | -$91,000,000 |
| Delaware | -$3,200,000 | -$6,300,000 | -$9,500,000 | -$12,600,000 | -$15,800,000 | -$19,000,000 |
| District of Columbia | -$3,500,000 | -$7,000,000 | -$10,500,000 | -$14,000,000 | -$17,500,000 | -$21,000,000 |
| Florida | $0 | $0 | $0 | $0 | $0 | $0 |
| Georgia | -$36,100,000 | -$72,300,000 | -$108,400,000 | -$144,600,000 | -$180,700,000 | -$216,900,000 |
| Hawaii | -$6,800,000 | -$13,600,000 | -$20,400,000 | -$27,200,000 | -$34,000,000 | -$40,900,000 |
| Idaho | -$2,600,000 | -$5,100,000 | -$7,700,000 | -$10,300,000 | -$12,900,000 | -$15,400,000 |
| Illinois | -$56,600,000 | -$113,200,000 | -$169,700,000 | -$226,300,000 | -$282,900,000 | -$339,500,000 |
| Indiana | -$12,800,000 | -$25,500,000 | -$38,300,000 | -$51,000,000 | -$63,800,000 | -$76,600,000 |
| Iowa | -$3,500,000 | -$7,000,000 | -$10,500,000 | -$14,000,000 | -$17,500,000 | -$21,000,000 |
| Kansas | -$7,000,000 | -$14,000,000 | -$21,100,000 | -$28,100,000 | -$35,100,000 | -$42,100,000 |
| Kentucky | -$5,500,000 | -$11,000,000 | -$16,500,000 | -$22,000,000 | -$27,600,000 | -$33,100,000 |
| Louisiana | -$4,400,000 | -$8,800,000 | -$13,200,000 | -$17,600,000 | -$22,000,000 | -$26,400,000 |
| Maine | -$600,000 | -$1,100,000 | -$1,700,000 | -$2,200,000 | -$2,800,000 | -$3,400,000 |
| Maryland | -$43,500,000 | -$87,000,000 | -$130,400,000 | -$173,900,000 | -$217,400,000 | -$260,900,000 |
| Massachusetts | -$36,000,000 | -$71,900,000 | -$107,900,000 | -$143,800,000 | -$179,800,000 | -$215,700,000 |
| Michigan | -$12,400,000 | -$24,800,000 | -$37,100,000 | -$49,500,000 | -$61,900,000 | -$74,300,000 |
| Minnesota | -$10,100,000 | -$20,300,000 | -$30,400,000 | -$40,600,000 | -$50,700,000 | -$60,900,000 |
| Mississippi | -$800,000 | -$1,600,000 | -$2,500,000 | -$3,300,000 | -$4,100,000 | -$4,900,000 |
| Missouri | -$4,000,000 | -$8,000,000 | -$12,000,000 | -$16,000,000 | -$20,100,000 | -$24,100,000 |
| Montana | -$100,000 | -$200,000 | -$300,000 | -$400,000 | -$500,000 | -$600,000 |
| Nebraska | -$3,500,000 | -$6,900,000 | -$10,400,000 | -$13,800,000 | -$17,300,000 | -$20,700,000 |
| Nevada | $0 | $0 | $0 | $0 | $0 | $0 |
| New Hampshire | $0 | $0 | $0 | $0 | $0 | $0 |
| New Jersey | -$52,300,000 | -$104,600,000 | -$156,900,000 | -$209,200,000 | -$261,500,000 | -$313,800,000 |
| New Mexico | $500,000 | $1,000,000 | $1,500,000 | $2,000,000 | $2,500,000 | $3,000,000 |
| New York | -$161,400,000 | -$322,800,000 | -$484,200,000 | -$645,600,000 | -$807,100,000 | -$968,500,000 |
| North Carolina | -$21,700,000 | -$43,400,000 | -$65,100,000 | -$86,900,000 | -$108,600,000 | -$130,300,000 |
| North Dakota | -$100,000 | -$100,000 | -$200,000 | -$200,000 | -$300,000 | -$300,000 |
| Ohio | -$10,600,000 | -$21,100,000 | -$31,700,000 | -$42,300,000 | -$52,900,000 | -$63,400,000 |
| Oklahoma | -$6,300,000 | -$12,600,000 | -$18,900,000 | -$25,100,000 | -$31,400,000 | -$37,700,000 |
| Oregon | -$21,400,000 | -$42,900,000 | -$64,300,000 | -$85,700,000 | -$107,200,000 | -$128,600,000 |
| Pennsylvania | -$24,200,000 | -$48,400,000 | -$72,600,000 | -$96,800,000 | -$121,000,000 | -$145,200,000 |
| Rhode Island | -$2,400,000 | -$4,800,000 | -$7,200,000 | -$9,600,000 | -$12,000,000 | -$14,400,000 |
| South Carolina | -$5,600,000 | -$11,300,000 | -$16,900,000 | -$22,600,000 | -$28,200,000 | -$33,900,000 |
| South Dakota | $0 | $0 | $0 | $0 | $0 | $0 |
| Tennessee | $0 | $0 | $0 | $0 | $0 | $0 |
| Texas | $0 | $0 | $0 | $0 | $0 | $0 |
| Utah | -$8,700,000 | -$17,500,000 | -$26,200,000 | -$35,000,000 | -$43,700,000 | -$52,500,000 |
| Vermont | -$200,000 | -$500,000 | -$700,000 | -$1,000,000 | -$1,200,000 | -$1,500,000 |
| Virginia | -$31,300,000 | -$62,700,000 | -$94,000,000 | -$125,400,000 | -$156,700,000 | -$188,100,000 |
| Washington | $0 | $0 | $0 | $0 | $0 | $0 |
| West Virginia | -$400,000 | -$700,000 | -$1,100,000 | -$1,400,000 | -$1,800,000 | -$2,100,000 |
| Wisconsin | -$7,600,000 | -$15,200,000 | -$22,800,000 | -$30,400,000 | -$38,000,000 | -$45,600,000 |
| Wyoming | $0 | $0 | $0 | $0 | $0 | $0 |
Note: Calculations begin from a starting point of 60 percent compliance, as discussed in ITEP’s 2024 report titled Tax Payments by Undocumented Immigrants. States with zero impact do not levy personal income taxes. Figures may not sum to totals due to rounding.
Source: Institute on Taxation and Economic Policy, February 2025
Fewer Undocumented Taxpayers
Second, if diverting IRS resources to immigration enforcement results in more deportations of undocumented immigrants, this would have a direct effect on public revenues. As our 2024 analysis found, undocumented immigrants paid $96.7 billion in federal, state, and local taxes in 2022. That amounts to $8.9 billion in public revenue for every 1 million undocumented immigrants who reside in the U.S.—and most of that would evaporate if these immigrants were to exit the country.
Putting aside these individuals’ property tax payments and tallying up just those taxes paid on the incomes they earn and the purchases they make inside U.S. borders, we expect that public services would lose at least $7.9 billion for every 1 million undocumented immigrants who are deported.
Fewer Resources for Tax Collection Cases
Lastly, taking IRS agents off the complex tax collections cases for which they are trained, and at which they are skilled, would reduce the amount of tax the agency is able to collect. It is well established that the most productive use of IRS enforcement dollars is rooting out tax evasion by the wealthy and corporations. Under this shift in policy, more wealthy scofflaws would evade detection, and more of their tax evasion efforts would be rewarded at the expense of the public purse.
The increase in IRS funding as part of 2022’s Inflation Reduction Act has led to an increase in tax collections, especially from wealthy tax avoiders. Last year, for example, the IRS announced that it had collected $1.3 billion in unpaid taxes from millionaire households. Estimators from the Congressional Budget Office and Government Accountability Office have found that extra resources for IRS tax enforcement efforts help the federal government’s bottom line. Those resources also help states and localities, since most state and local income taxes piggyback on federal rules and benefit from improved federal compliance. Redirecting tax enforcement resources toward the enforcement of immigration law would therefore increase the federal budget deficit and harm state and local budgets.