The federal government could forfeit between $147 billion and $479 billion in tax revenue over the next decade as undocumented immigrants increasingly avoid filing returns out of fear of deportation, according to projections from Yale University’s Budget Lab.
The estimates reflect a shift in tax-filing behavior that immigration tax preparers say is already visible in their offices.
Practitioners attributed the trend to data-sharing arrangements between the Internal Revenue Service and federal immigration enforcement, as well as the elimination of certain tax benefits previously available to immigrant families.
Daisy Schmidt, a tax adviser who works primarily with Latino clients, said her client base has contracted by as much as 75 percent. Many of those who walked away no longer see filing as worth the perceived risk.
“Our target is the Latino community, and many people didn’t file taxes because of fear of ICE,” Schmidt told The Guardian. “They said: ‘If they can deport me, what am I filing taxes for?’”
In Maryland and Virginia, tax adviser Edgar Villacorta reported that 30 to 40 percent of his clients did not file this year. He cited the recent loss of the child tax credit for some parents without legal status — including those whose children are U.S. citizens — as a key reason filers see diminishing value in compliance. Some of his colleagues reported even steeper declines, with up to half of their clients skipping returns.
The IRS has previously estimated that a 1% decline in voluntary tax compliance results in roughly $46 billion in lost federal revenue. No official federal data has yet quantified the impact of the current drop-off.
Undocumented immigrants have historically contributed substantial sums to public coffers despite being ineligible for most deductions and credits. The Institute on Taxation and Economic Policy estimates that roughly half of undocumented households file income tax returns, and that this population paid approximately $96.7 billion in taxes in 2022. The same research indicates that every one million undocumented immigrants generates about $8.9 billion in additional tax revenue for public services, according to the Latin Times.
A separate analysis from the Cato Institute found that immigrants contributed more in taxes than they received in government benefits every year from 1994 through 2023. The study estimated a cumulative surplus of nearly $10.6 trillion in federal, state, and local tax revenue, exceeding spending on immigrant-related government services during that period.
According to Cato’s findings, immigrants produced this fiscal surplus despite earning lower average incomes than U.S.-born residents. The institute attributed the gap to higher labor-force participation rates, a younger working-age profile, and lower reliance on age-related government programs among the foreign-born population.
The decline in filings comes amid the Trump administration’s broader immigration enforcement agenda, which has expanded interior removals beyond the initial focus on individuals with criminal records. Administration officials have separately argued that immigrants strain federal welfare programs — a rationale cited in the rollback of the child tax credit for certain non-citizen filers.
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