{"id":607,"date":"2025-01-19T22:25:03","date_gmt":"2025-01-19T22:25:03","guid":{"rendered":"https:\/\/finzexpert.com\/blog\/how-unauthorized-immigrants-help-finance-social-security-benefits\/"},"modified":"2025-01-19T22:25:03","modified_gmt":"2025-01-19T22:25:03","slug":"how-unauthorized-immigrants-help-finance-social-security-benefits","status":"publish","type":"post","link":"https:\/\/finzexpert.com\/blog\/how-unauthorized-immigrants-help-finance-social-security-benefits\/","title":{"rendered":"How Unauthorized Immigrants Help Finance Social Security Benefits"},"content":{"rendered":"\n<div data-testid=\"companionColumn-0\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">The Social Security Administration receives billions in free money each year from an unexpected source: undocumented immigrants.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">This group paid an estimated $25.7 billion in Social Security taxes in 2022, according to a recent <a class=\"css-yywogo\" href=\"https:\/\/itep.org\/undocumented-immigrants-taxes-2024\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">analysis<\/a> from the Institute on Taxation and Economic Policy, a left-leaning tax research group. Since unauthorized workers cannot collect retirement and other Social Security benefits without a change to their immigration status, the billions they pour into the program effectively act as a subsidy for American beneficiaries.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">President-elect Donald J. Trump has vowed to carry out the nation\u2019s largest mass deportation program to date, and restrict legal pathways to immigration. It\u2019s hard to predict whether the incoming administration will be able to follow through with its most aggressive promises, among them sending home the estimated 11 million undocumented immigrants currently in the United States, <a class=\"css-yywogo\" href=\"https:\/\/www.americanimmigrationcouncil.org\/research\/mass-deportation#:~:text=In%202022%2C%20nearly%2090%20percent,participate%20in%20the%20labor%20force.\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">most of whom<\/a> are of <a class=\"css-yywogo\" href=\"https:\/\/www.migrationpolicy.org\/data\/unauthorized-immigrant-population\/state\/US\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">working<\/a> age.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But if the White House does follow through, economists project a broad drag on the economy \u2014 and it could cost Social Security roughly $20 billion in cash flow annually, according to actuaries at the Social Security Administration, which sends <a class=\"css-yywogo\" href=\"https:\/\/www.ssa.gov\/news\/press\/factsheets\/basicfact-alt.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">benefits<\/a> to 68 million Americans each month, totaling $1.5 trillion last year.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-1\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Social Security has faced a financing shortfall for years, partly because of demographic shifts. Falling birthrates mean fewer people are paying into the program, thousands of baby boomers are retiring daily, and retirees are collecting benefits for longer periods.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cAmerica\u2019s demographic realities are increasingly challenging for financing programs like Social Security,\u201d said Shai Akabas, executive director of the economic policy program at the Bipartisan Policy Center, a nonprofit. \u201cNet immigration into the country is one factor that has positively pushed against that trend and helped fill the gap left by an aging work force.\u201d<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The trust fund that pays Social Security\u2019s retiree benefits is <a class=\"css-yywogo\" href=\"https:\/\/www.ssa.gov\/OACT\/TR\/2024\/tr2024.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">expected<\/a> to run dry in 2033, when tax revenue will be enough to pay 79 percent of scheduled benefits. That means beneficiaries\u2019 checks would be reduced by 21 percent if Congress did nothing. (Legislators are expected to do something, though there is a debate about the best approach to shore up the program.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Major shifts to immigration policy could have ripple effects on Social Security. The net immigration rate was projected to drive population growth \u2014 and account for all population increases beginning in 2040 because American fertility rates are so low, according to a 2024 report from the <a class=\"css-yywogo\" href=\"https:\/\/www.cbo.gov\/system\/files\/2024-01\/59697-Demographic-Outlook.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">Congressional Budget Office.<\/a><\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cIf the immigrant work force declines, that will likely worsen Social Security\u2019s financial picture in the near term and require more significant reforms elsewhere,\u201d said Mr. Akabas of the Bipartisan Policy Center, which <a class=\"css-yywogo\" href=\"https:\/\/bipartisanpolicy.org\/explainer\/immigration-social-security-solvency\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">recently studied<\/a> the issue. \u201cThat said, the broader questions of immigration policy and border security require careful thought that goes beyond their impact on the Social Security program.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-2\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">To get a sense of how different levels of immigration \u2014 both lawful and otherwise \u2014 can alter the program\u2019s finances over the long term, we can look at the Social Security Administration\u2019s latest annual <a class=\"css-yywogo\" href=\"https:\/\/www.ssa.gov\/oact\/trsum\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">trustees report<\/a>, which forecasts the financial health of the combined trust fund for retiree and disability benefits over a 75-year period starting in 2024. (Social Security\u2019s shortfall is often measured as a percentage of the total payroll covered by the program, or all the wages subject to payroll taxes, the program\u2019s dedicated funding source.)<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The trustees\u2019 <a class=\"css-yywogo\" href=\"https:\/\/www.ssa.gov\/OACT\/TR\/2024\/VI_D_LRsens.html#100036\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">best estimate assumes<\/a> a population of 1.24 million net immigrants each 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 (its low estimate), the program\u2019s long-term financing shortfall would worsen by about 10 percent (to 3.9 percent of taxable payroll from 3.5 percent).<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But if net immigrants rose to nearly 1.7 million annually, the financing shortfall would improve by 10 percent (to 3.1 percent of payroll).<\/p>\n<p class=\"css-at9mc1 evys1bk0\">In other words, for every 100,000 net immigrants each year, the funding gap is improved by 0.09 percent of taxable payroll.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cMost of these individuals are <a class=\"css-yywogo\" href=\"https:\/\/www.actuary.org\/node\/14008\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">earlier in their careers<\/a> and begin contributing to Social Security immediately, even though they will not claim benefits for years into the future, if ever,\u201d a Bipartisan Policy Center report said. \u201cThis creates a net positive effect on the Social Security system.\u201d<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-3\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">Undocumented workers are still required to pay taxes on any income earned in the United States, and it\u2019s estimated that at least half of them file federal tax returns. But even if they have contributed to payroll taxes, they are not permitted to collect any Social Security benefits and many other credits, including the <a class=\"css-yywogo\" href=\"https:\/\/www.irs.gov\/credits-deductions\/individuals\/earned-income-tax-credit\/who-qualifies-for-the-earned-income-tax-credit-eitc#:~:text=To%20qualify%20for%20the%20EITC%2C%20you%2C%20your%20spouse%20if%20filing,for%20work%20with%20DHS%20authorization.%E2%80%9D\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">earned-income tax credit<\/a>, which requires that all tax filers and their dependents have valid Social Security numbers.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Employers are generally required to verify prospective workers\u2019 identities and their eligibility to work using the <a class=\"css-yywogo\" href=\"https:\/\/www.uscis.gov\/i-9\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">I-9 form<\/a>, and to collect documentation as evidence. Since people generally <a class=\"css-yywogo\" href=\"https:\/\/www.ssa.gov\/pubs\/EN-05-10107.pdf\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">need a Social Security<\/a> number to get a job, undocumented workers who receive paychecks \u2014 instead of being paid in cash, for example \u2014 may use made-up Social Security numbers, another person\u2019s number or a number that was once valid when they had work authorization status.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">But when they file their tax returns, they use another number: the individual taxpayer identification number, also nine digits and known as <a class=\"css-yywogo\" href=\"https:\/\/www.irs.gov\/tin\/taxpayer-identification-numbers-tin\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">ITIN<\/a>s. The Internal Revenue Service created them in 1996 to enable people who are ineligible or who do not have Social Security numbers to legally file tax returns and comply with tax laws \u2014 say, a student visa holder or certain spouses of people with employment visas.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Though undocumented workers may fear that their having obtained an ITIN could be used to deport them, there are protections that prevent the I.R.S. from sharing taxpayer information with other federal agencies. Congress would need to take legislative action for this to change.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">Undocumented workers often file tax returns to show good moral character, which might later help them in any immigration cases, whether that\u2019s related to deportation or putting them on the road to citizenship.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n<div data-testid=\"companionColumn-4\">\n<div class=\"css-53u6y8\">\n<p class=\"css-at9mc1 evys1bk0\">\u201cThey want to integrate into American society, and this is an important way to do that,\u201d said Sarah Lora, an associate clinical professor at Lewis &amp; Clark Law School and the director of its low-income-taxpayer clinic. \u201cThere is almost a reverence for the tax system,\u201d she said, referring to the attitudes of undocumented taxpayers she has assisted with returns.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">The Institute on Taxation and Economic Policy <a class=\"css-yywogo\" href=\"https:\/\/itep.org\/undocumented-immigrants-taxes-2024\/\" title=\"\" rel=\"noopener noreferrer\" target=\"_blank\">estimates<\/a> that undocumented workers paid a total of $96.7 billion in federal, state and local taxes in 2022, a third of which went toward the payroll taxes that are dedicated to paying for social insurance programs, including Social Security, Medicare and unemployment taxes.<\/p>\n<p class=\"css-at9mc1 evys1bk0\">\u201cIt is well established that undocumented workers contribute to the solvency of major social insurance programs through their tax contributions,\u201d said Carl Davis, research director of the Institute on Taxation and Economic Policy.<\/p>\n<\/div>\n<aside class=\"css-ew4tgv\" aria-label=\"companion column\"\/><\/div>\n","protected":false},"excerpt":{"rendered":"<p>The Social Security Administration receives billions in free money each year from an unexpected source: undocumented immigrants. This group paid an estimated $25.7 billion in Social Security taxes in 2022, according to a recent analysis from the Institute on Taxation and Economic Policy, a left-leaning tax research group. Since unauthorized workers cannot collect retirement and [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":608,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8],"tags":[242,239,238,241,240,237],"class_list":["post-607","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-loan","tag-benefits","tag-finance","tag-immigrants","tag-security","tag-social","tag-unauthorized"],"_links":{"self":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/607","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/comments?post=607"}],"version-history":[{"count":0,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/posts\/607\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media\/608"}],"wp:attachment":[{"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/media?parent=607"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/categories?post=607"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/finzexpert.com\/blog\/wp-json\/wp\/v2\/tags?post=607"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}