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A proposed plan to allow Immigration and Customs Enforcement (ICE) to access IRS data on taxpayers, including undocumented workers, could have far-reaching consequences for tax collection in the U.S. Experts warn that this unprecedented move could discourage immigrants from paying taxes, threatening nearly $100 billion in federal and state revenue.
In 2022, undocumented immigrants contributed an estimated $97 billion in taxes. Many of these individuals file tax returns in the hope that doing so may help their future legal status applications. However, under a deal reportedly being pushed by ICE, this information could be used to identify individuals suspected of being in the country illegally.
This proposal represents a dramatic shift in the IRS’s traditional policy of data protection. Historically, the IRS has been extremely conservative about sharing taxpayer information, requiring a court order for even basic data like names and addresses. However, under the Trump administration’s push to deport record numbers of immigrants, ICE seeks access to IRS records for cross-referencing against their immigration database.
Vanessa Williamson, a Brookings Institution fellow, emphasized the significant change this would bring: “The IRS has traditionally been very, very conservative in terms of data sharing,” she said.
Experts fear that immigrant taxpayers will be less inclined to file returns if they know their personal information could be used for deportation efforts. This could lead to a sharp decline in compliance, with many immigrants opting for under-the-table jobs paid in cash rather than paying taxes.
Carl Davis, research director at the Institute for Taxation and Economic Policy, pointed out the potential loss of compliance, noting, “The mere fact this is being talked about and reported on is going to lead to declining compliance in the immigrant community.”
In addition to this, the IRS is already facing a $500 billion shortfall in tax collections this year due to cuts in staffing, further exacerbating the situation.
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