Most undocumented workers work “on the books” by supplying a social security number which is not theirs. Employers withhold payroll taxes from their wages. The $7 billion figure refers to a government calculation of the employee’s half of social security and Medicare tax, 7.65% of wages. But economists tell us that realistically the employee pays both halves, the 7.65% withheld from the employee’s half but also the matching 7.65% sent in as the “employer’s half.” That is because employers are indifferent to the composition of total employee compensation. If there were no employer’s half of 7.65% the employer would just give that part to the employee as additional wages. The employee is worth 100% of wages plus 7.65% employer match to the employer and the employer will pay to whoever gets it the full amount the employee is worth. So the real payer of both halves is the employee. So undocumented really pay twice the seven billion, or 14 billion. But undocumented also pay state and local taxes. The Tax Foundation calculates that averages about 8% of wages for the undocumented. That’s another $7 billion or so. Sales tax, gas tax, alcohol tax, car tax, other taxes. But there is more. Many undocumented get an individual tax identification number, ITIN, other than a social security number to file form 1040. Any person on earth can get an individual tax identification number to pay US taxes they owe. They do this to document their compliance with US tax laws at a time they may be permitted to file an application to legally reside in the US. More tax is paid this way. How do we know undocumented pay $7 billion plus $7 billion social security and Medicare tax? When the social security number does not match the name for the number, after efforts to resolve the discrepancy, it goes into the Social Security Suspense Fund, thought to be almost exclusively from the undocumented. The amount in that fund is growing about $14 billion per year.
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That money must end up going to someone.
