Trump-era IRS policy endangers immigrant tax revenue in Texas

Key Takeaways

• Trump-era IRS policy allows tax data sharing with DHS for those with final removal orders.
• Undocumented immigrants in Texas paid $4.9 billion in state and local taxes in 2022.
• Experts warn decreased immigrant tax filings could cost the federal government $8.6 billion annually.

A Trump-era IRS policy is now threatening to cut billions of dollars from tax revenue collected from immigrants in Texas, and possibly around the United States 🇺🇸. This policy allows the IRS—the government agency responsible for taxes—to share taxpayer information with immigration enforcement. As a result, many immigrants, especially those without legal status, worry that filing taxes could now lead to deportation instead of staying safe and helping their communities.

Let’s break down what this policy means, why it matters so much for tax revenue, public services, and the trust between the government and immigrant communities, focusing closely on Texas 🇺🇸.

What Is the Trump-Era IRS Policy?

Under the Trump-era IRS policy, the IRS made an agreement with the Department of Homeland Security (DHS). This agreement, called a Memorandum of Understanding (MOU), says that the IRS can share confidential tax information about immigrants who already have a final order of removal (which means the government has ordered them to leave the country) [1][3][5]. This sharing is allowed under a special rule—known as the criminal exemption under Internal Revenue Code Section 6103—which lets the IRS help other law enforcement agencies when it comes to violations that aren’t about taxes, such as immigration law violations [1].

Before this change, the government had always promised that tax information would stay private, especially so immigrants—regardless of their legal status—would not be scared to file taxes. The goal was simple: make sure everyone who earns money is paying into the system, helping schools, hospitals, and roads in every community.

What Does This Policy Change Mean for Immigrants?

For years, the IRS encouraged undocumented immigrants to pay taxes using a special number called an Individual Taxpayer Identification Number (ITIN). Immigrants who do not have a Social Security Number can use an ITIN for tax filing [5].

• ITINs helped undocumented immigrants follow tax laws, even though they cannot get most benefits like Social Security or Medicare.
• These tax payments help pay for things like schools, hospitals, and public safety.

Now, with this IRS-DHS agreement, many immigrants—especially those without papers—are afraid that if they file taxes, their information could be given to immigration enforcement and could lead to removal (deportation) [2][5][6]. Simply put, what was once a safe and trusted system now feels risky.

How Could This Affect Tax Compliance and Revenue?

Here’s what the experts and reports clearly say: If immigrants, especially those without documents, do not trust the government to keep their information private, fewer of them will file taxes. That means less money for federal, state, and local public services.

Analysis from VisaVerge.com suggests that for every time tax compliance (the number of people who file taxes correctly) falls by ten percentage points among undocumented immigrants, the federal government loses $8.6 billion each year. States, taken together, lose another $900 million—even though those states still have to pay for schools, emergency services, and roads [2]. The drop in tax compliance is directly tied to fear created by the Trump-era IRS policy.

A report from the Institute on Taxation & Economic Policy puts it clearly: “If any… undocumented immigrants who pay taxes decide instead to remain in the shadows and try to avoid paying taxes, public revenues take a hit—and that trust can’t be put back together…” [2]. This means, once trust is broken, it will be very hard to convince immigrants it’s ever safe to pay taxes again.

The Big Picture in Texas 🇺🇸

Let’s look closely at Texas 🇺🇸, where the impact is especially powerful:

• In 2022, undocumented immigrants in Texas 🇺🇸 paid approximately $4.9 billion in state and local taxes—mostly through sales tax ($2.8 billion) and property tax ($1.8 billion) [8]. This is because Texas 🇺🇸 does not have a state income tax, so most taxes are collected on things people buy and on homes or apartments.
• On average, each undocumented immigrant in Texas 🇺🇸 contributes $2,615 per year. For every half-million undocumented people in the state, this creates an extra $1.3 billion for services everyone uses.
• The tax rate these immigrants pay (8.9%) is greater than the rate paid by some of the wealthiest Texans (4.6%). That means immigrants, even those with lower incomes, are often contributing a bigger share of their earnings to public funds [8].

Across the United States 🇺🇸, estimates show nearly $100 billion was paid by undocumented immigrants in taxes in 2022, including contributions made to federal Social Security funds—often using borrowed or incorrect Social Security Numbers, even though the workers making those payments will never get benefits from the system [1][5]. This is money that keeps hospitals, police, fire departments, and schools running.

What Happens If Immigrants Stop Paying Taxes?

If the Trump-era IRS policy makes immigrants too afraid to file taxes, there are several big risks:

1. Public Services Lose Money: Schools, hospitals, fire stations, and other services that everyone relies on may have less funding. That could mean larger class sizes, limited hospital hours, or fewer emergency workers.

2. Other Taxpayers Pay More: When one group stops contributing, the government often has to raise taxes on others or cut services. This affects everyone in the community, not just immigrants.

3. Loss Is Hard to Undo: Even if the government later promises tax information will be safe, it might be impossible to rebuild trust with immigrant communities. Many will continue to avoid filing taxes out of fear.

4. Federal Budgets Suffer Too: Lower compliance means the federal government collects fewer payroll taxes, which help pay for Social Security and other benefits, creating bigger nationwide problems.

Why Was Confidentiality Important?

For decades, the government made it clear that reporting income and paying taxes would not be used to punish people for their immigration status. The Internal Revenue Service (IRS) and its rules were designed to separate tax collection from immigration enforcement. The Trump-era IRS policy changed this by allowing taxpayer information to be used if an immigrant already has a deportation order (final order of removal).

• The old promise: Pay your taxes, and you won’t risk deportation just because you filled out the right forms.
• The new reality: If you have a final order to leave the country, your tax information could be used to find and remove you.

This shift is not just about changing rules—it changes lives and decisions for millions of people.

Real Effects on Families and Local Communities

The tax revenue collected from immigrants doesn’t just help pay for big items like highways or prisons. It also covers the basics:

• Keeping water clean and safe.
• Fixing potholes in roads.
• Paying teachers and buying schoolbooks.
• Running clinics and emergency health services.
• Making sure there are enough firefighters and police officers.

Even a small drop in tax filings by immigrants can have a large impact on these everyday services, especially in states like Texas 🇺🇸, where so much revenue comes from wide participation in the tax system.

Wider Impact Across the United States 🇺🇸

This is not just a Texas 🇺🇸 story. If the Trump-era IRS policy goes forward without change, areas with large immigrant populations across the country will feel the pinch:

• Big drops in tax revenue can force tough choices—cutting teachers, reducing healthcare hours, or raising taxes on everyone else.
• This policy could send a message to immigrants in all states that they can no longer trust the government to protect their privacy.

Even immigrants who are not directly targeted (those without a final removal order) may avoid tax filing out of fear that their turn could be next.

Debate and Concerns Among Experts

Advocates, economists, and policy makers agree that the Trump-era IRS policy is risky for the whole country. Here are some key points from what experts are saying:

• Trust Is Fragile: Once immigrants lose trust in the system, it is very hard to win that trust back, even if rules later change.
• Public Money at Risk: Billions lost in tax revenue could mean less funding for roads, schools, and medical care for everyone.
• Policy Could Backfire: Instead of catching a few people for deportation, the policy could cause widespread harm, pushing people to avoid taxes and leading to bigger holes in state and federal budgets.

Possible Next Steps for Affected Immigrants

If you are an immigrant in Texas 🇺🇸 or anywhere in the United States 🇺🇸, you may want to know your rights and responsibilities. The IRS provides information for new immigrants about how to file taxes, what numbers to use, and what help is available. You can find official resources by visiting the IRS’s tax information for new immigrants page.

What Could Be Done to Address the Problem?

Government officials and experts recommend several things to help protect public funds and rebuild trust:

• Review the Policy: Lawmakers and the IRS could look again at the Trump-era IRS policy to see if its benefits are worth the risk to tax collections and public trust.
• Clear Communication: The government could make it as clear as possible what tax data will (and won’t) be shared, helping remove fear and confusion.
• Protect Confidentiality: Building strong walls between tax filing and immigration enforcement can keep public services strong for everyone.
• Community Outreach: Local agencies and community leaders can work together to spread correct information and make sure people know both their rights and responsibilities.

Final Thoughts

The Trump-era IRS policy allowing the sharing of taxpayer information with immigration enforcement is a huge change, especially for immigrant communities in Texas 🇺🇸 and across the United States 🇺🇸. As reported by VisaVerge.com, this change risks billions in tax revenue—money that supports basic services in every community. If undocumented immigrants are too afraid to file taxes, the impact will not only hurt them but will also reach every person who relies on schools, clinics, or safe neighborhoods.

Protecting the tradition that tax information is confidential isn’t just about helping one group—it’s about keeping public services strong for everyone. Policymakers must carefully consider whether using tax records for immigration enforcement is worth the high cost to essential services and public trust. If they don’t, we may all pay the price for years to come.

Learn Today

Final order of removal → A government order requiring an individual to leave the United States, also known as a deportation order.
Memorandum of Understanding (MOU) → An agreement between two government agencies outlining how information or resources are shared for a specific purpose.
Individual Taxpayer Identification Number (ITIN) → A tax processing number issued by the IRS for people not eligible for a Social Security Number.
Section 6103 (Internal Revenue Code) → A law section that generally protects the confidentiality of taxpayer information, with some exceptions for law enforcement.
Tax compliance → Adhering to rules by correctly filing and paying taxes as required by law.

This Article in a Nutshell

A Trump-era IRS policy lets authorities share immigrant taxpayers’ data with immigration enforcement, ending long-held privacy guarantees. This induces fear, especially among undocumented immigrants, threatening billions in tax revenue critical to public services like schools and hospitals in Texas and nationwide. Trust and fiscal stability are now at risk.
— By VisaVerge.com

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