President Donald Trump’s immigration crackdown could cost the federal government nearly half a trillion dollars in lost tax revenue over the next decade, according to economists.
Undocumented immigrants currently pay about $66 billion each year in payroll and federal income taxes. But policy changes introduced by the Trump administration may deter many from filing returns, potentially reducing federal revenue by between $147 billion and $479 billion over 10 years, an analysis by the Yale Budget Lab concluded.
Trump, who pledged to carry out the largest deportation effort in U.S. history, has taken a number of steps in furtherance of that goal, including strengthening enforcement measures, promoting self-deportation and significantly boosting funding for ICE.
One key development came last April, when the Internal Revenue Service agreed to share taxpayer data with Immigration and Customs Enforcement for individuals with final removal orders. Under the arrangement, ICE submitted names and addresses, which the IRS matched against its records before returning confirmed identities. By August, the agency had handed over tens of thousands of records.
Although a federal court found the agreement unlawful in November, the policy shift may have already had a chilling effect, discouraging some immigrants from filing taxes.
The IRS had long maintained a policy of assuring migrants that their information would be kept private, according to The Guardian, which noted that immigrants unauthorized to work in the U.S. are still legally required to pay taxes.
“Historically, the IRS has been very, very good at keeping taxpayer information highly confidential, to make sure that taxpayers would feel confident in sharing such personal information with the system,” Luisa Godinez-Puig, a researcher at the Urban-Brookings Tax Policy Center, told the outlet. “To think that the IRS would share information with any agency would have been unthinkable a few years ago.”
About half of U.S. households composed of undocumented immigrants file income tax returns, paying about $96 billion in 2022, according to the Institute on Taxation and Economic Policy. They usually do not qualify for benefits or deductions, leading them to pay a larger share of their income than many American citizens.
“So this is a huge, huge change to how the policy and then this trust was built between agencies, and that’s why this is a very large issue with grave consequences,” Godinez-Puig said.
In addition to the recent data-sharing agreement, a law enacted last year may further disincentivize immigrants from filing taxes. Under the “Big, Beautiful Bill,” signed into law on July 4, undocumented parents are no longer eligible for the child tax credit, even if their children are U.S. citizens.
The revised policy requires that both the child and at least one parent have a Social Security number to qualify, putting a benefit worth thousands of dollars per year out of reach for many families.
“It used to be the case that as long as the child was American and had a social security number, the parents could qualify, even if they both were undocumented,” Godinez-Puig told The Guardian. “Because the point of this credit was to help American children … regardless of who the parents were.”
Trump has long argued that undocumented immigrants should not receive tax benefits, asserting that they take advantage of unearned resources while displacing American workers.
In a February 2025 executive order titled “Ending Taxpayer Subsidization of Open Borders,” the president wrote: “My Administration will uphold the rule of law, defend against the waste of hard-earned taxpayer resources, and protect benefits for American citizens in need, including individuals with disabilities and veterans.”
The Independent has reached out to the White House and the IRS for comment.
Some tax advisers said the administration’s changes have already had a profound dampening effect.
Daisy Schmidt, who owns Crece Latino, a tax service in Virginia, said up to three-quarters of her clients did not return this tax season.
“Our target is the Latino community, and many people didn’t file taxes because of fear of ICE,” Schmidt told the outlet. “They said: ‘If they can deport me, what am I filing taxes for?’”
“The damage is already done,” Brian Pastori, who assists undocumented immigrants in filing taxes in Massachusetts, told The New York Times last month. “We got a significant drop-off last year, and we haven’t recovered.”
Twenty-five percent of adults in immigrant families are concerned about deportations, according to a survey conducted last April by the Urban Institute. A majority of Americans, 57 percent, disapprove of the way Trump is handling immigration, while 43 percent approve, according to a CBS News poll released last week.
