Undocumented Immigrants Contribute Billions in Taxes to California Economy, Reports Show

Undocumented immigrants in California contributed nearly $8.5 billion in state and local taxes in 2022, playing a significant role in the state's economy, according to recent reports from the Institute on Taxation and Economic Policy (ITEP) and the California Budget & Policy Center. This figure directly challenges claims that the state's economy is "propped up on the backs of illegal immigrant slave labor," as stated in a tweet by Kevin Dalton.

The data indicates that California's undocumented residents are deeply integrated into the state's economic fabric, supporting public services through various tax contributions. These include sales and excise taxes on purchases, property taxes paid directly or indirectly through rent, and individual and business income taxes. Despite these substantial contributions, many undocumented individuals remain excluded from numerous public services they help fund.

A June 2025 report highlighted that nearly 1.5 million undocumented individuals are active in California's labor force, accounting for almost 8% of all workers and generating close to 5% of the state's GDP. Their labor force participation rate stands at over 72%, surpassing that of native-born residents. Key sectors such as agriculture and construction heavily rely on these workers, with 61% of construction laborers being immigrants, 26% of whom are undocumented.

Lieutenant Governor Eleni Kounalakis emphasized the vital role immigrants play, stating, "California’s strength lies in its diversity, and immigrants are the backbone of our economy, our workforce, and our communities." She warned that mass deportation policies could lead to a loss of $275 billion in economic output and $23 billion in annual tax revenue for the state. Research further suggests that mass deportations could result in 10 U.S.-born workers losing their jobs for every 13 foreign-born workers removed from the labor force.

The economic contributions of undocumented immigrants extend beyond taxes and labor. They are also significant consumers and entrepreneurs, with nearly 900,000 immigrants in California owning businesses, generating $28.4 billion in business income. These figures underscore the complex and integral relationship between undocumented immigrants and California's robust economy.