Immigration in Iowa
New Iowans Contribute Millions to State Economy, Treasury
By Heather Gibney and Peter S. Fisher

IPP Policy Brief (14 pages, plus 2-page executive summary, PDF)
Executive Summary (2 pages, PDF)

IOWA CITY, Iowa (July 2, 2014) — Undocumented immigrants pay an estimated $64 million in state and local taxes, a new report finds.

The report by the nonpartisan Iowa Policy Project (IPP) suggests that immigration reform expanding work authorization or access to citizenship would increase the already significant contribution to Iowa by all immigrants whether documented or not.

“The vitality that immigrants bring to Iowa communities is expanded by their economic contributions, as well as the taxes they pay — with limited access in some cases to the services they support,” said Heather Gibney, research associate for the nonpartisan Iowa Policy Project (IPP) and co-author of the report with IPP Research Director Peter Fisher.

“It is unclear whether federal immigration reform will happen or what form it may take, but what is clear is that this population of about 130,000 people is important to our state and the economy.”

The report updates previous IPP research tackling the difficult task of estimating economic and tax contributions of a partially undocumented population. It describes what is known about the foreign-born population generally, as well as making estimates about the subset of immigrants who do not have documentation.

The report notes that the estimated 130,000 Iowans born outside the United States are about 4.3 percent of the state population and account for 4.5 percent of the state’s economic output. The number includes naturalized citizens, legal permanent residents (green card holders), those with work or student visas, and refugees, as well as undocumented immigrants.

Among findings in the report:

— Immigrants contribute as both workers and employers in the Iowa economy.
— Half of immigrant families make more over $58,000. Like most Iowa families, the majority of immigrant families have incomes between $20,000 and $80,000.
— Undocumented immigrants pay an estimated $64 million in Iowa state and local taxes, and their employers contribute $45 million in payroll taxes and unemployment insurance, one of several state and local programs undocumented immigrants are barred from receiving.
— Undocumented immigrants represent about 2.5 percent of the state population — about 75,000 persons — according to recent estimates.

The report also found that while immigration has little impact on U.S.-born Iowans’ wages, legal status would likely reduce wage theft and other abuses that create unfair competition, driving down compensation for all. Thus, legal status would benefit more than the immigrant population.

Fisher and Gibney said the taxes paid by undocumented immigrants work out to over $100 million — including the $64 million to state and local governments each year.

“Despite being barred from accessing nearly all federal public assistance programs, undocumented immigrants in Iowa contribute about $37 million annually in federal payroll taxes — supporting Social Security and Medicare programs for which they are ineligible,” Fisher said.

“Another $45 million is contributed by employers on their behalf in payroll taxes and in contributions for unemployment insurance that they are barred from receiving.”

The report notes the average undocumented immigrant household pays state taxes amounting to about three-fourths of what a legal resident would pay at the same income level. But undocumented residents are barred from services that account for about one-fourth of the state budget, because they are ineligible for Medicaid and other programs.

According to the report, immigrants in general are more likely than native-born Iowans to be working, because work is what drew most of them to the United States. While 60.5 percent of native-born Iowans are of prime working age (between 18 and 64), 83.2 percent of immigrants fall in that age group.

“Immigration has thus helped to moderate the aging of the Iowa population and to provide workers who generate the income and pay the taxes to support schools and other services for our children, and to support Social Security and Medicare for retirees,” the authors said.

The report examines several points about the immigrant population that provides context for their role in the Iowa economy. For example, the report finds:

— Immigrants are more likely than other Iowans to have less than a high school education, but more likely to have an advanced degree.
— Immigrants earn less than native-born Iowans, with the largest gaps among those with a high school diploma but no college degree.
— Immigrants work in many occupations but show large percentages in meat-packing, teaching, computer programming and housekeeping.
— About 4.5 percent of immigrants own small businesses.

Immigration reform providing legal work status would open up better job opportunities for immigrants and make it more worthwhile for both workers and employers to invest in their education and training, the authors said. It would also help to level the playing field, so that U.S. born workers would not have to compete for jobs with workers vulnerable to wage theft and other employment abuses.

The higher wages resulting from legal work status would increase Iowa state and local tax contributions of currently undocumented immigrants by an estimated $16.5 million, they stated.

The Iowa Policy Project is a nonpartisan, nonprofit public policy research organization in Iowa City. Reports are at

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