The Short Run: Taxing the Poor and the Poorer

Taxing the Poor and the Poorer
An item from "The Short Run" in the May/June issue of Dollars & Sense.

Imagine the most unfair tax you can. How about a double tax on the incomes of people who are hard-working but poor, a tax that hits them just at the moment they're using the money to support their families? The state senates of Texas and Arizona are considering just such a tax-on the money that undocumented workers wire back home.

Supporters of the tax claim that it's only fair, since the undocumented obviously don't pay income tax. Obviously they're wrong. The Urban Institute reports that 75% of undocumented workers have taxes withheld (and typically do not file for income-tax refunds they may well be owed). The Social Security Administration receives about $7 billion each year under false IDs. No documents means no Social Security benefits, so that's quite a windfall!

Last year, Georgia rejected a similar tax, the proceeds from which would have funded indigent emergency room care. After all, the undocumented do tend to lack health insurance. Arizona, on the other hand, has outlawed medical care for the undocumented. But, necessity being the mother of invention, that state found an even better use for the anticipated revenue: building a fence on the border. Wonder where they'll find construction workers...

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