Steve Tava / USDA
The government licenses businesses belonging to undocumented immigrants because they create jobs and generate taxes.
If you are an undocumented immigrant seeking to reside in this country legally, you will likely face impossible hurdles getting the paperwork you need. But if you want to open and run a small business? No problem.
“Even if you are here illegally, you can open a bank account, incorporate a business, get a tax identification number,” says Alex Suarez, an attorney and businessman who works between Austin, Houston, and Mexico.
As it cracks down on illegal immigration, the federal government tolerates businesses belonging to undocumented immigrants. That’s because businesses owned by illegal immigrants create jobs and generate taxes, both of which are good for the economy.
“The government has specific things to attend to, and one of them is the collection of taxes,” says Matias Rios, a consultant in Houston who supports undocumented business owners. “It’s a huge problem for the government to have people who are helping create jobs and strengthen the economy, but doing so as illegal immigrants.”
It’s estimated some ten percent of the eight million undocumented people in this country are small business owners. That’s hundreds of thousands of small U.S. businesses—landscapers, food trucks, restaurants, construction companies, and home improvement businesses—operating as legal enterprises.
Some ten percent of the eight million undocumented people in this country are small business owners. And they pay taxes.
Most employ between two to five people, Rios says. About 5 percent of these businesses, especially in construction, employ more than 100 people.
“These people are needed, especially with the current historically low 3 percent unemployment,” Rios says. “It’s very tough to find employees when unemployment is so low; there aren’t enough available people.”
So great is the demand for foreign workers that in 2017 the annual allocation of 85,000 H-1B visas that businesses apply for to employ foreign workers hit its cap within four days of the application period opening.
Despite not being able to get a Social Security card, undocumented immigrant business owners are able to legally obtain an Individual Taxpayer Identification Number, which they use to fill out tax returns.
It would not be hard for U.S. Immigration and Customs Enforcement to use those returns to identity potential undocumented immigrants. But according to the National Immigration Law Center, the Internal Revenue Service is generally prohibited from disclosing taxpayer information, even to other federal agencies, unless there is a criminal investigation or a federal court has issued an order.
Also, Rios notes, the IRS is keenly aware of what would happen if undocumented business owners learned that ICE was tracking people based on information from tax forms—no more tax forms filed and no more taxes.
In addition to swelling the tax coffers of the government, undocumented immigrants also benefit the Social Security system. They routinely buy fake Social Security cards presented to employers who either don’t know they are fake or don’t look too closely. The subsequent payroll taxes are held by the federal government, even if the Social Security number isn’t linked to anyone on file. A large part of that money ends up in Social Security trust funds, from which retirement benefits are drawn by aging Americans.
“Millions of undocumented immigrants are generating billions of dollars even though they won’t get any benefits from the system,” says Galer. The Social Security Administration estimated it received $13 billion in payroll taxes from undocumented workers in 2010.
The Social Security Administration estimates it received $13 billion in payroll taxes from undocumented workers in 2010.
Undocumented immigrants also help fund public schools and local government services by paying sales and property taxes. Their contributions totalled $10.6 billion in state and local taxes in 2010, according to the Institute on Taxation and Economic Policy.
At the heart of all this lies a very American ideal, says Galer, who is himself an immigrant from Latin America.
“If you are a house maid or a janitor in Latin America,” Galer says, “you will not move from one social group to another. But in the United States, if you are a bit smart and, for example, join forces with other cleaning ladies, you can start a company and move from the bottom to middle class and even to upper. I have seen that. If they make an effort here, they can change their life and create success.”
The harsh realities of many Latin American countries also explain why many undocumented migrants willingly pay taxes, even when the threat of deportation looms.
“At home they see taxes siphoned off through corruption, but in the U.S. they see investments in infrastructure,” Galer says. “They can go from Austin to Houston along Interstate 10 without paying a cent; they see the taxes coming back to the people.”
Some undocumented business owners also willingly paying taxes because of the chance of immigration reform in the future.
Past legalization efforts have required undocumented immigrants to prove how long they have been living in the United States, and to pay the taxes they owe before receiving legal status. Some believe that a taxpaying history would increase the chances of their being granted legal status in the event of immigration reform.
Since Donald Trump was elected President, however, there have been reports that undocumented business owners are selling their enterprises, transferring them to relatives or simply closing them to avoid a total loss if they are suddenly deported.
“These are good businesses providing people with incomes and generating taxes,” Suarez says. “What’s going to happen if immigration [policy] gets even tougher?”
Trump has been criticized for a heavy-headed approach to immigration, but immigrants rights advocates note that neither side of the political spectrum seems willing to do what is necessary to find a solution.
“Republicans and Democrats are in a permanent fight,” Rios says. “To make a real deal on immigration they need to agree but there is never the opportunity—they have such different visions.”
But as Galer sees it, no President, no matter how powerful, will be able to jam a stick in the great wheel of American business.
“After Trump was elected I thought, ‘Oh my goodness, no one will want to come,’ but I was wrong,” Galer says. “Plenty of business clients still want to come to America—it remains a magnet.” He adds, “What I would like is the government to give the opportunity to those who have created these businesses, to be here legally.”
James Jeffrey is a British journalist who divides his time between America, East Africa, and the UK. His writing appears in various international media.