U.S. Could Raise $1-2 Billion a Year from Illegals by Copying Oklahoma

This article was last updated on April 16, 2022

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The United States could collect $1-2 billion a year in revenues from illegal aliens if it just copied a tax practice Oklahoma adopted a couple of years ago.

Two quite different data sources suggest that this can be done: the World Bank and the Oklahoma tax authorities.

How do you extract tax dollars from illegals busily violating at least the immigration, labor, and tax laws of the country? Well, you can’t tax them all, but what Oklahoma does is place a 1 percent withholding tax on all moneys transferred by wire, or through banks, to people in other nations and other states. (This applies to transfers made by individuals, not corporations.)

This taps into the $100 billion a year-plus flow of remittances out of the nation, most dispatched by illegal aliens. If someone wants to send grandma some money in Mexico City, for instance, by far the best way, if not the only way, is to entrust it to Western Union or a bank. Putting cash in the mail to her or trusting someone traveling to that location to carry the dough for you is possible, but risky and awkward.

Oklahoma’s legislature knows this, and imposed the 1 percent tax despite the squeals of the wire transfer companies and banks, as we reported earlier. A recent report from the Oklahoma Tax Commission indicates that it is working like a charm.

Note that I used the word “withholding”. Anyone wiring money outside the state gets a full credit for the 1 percent fee against his or her income tax. So the fee does not cost anyone a dime if they are paying state income taxes. The bite only applies to people who are not paying those taxes, which should be a strong selling point for the legislation.

Now it would be too much to expect that the highly cosmopolitan (and distinctly pro-Third World) World Bank in Washington and the tax folks on the plains of Oklahoma would join forces on this matter. They did not, but each system has recently produced data that support our conclusions. Here is what they reported:

Oklahoma’s Tax Commission. In its FY 2013 annual report (p. 11), it indicates that the state collected $9,764,828 from this source, up about a million from the year before. (The amount of net revenue is unknown but necessarily smaller, since some legal residents will have applied the fee to their state tax bills.) To project a national total from this one-state total, let’s assume that the distribution of illegal aliens by state (which is not known) is about that of the distribution of foreign-born by state (which is known). Oklahoma has about 0.5 percent of the nation’s foreign-born, so the multiple to be applied would be about 200.

Since 200 times $9.7 million equals $1.94 billion, we can start our national estimate with that figure. Oklahoma, however, lays this tax provision on everyone shipping money out of the state, not just out of the nation as I would propose, so I would assume that the Oklahoma fees, when just applied to out-of-U.S. payments, would be something like $7.5 million a year, reducing the national projection to about $1.5 billion.

The World Bank. The bank uses its access to data on global money transfers and its large, high-powered, polyglot staff to regularly count and estimate international flows of personal remittances, usually from people working in rich countries to their relatives in poor ones. The staff is enthusiastic about these transfers, as they tend to soften the sharp divide between wealthy nations and developing ones, so the bank spends a lot of research funds in this area, as you can see from this Pew report.

The bottom line for the United States, which ships more remittances abroad than any other nation on Earth, is that these total $123 billion a year. These are personal transmissions from individuals here to persons elsewhere in the world and (as the World Bank does not discuss) this includes sizeable amounts of income untaxed in the place of origin. I suspect most of these remittances are from illegal aliens, but some part of the flow can be attributed to legal residents as well.

And 1 percent of $123 billion is $1.23 billion, a sum close to the $1.5 billion suggested above.

The legislative problem, of course, is both the mas-migration lobby, including the White House, and the banks and the wire transfer services. Perhaps the latter’s opposition could be tempered if the middlemen were given a perfectly legitimate fee for their collection services, as some states pay retailers a bit for passing on the sales tax.

Needless to say, the Treasury can use every billion that can be scrapped up from new tax sources, and in this case virtually of the money will be raised from people who are not voters!

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