Trump immigration crackdown could cost $479bn in lost taxes over 10 years

The Trump administration’s immigration crackdown could cost the US up to $479bn in lost tax revenue over the next decade, as enforcement deters undocumented workers from filing taxes this year, tax experts said.

Major changes, including a proposed data-sharing agreement with immigration enforcement, have made tax filing risky for undocumented immigrants, tax advisers said. The removal of tax benefits for immigrant parents has further eliminated incentives to file.

Every tax season keeps Daisy Schmidt busy with typical accounting tasks, from bookkeeping to helping clients prepare their returns.

But with an ongoing Immigration and Customs Enforcement (ICE) crackdown, Schmidt has spent much of her time trying to calm clients too nervous to file. Despite her efforts, many refused to file this year.

“Our target is the Latino community, and many people didn’t file taxes because of fear of ICE,” said Schmidt, a tax adviser. “They said: ‘If they can deport me, what am I filing taxes for?’”

Schmidt said she lost as many as 75% of her clients at Crece Latino, the tax service firm she owns in Springfield, Virginia. Other tax advisers working with Latino clients reported a drop in clients after federal immigration policy changes.

Last year, the Internal Revenue Service (IRS) agreed to share names and addresses of undocumented immigrants with the Department of Homeland Security, ICE’s parent agency. A federal judge paused the agreement in November and later ruled it violated federal law, but many remain worried about their information being passed to ICE.

Parents without legal status became ineligible for the child tax credit in 2025, even if their children are US citizens, losing thousands of dollars in potential savings.

Immigrants not legally authorized to work in the US are still required to pay taxes, and a longstanding IRS policy assured them their data would be protected.

Though the IRS finds it harder to pursue undocumented workers who don’t pay taxes, those who work with undocumented immigrants say they still pay to show willingness to comply with the system, which can help when applying for legal status.

“The system relies heavily on this trust, because people can decide not to do it,” said Luisa Godinez-Puig, a senior research associate at the Urban-Brookings Tax Policy Center.

Approximately 50% of undocumented immigrant households typically file income tax returns in the US. In 2022 alone, they paid an estimated $96.7bn, according to the Institute on Taxation and Economic Policy.

Undocumented immigrants don’t qualify for most deductions or tax benefits, and as a result, often pay a higher percentage of their income than US citizens, Godinez-Puig added.

“Historically, the IRS has been very, very good at keeping taxpayer information highly confidential, to make sure that taxpayers would feel confident in sharing such personal information with the system,” said Godinez-Puig. “To think that the IRS would share information with any agency would have been unthinkable a few years ago. So this is a huge, huge change to how the policy and then this trust was built between agencies, and that’s why this is a very large issue with grave consequences.”

Experts believe a drop in tax filings could cost the federal government billions in lost revenue. According to Yale’s Budget Lab, losses could range from $147bn to $479bn over the next decade. Up to 2.7 million children who are US citizens or lawful permanent residents might lose access to the credit due to these policy changes.

Though no official data exists on the effect on federal revenue, the IRS estimates that a 1% decrease in voluntary tax compliance would lead to $46bn in lost federal tax revenue. The IRS did not respond to a request for comment.

Edgar Villacorta, owner of Latin Tax in Maryland and Virginia, said about 30% to 40% of his clients didn’t file taxes this year.

“They see that it isn’t giving them any benefit,” he said, referring to the loss of the child tax credit, adding “there is so much news about that ICE-IRS agreement.”

His only consolation is that his losses are not as big as some peers face. “Other colleagues tell me that half of their clients didn’t come back.”

The risk of exposure to federal immigration enforcement has stoked fears among undocumented immigrants nationwide. An Urban Institute survey found one in four adults in immigrant families, documented and undocumented, worry about deportations, and one in six reported personally seeing or knowing someone taken into ICE custody in 2025.

“The government’s priority should be to ensure everyone feels safe when following the law and filing their taxes. And when they do file taxes, immigrants should be treated the same as other tax filers,” wrote Ben D’Avanzo and Sarah Krieger, senior strategist and senior policy counsel at the National Immigration Law Center, in a report. “The Trump administration should publicly commit to abiding by the court orders prohibiting data sharing of taxpayer information and end its attempt to use IRS or other federal data for immigration enforcement.”

Immigrant advocacy groups assert children are most harmed by the change in the child tax credit.

Proponents of the child tax credit emphasize it reduces poverty and helps families remain economically stable amid rising costs. Child poverty recently surged to an estimated 13% to 16% (roughly 10 million to 11.4 million children), a sharp increase from a record low of 5.2% in 2021.

“It used to be the case that as long as the child was American and had a social security number, the parents could qualify, even if they both were undocumented,” said Godinez-Puig. “Because the point of this credit was to help American children … regardless of who the parents were.”