Fact Blog: Who Really Subsidizes Whom?

Published: October 2025

The immigration debate often paints undocumented immigrants as a burden on taxpayers. But when we examine the actual flow of money between Washington, the states, and immigrant communities, the picture flips — especially in many red states that receive far more federal dollars than they contribute.

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Perception vs. Reality

Perception: Undocumented immigrants drain public resources, while red states pay the bill.

Reality: Many red states are net recipients of federal dollars, while undocumented immigrants contribute more in taxes than they receive in benefits.

Arizona illustrates this trend but is far from unique — it represents a larger national pattern.

Note: Figures below are based on the most recent comprehensive data available from 2022–2024.

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The Red‑State Federal Balance Sheet

Most conservative‑leaning states, including Arizona, Mississippi, West Virginia, Alabama, and Kentucky, consistently receive more federal spending than they send in federal taxes.

• According to Rockefeller Institute and USAFacts data (2023–2024), many red states receive $1.60–$2.90 or more in federal spending for every $1.00 they pay in federal taxes.
• Examples of 2024 return ratios:
  • Arizona: $1.62
  • Mississippi: $2.66
  • West Virginia: $2.91
  • Alabama: $1.90
  • Kentucky: $1.68 (some sources report higher due to per‑capita methods)
• The net inflow is driven primarily by:
  • Social Security and Medicare payments to retirees (often >40% of inflows)
  • Federal Medicaid funds (especially in expanded states)
  • Defense spending, veterans’ benefits
  • Disaster relief and infrastructure investments, particularly post‑2020

Translation: High‑tax blue states effectively subsidize public services in many red states.

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Undocumented Immigrants’ Fiscal Reality

Nationwide, undocumented immigrants remain net contributors to the federal budget.

• Paid $96.7 billion in combined federal, state, and local taxes in 2022 (reaffirmed by ITEP in 2025)
• Contributed $59.4 billion to the federal treasury
• Paid $25.7 billion into Social Security and $6.4 billion into Medicare — funds they largely cannot access
• Paid $1.8 billion into unemployment insurance
• Also pay sales, property (via rent), and excise taxes
• ITEP notes that undocumented households face an effective state/local tax rate of 8.9%, higher than the top 1% of earners (7.2%)

Benefits received:

• Excluded from most federal programs (Medicaid, ACA subsidies, Social Security retirement, TANF, SNAP)
• Limited mainly to emergency medical care and narrowly targeted state‑funded programs in a few states

Their contributions to Social Security and Medicare are effectively a “deadweight subsidy” to these programs, strengthening them for others without the contributors being eligible to benefit.

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The Fiscal Flip

	Many Red States	Undocumented Immigrants
Federal Tax Position	Receive more than they pay — ≈ $1.60–$2.90 in federal spending per $1 paid in taxes	Pay more than they get back — net contributors
Access to Benefits	Full access for eligible residents to all federal programs	Largely excluded from major federal programs
Narrative	Framed as the taxpayer “victim”	Portrayed as the “burden,” despite subsidizing the system

Note: Ratios focus on direct fiscal flows and exclude indirect benefits like public education for citizen children of immigrants.

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The Takeaway

• Many red states depend heavily on net inflows of federal tax dollars.
• Undocumented immigrants often pay more in than they receive, subsidizing programs they cannot access.

This fact check highlights a reality often overlooked in political debate: those labeled as a “burden” are frequently helping to subsidize states portrayed as self‑reliant.

For further exploration, check interactive state‑by‑state fiscal balance tools from sources like the Rockefeller Institute or USAFacts to see how your state stacks up.

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Sources:
Tax Foundation (2024), Rockefeller Institute of Government (2025; 2023 data), ITEP (2024/2025), KFF (2025), Migration Policy Institute (2024), USAFacts (2023/2024), MoneyGeek (2024), U.S. Treasury Fiscal Flows Reports (2018–2024).