What the IRS/ICE agreement means for immigrants—and California’s economy

Were you forwarded this email? Click here to subscribe. 

The Weekly Dispatch

Community-powered immigration news from the Bay Area.

---

Welcome to El Tímpano’s Weekly Dispatch. I’m Erica Hellerstein, senior immigration, labor and economics reporter.

This week, millions of people across the country filed taxes with the Internal Revenue Service (IRS), participating in the storied American ritual known as Tax Day.

Of course, filing taxes is rarely anyone’s idea of a good time, but this year’s deadline carried an even heavier weight for some. That’s because just a week before April 15, news broke that the IRS had quietly struck a deal with U.S. Immigration and Customs Enforcement (ICE) to share undocumented workers’ tax information for immigration enforcement purposes.

The shock announcement marked a departure from decades of precedent. For years, the IRS has urged undocumented immigrants to file taxes using an Individual Taxpayer Identification Number (ITIN), offering reassurances that their information would remain confidential. That trust has paid off, not just for the federal government, but for state and local governments, too. In 2023 alone, undocumented immigrants contributed an estimated $66 billion in federal taxes, according to the Yale Budget Lab, with about two-thirds coming from payroll taxes and one-third from individual income taxes.

But the benefits of that arrangement extend far beyond Washington. Here in California, undocumented immigrants paid nearly $8.5 billion in state and local taxes in 2022, according to the Institute on Taxation and Economic Policy (ITEP). That includes sales taxes, property taxes, and income taxes—money that helps fund infrastructure, public schools and essential safety net programs. On the federal level, undocumented workers have also helped bankroll programs they’re unable to access themselves. In 2022, they contributed $25.7 billion to Social Security, $6.4 billion to Medicare and $1.8 billion to unemployment insurance, ITEP found.

Now, the Trump administration’s immigration crackdown threatens to upend that math. “They’re kicking out so many immigrants who come only to work and have been working here for many years paying taxes,” one of El Tímpano’s SMS subscribers in Oakland told us. The ripple effects of those actions could be significant, not just for immigrant families, but for the services those tax dollars support.

What this could mean for California

Over the years, multiple studies have shown that a significant share of undocumented immigrants pay taxes, supporting programs and services relied on by millions. But the recent IRS and ICE agreement has raised concerns that undocumented immigrants could become discouraged from filing taxes at all, or pushed into under-the-table employment to avoid detection, where employers often don’t withhold taxes from their paychecks.

That shift could have major financial impacts. The Yale Budget Lab estimates that fewer undocumented immigrants paying taxes could cost the federal government $313 billion in lost tax revenue over the next decade.

California, in particular, stands to lose significantly. ITEP estimates that just a 10% decline in tax compliance could translate into a $221.7 million drop in state and local revenues. And if the administration’s mass deportation efforts move forward? The report warns of a “$7.9 billion reduction in annual revenue for every 1 million undocumented people who exit the country,” $2.5 billion of which would come out of state and local budgets.

In other words, an immigration crackdown of the magnitude the Trump administration has proposed could destabilize the state and federal funding ecosystem of public infrastructure, institutions and social services.

Bay Area immigrant communities on edge

The agreement between ICE and the IRS stipulates that the information-sharing arrangement will happen on a case-by-case basis. Under the deal, ICE officers can ask the IRS to share data about immigrants who have been ordered to leave the country or are under criminal investigation.

Even though it’s barely a week old, the agreement has already begun raising concerns. One immigrant living in Union City told us the news is hitting close to home. “We are afraid,” they said, “but we are strong and will move forward.”

Kelly Batson, Chief Community Impact Officer for United Way Bay Area, says the announcement has created “lots of fear and confusion” among ITIN filers. Her organization oversees a coalition of dozens of local groups that provide free tax preparation support.

“They’re nervous and scared to come in,” she said. Others who have already filed are now unsure what comes next. “They’re wondering what will happen and how to protect their own data.”

Batson says the organization is advising its partners not to offer tax advice, but instead connect clients with trusted immigration legal resources that could help them make an informed decision.

In Oakland, Tiffany Lacsado, the Chief Program Officer at the Fruitvale-based Unity Council, which also provides free tax prep services for ITIN holders, says the new agreement is “of grave concern.” Though the news is still making its way through the community, staff are already fielding questions about what the deal means and what people should do.

How staff respond to these concerns is influenced by a variety of factors, including state and local policymakers’ response to the administration.

During the previous Trump administration, Lacsado said, state and local lawmakers were vocal in their defense of immigrants. This time around, she added, things have felt noticeably quieter (a dynamic we’ve explored in previous editions).

“I think we can’t confidently say that the local governments are going to protect the community,” she said. “All of this is a slippery slope. The more that we allow this administration to move the line, the further they’ll go. It’s really time for everybody to stand up and fight, because we cannot lose any ground.”

That’s all for now—thanks for reading and see you next week.

Ear to the Ground

El Tímpano’s text messaging (SMS) service reaches 5,700 Spanish-speaking immigrants across the Bay Area. Many of our subscribers are experiencing increasing fear and uncertainty in response to a variety of changing policies, including the new ICE and IRS agreement. Here are a few of their responses:

I’m a little frustrated because people are trying to pay their taxes and do the right thing.

Me siento un poco frustrada porque esas personas están tratando de pagar sus impuestos y hacer lo correcto.

–Penngrove resident 

I felt anger, sadness and helplessness, because I have friends and neighbors who are in this situation. They are in this country and they work hard and they have not been able to get their papers.

Sentí coraje, tristeza e impotencia, porque tengo amigos y vecinos que están en la situación. Ellos están en este país y trabajan duro y no han podido arreglar sus documentos.

– Oakland resident 

I have heard comments [about the IRS agreement] and I have to pay taxes. This year I’m not going to do them.

He escuchado comentarios [sobre el acuerdo con el IRS] y a mi me toca pagar impuestos. Este año no los voy a hacer.

–Oakland resident 

• Further south, in Los Angeles, protestors sound the alarm on ICE and police data sharing: Activists demonstrated in front of the Los Angeles Police Department headquarters on Tuesday to speak out against data sharing with ICE, reports the Los Angeles Times. Advocates raised concerns that the vast amount of data collected by the police department’s surveillance system, from license plate readers to body cameras, could be shared with federal immigration authorities. While city officials recently voted to establish L.A. as a sanctuary city, members of the Stop LAPD Spying coalition stressed that federal officials already have the ability to access police department data. “There are many large, systemic, and direct ways that the Los Angeles Police Department is participating in the targeting and banishment of immigrant communities in Los Angeles,” they wrote in a recent letter. For more, read our recent edition on the expansion of immigrant surveillance in the Bay Area.

Copyright © 2025 El Tímpano, All rights reserved.
You are receiving this email because you expressed your interest, online or in person, to receive updates from El Tímpano.

Our mailing address is:

El Tímpano

P.O. Box 420442

San Francisco, CA 94142