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Missouri treasurer misread illegal immigration study

The Star

JEFFERSON CITY | In her first big policy foray since jumping into the race for governor, Missouri Treasurer Sarah Steelman last week went after a familiar target — illegal immigrants.

The Republican presented a report to a Senate committee, expounding on the burden that illegal workers place on the state and federal government. Such workers and their employers avoided paying between $242 million and $449 million a year in income and payroll taxes for Social Security, Medicare and unemployment insurance, she said.

“So the problem is quite evident,” Steelman said. “It also creates an unfair advantage for employers who are not paying those taxes over companies that do pay the required taxes.”

The problem was that Steelman’s numbers were based on the misinterpretation of a nationwide study.

Steelman’s report overstated the estimate of illegal workers in Missouri by 5,800 to 10,800 workers. It overstated the unemployment rate among illegal workers by more than two-thirds. It also assumed that not a single illegal immigrant living in Missouri works for an employer who withholds and pays payroll taxes.

Other studies estimate that at least half of illegal workers pay normal withholding and payroll taxes. Those issues combined would cut Steelman’s estimate by nearly 60 percent.

Officials in Steelman’s office conceded that her testimony was flawed, but they insisted her point was still valid — employers who hire illegal workers need to be punished because they rob the government of taxes and deprive Missouri residents of jobs.

But people who study immigration issues say such mistakes don’t merely exaggerate the problem. They also illustrate the vague — and often wrong — information that pervades discussions of illegal immigration and can skew public policy.

Steelman’s report, for example, also failed to note that illegal workers who pay payroll taxes contribute to a Social Security system from which they can never qualify for benefits, said Ruth Ehresman, a Missouri policy analyst who in 2006 wrote a report on costs associated with illegal immigration.

Steelman’s report also failed to take into account sales taxes that illegal workers pay whenever they go into a restaurant or store, said Joan Suarez, the chairwoman of Missouri Immigrant and Refugee Advocates, which is based in St. Louis.

“It blows my mind that someone running for statewide office could be so uninformed and could have such a limited understanding of laws and the way revenue is collected,” Suarez said.

Immediately after her presentation to the Senate Pensions Committee, Steelman reiterated the numbers she gave to lawmakers. She cited figures from the Pew Hispanic Center, a Washington think tank, which estimated Missouri’s illegal immigrant population at 35,000 to 65,000 people.

But Steelman’s report used those figures as the number of workers, without noting that the Pew Hispanic Center estimated that one of every six illegal immigrants is a child who does not work.

Deputy Treasurer Doug Gaston later acknowledged that the report overstated the Pew center’s estimate of illegal workers. But he said the error was insignificant because no one knows the actual number.

“The numbers may be overstated or understated, but we know it’s a problem,” Gaston said. “Illegal immigrants are in our state and they are working without paying taxes. This was an effort to quantify that.”

Steelman said her report was prompted by the case of a St. Charles County contractor who was caught employing illegal workers on a project that received state tax subsidies. She presumed that those workers were paid under the table.

Steelman said such employers should have their tax credits rescinded and perhaps have their business licenses cancelled.

She estimated that the unpaid taxes from illegal workers cost Missouri $26.4 million to $49.1 million, based on an average wage of $25,000 a year per illegal worker.

But the Institute on Taxation and Economic Policy, a national think tank, estimated that half the nation’s illegal workers pay taxes through normal payroll withholding.

The Pew study that Steelman cited as the basis for her report found that most illegal immigrants work in construction, food processing, restaurants, building maintenance, landscaping, manufacturing and health services.

Suarez said illegal workers may get jobs by using Social Security numbers that belong to friends or relatives. But relatively few large employers will risk running afoul of tax authorities by paying millions of dollars in cash wages under the table, she said.

Even the Missouri Department of Revenue said it received “a wave of tax returns” last year seeking refunds of excess taxes withheld using an Individual Taxpayer Identification Number rather than a Social Security number. Such refund applications are presumed to be from illegal workers and are not processed, the department said.

In 2006, Ehresman, director of health and budget issues for the Missouri Budget Project, a public policy group, wrote a report on illegal workers that was based on the same national statistics that Steelman cited. Ehresman’s report estimated that illegal workers paid Missouri taxes totaling $29 million to $57 million a year, mainly through sales taxes on purchases.

Gaston said Steelman was standing by her report, despite the discrepancies.

“The point was that — even if we don’t know the number of illegal immigrants, whether it’s 35,000 or 65,000 or 155,000 — it’s coming at a cost to the state,” Gaston said.

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