"As the debate over illegal immigration continues to rage, some pundits and policymakers are claiming that unauthorized immigrants do not pay taxes and rely heavily on government benefits. Neither of these claims is borne out by the facts. Undocumented men have work force participation rates that are higher than other workers, and all undocumented immigrants are ineligible for most government services, but pay taxes as workers, consumers, and residents."
A few weeks ago, a friend that I deeply respect told me that undocumented immigrants don't pay taxes because their pay is "mostly off the books." This is incorrect - a thorough explanation is given in the following report: http://www.ailf.org/ipc/factchecks/StateLocal07.pdf
In regards to the "off the books" - most Americans think of undocumented workers as the men who stand at the corner outside of Home Deport. Actually what people generally see is an extremely small percentage of the whole group.
The way it generally happens is: most undocumented workers get a regular pay check, withholding is taken out for social security and federal income tax. Companies have to take out withholding or be subject to heavy fines. For those undocumented workers who have certain skills (construction people, plumbers helpers, painter, landscapers etc.) they often perform small outside jobs (after hours) in which they get paid cash. But most of their income comes from their salaried jobs. And remember they do not benefit from anything withheld. When they reach 65, they cannot claim social security because it was not under their name. Their lost money goes into the big social security pot that the rest of us will enjoy later.
In Texas, everybody pays sales tax - citizen, resident, or undocumented - and - everyone pays real estate tax, even when they rent, because the monetary amount needs to include what the owner will pay on his/her property.