California stands to lose billions of dollars in annual tax revenue after the Trump administration authorized the IRS to share illegal immigrants’ tax data with ICE.

If ICE, armed with this information, is able to ramp up deportations of California’s 1.8 million unauthorized migrants – the largest population in any US state – the state risks losing the estimated $8.5 billion in state and local taxes they pay every year.

Governor Gavin Newsom, widely considered to be a favorite in the 2028 Democratic Primary, hasn’t commented on what this will mean for the state’s finances.

But his office did take the opportunity to slam President Donald Trump and allies for their supposed hypocrisy on this issue.

‘Let me get this right — the Trump administration is finally admitting that undocumented people contribute to our economy and pay taxes?’ Diana Crofts-Pelayo, a Newsom spokesperson, told the Los Angeles Times.

Both of California’s recently elected senators also spoke out against the move, arguing the agreement between the Treasury Department and ICE will undermine trust in migrant communities.

‘This agreement is a complete betrayal of the federal government’s decades-long commitment to never weaponize taxpayer information for political purposes,’ Sen. Alex Padilla said in a statement. 

‘And this reversal of precedent will only create more fear within our immigrant communities and make it less likely for undocumented individuals to file their taxes, which could cost billions in lost tax revenue for states and the federal government.’

Governor Gavin Newsom hasn’t himself commented on the Trump administration’s plan to share tax data of illegal immigrants with Immigration and Customs Enforcement (ICE). Experts say this could especially devastate California’s workforce and tax base

Alex Padilla and Adam Schiff, California’s two Democratic senators, have come out swinging against this move by the Trump administration, calling it illegal and a betrayal of migrants who have been paying taxes for years

Sen. Adam Schiff said the data-sharing deal is illegal and is ‘a total betrayal’ to migrants who work and pay taxes.

‘This lawless action will not make Americans any safer — and will only damage our economy,’ said Schiff, the former representative who was once one of the most vocal Democrats accusing Trump of colluding with Russia during the 2016 presidential race.

The IRS-ICE deal was first nothing but a rumor, but a rumor that spurred a lawsuit. 

This forced the federal government to reveal in court filings that there was in fact a memorandum of understanding between Treasury Secretary Scott Bessent and Homeland Security Secretary Kristi Noem outlining the sharing of taxpayer data for ‘nontax criminal enforcement.’

The data that ICE wants from illegal migrants is their individual taxpayer identification number, or ITIN. It’s how they identify themselves when filing their taxes in lieu of a Social Security number.

Maria, an accountant who helps her fellow undocumented small business owners in Southern California with their taxes, said all of her clients are now hesitant to file.

‘I heard it from everybody,’ the 40-year-old told the Los Angeles Times. ‘They come to me and they say, “Hey, should I do my taxes this year? Because they’re going to come find me.”‘

She asked to only be identified by her first name out of the fear that she’ll be targeted by the Trump administration.

Migrants make up about 7 percent of the state’s workforce and at least half of all farmworkers, according to the Pew Research Center and a UC Merced study

Maria has been in the US for decades. In that time, she’s earned multiple degrees at California universities, has had children who are US citizens and has been spending years applying for legal residency.

Like many of her clients, she still lacks legal status. Ultimately, she advised them all to pay their taxes, since the IRS already has most of their information from previous years.

Still, she said she feels betrayed by the system she’s been loyally paying into for years.

‘They’re trying to criminalize us,’ Maria said. ‘They’re trying to make it that we did it wrong, but really the government did it wrong.’

Migrants make up about 7 percent of the state’s workforce and at least half of all farmworkers, according to the Pew Research Center and a UC Merced study.

‘We think it really is detrimental to our local economies, especially in Los Angeles, especially in California, but throughout the country,’ said Rudy Espinoza, executive director of Inclusive Action for the City, an organization that provides loans to undocumented entrepreneurs.

Inclusive Action and other immigrant groups have sued to block the implementation of the data-sharing plan.

Lawyers for the Trump administration argue that this will only be used to investigate illegal migrants who have committed crimes.

Rudy Espinoza, executive director of Inclusive Action for the City, an organization that provides loans to undocumented entrepreneurs, has argued against the data-sharing agreement

This comes as the Trump administration notched a major win in the Supreme Court , which ruled Monday that the executive branch could legally deport suspected migrant gang members using the Alien Enemies Act of 1798

The federal government, while acknowledging that the law ‘generally prohibits’ the IRS from disclosing tax return data, feels that this falls under an exception.

It noted that the IRS is required to share information when its requested as part of a criminal inquiry.

When it comes to migrants, those crimes could be overstaying their visa or reentering the country after being deported.

Espinoza disagreed, telling the LA Times that if ‘the ITIN is no longer a credible, safe sort of vehicle to pay taxes, then we anticipate that many immigrant entrepreneurs are not going to want to contribute.’

‘They’re going to be afraid to contribute to the economy, and they’re going to be afraid to seek out services from organizations like us.’

This comes as the Trump administration notched a major win in the Supreme Court, which ruled Monday that the executive branch could legally deport suspected migrant gang members using the Alien Enemies Act of 1798.

Trump had declared that members of the Tren de Aragua gang were terrorists, and his border czar Tom Homan rounded up suspected gangsters across the United States last month to send them back to ‘hell hole’ prisons in Venezuela.

But the president’s efforts were halted on March 15 when Obama-appointed US District Court Judge James Boasberg issued an injunction blocking the deportations. 

That injunction has now been lifted under the Supreme Court’s ruling – allowing the president to once again send suspected gang members to their home countries.