Thursday, November 8, 2007

The Immigrant Tax

The Nov 2 Wall Street Journal contained an article on page A12 about a proposed "Immigrant Visa Tax" by Senator Grassley to be applied to H1-B visas. I have no real problem with this proposal, but it seems like window dressing and does nothing to address any of the security or economic issues that have arisen with the illegal immigration debate.

First, the amendment will not address illegal immigration at all. The tax would apply only to H1-B visas, which are exclusively reserved for immigrants with a minimum of a Bachelors college degree.

Second, even among the skilled immigrants to whom it applies, it would have practically no impact on the total number of immigrants. Here's why: Since there is a quota, the number of immigrants who are allotted visas is already fixed. The recipients of those visas are already benefiting in the form of "economic rents" and would be willing to pay for the right to receive the benefits afforded them by owning one of the visas. Without a well-targeted tax on the visas, these immigrants essentially gives the immigrants and the private U.S. firms who employment a free lunch. The immigrant benefits from the added salary they earn and the firm benefits from the skilled labor that they can employ for the specialized fields that qualify these immigrants to receive consideration for an H1-B. The only thing the tax changes is that the immigrants and firms would be paying for lunch instead of Uncle Sam.

Ironically, practically nothing about the tax impacts the "economic efficiency" of the immigrant quota. What it does impact is the recipient of the "rent." With the tax, Uncle Sam scoops back the rent; without it, more is left for the private individuals and firms Republicans claim to love so much. In fact, an even more effective mechanism for scooping out the rents would be an auction, and use the revenues to do something like fight a war or give children health care. Senator Grassley is a............ Republican.

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