Immigration Tariff: Improve System, Shrink Budget Gap

Immigration Tariff: Improve System, Shrink Budget Gap

February 09, 2012
Originally published in Investor's Business Daily

Of the public policy problems most Americans worry about, there are two that seem intractable. The first is the federal budget deficit. The second is immigration. For the former, policymakers cannot agree on whether to raise taxes, cut spending or do some combination of the two. For the latter, almost every reform effort is dead on arrival.

Transforming our immigration system from the current Byzantine quagmire of regulations and restrictions into a tariff would both reform the system and help close the budget gap.

In a new OnPoint by the Competitive Enterprise Institute, I explore the costs and benefits of this immigration tariff. It would be a fee levied on every permanent work visa issued in place of the other quotas, rules and regulations. Immigrants, their potential employers, family members or others could pool money to buy one.

It would shorten the wait time, create a legal immigration system for millions currently denied entry, undermine most of the illegal market for immigration and increase federal revenues by billions of dollars.

A few restrictions should remain. Criminals, suspected terrorists and individuals with deadly transmittable diseases should still be barred entry. Those tasks would be easier as government bureaucrats shift from regulating the wages of tomato pickers and computer engineers and complying with arcane rules to security instead.

Rigid immigration quotas cannot adjust to an increasingly dynamic economy. Replacing visas like the EB-5 investors visa with a background check and a tariff of, say, $10,000, makes things a lot easier on American business and foreign investors.

For example, if American technology firms are expanding, current immigration quotas for computer engineers do not adjust to accommodate the increased demand for their talents. It is unclear how the government would even figure out how to increase specific quotas in a timely manner, as rule-making can take years.

Instead, if a computer programmer has merely to comply with a background check and pay an immigration tariff, he could quickly fill a new spot in an expanding industry.

A tariff makes the process more predictable and timely because it focuses on one factor — money. Instead of relying upon the arbitrary decisions of bureaucrats or lotteries, immigrants have a finish line they can cross.

They can save, borrow or have their employers pay the tariff with the certainty that, unless they are criminals or very ill, they will be able to enter the U.S. to work, start a business, and build a life.

Some poor immigrants who cannot afford to pay the tariff might still resort to entering illegally, but most will not. Unauthorized immigrants already pay thousands of dollars, some of them tens of thousands, to be smuggled into the U.S. without any work authorization.

If unauthorized immigrants are willing to pay that much money for legal uncertainty and the chance of being sold into slavery, almost all of them would gladly pay more to the government for a permanent work permit that removes the chance of slavery or deportation.

Authorization increases their wages dramatically because working in a legal market without fear of deportation leads to better long-term investment of resources in the worker, both from himself and others.

An immigration tariff would also remove lawyers, administrative barriers, rent-seeking, corruption and lotteries that determine who gets visas. With a tariff, people who have the most to gain from immigration will pay the price to skip the uncertainty of illegal entry.

When it comes to revenue, if an average tariff was $10,000 per work permit and 5 million immigrants entered the U.S., the government could raise $50 billion. That is more than enough to fund the three major immigration regulation and enforcement agencies for 21/2 years. If those agencies were downsized to deal with just enforcing a tariff and background checks, tariff revenue could help reduce the deficit.

Setting the price for a work permit and letting the quantity issued adjust to demand would go a long way toward creating a market-based immigration system. The current immigration system is failing because it relies on restrictions and regulations.

By contrast, an immigration tariff is a humane approach that would boost economic growth, help lower the federal deficit, and increase individual freedom.