Immigration Tariff: Reforming a Broken System

Immigration Tariff: Reforming a Broken System

August 26, 2011
Originally published in The Huffington Post: Latino Voices

America's immigration system is broken. Years of overregulation aimed at micromanaging the system has produced nearly 100 different types of visas, each with its own complex rules, regulations, and requirements. These rules and regulations hold back American economic growth by discouraging the hardworking and entrepreneurial to come to this country. With unemployment persisting above 9 percent and escalating government deficits, an immigration tariff to replace the current regulatory labyrinth is both sensible and pragmatic.

The immigration tariff is a fee levied on every work visa or green card issued. The tariff approach would streamline immigration procedures, increase federal revenue, and remove most of the cumbersome, economy-killing immigration restrictions now on the books. Ideally, the government immigration services would just interdict criminals, suspected terrorists, and those with deadly transmittable diseases. All others would be eligible for work visas or green cards, for which they would pay the tariff.

Our immigration laws are crammed with silly requirements and anachronistic rules that prevent entrepreneurial immigrants from setting up shop here. For example, EB-5 visas, which are issued to entrepreneurs, require that applicants invest between $500,000 and $1 million in a new U.S. commercial enterprise depending on the region of the country, directly create 10 new jobs within two years, or significantly expand an existing U.S. business. No wonder EB-5 visas are underused.

These problems are compounded by quotas, which create a massive backlog in the migration process. Quotas are rigid in the face of an increasingly dynamic economic reality. Replacing visas like the EB-5 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 the wages for computer programmers were to skyrocket because American firms are expanding, current quotas do not adjust to accommodate the increased demand. But if a computer programmer had merely to comply with a background check and pay an immigration tariff, he would be able to fill the spot in no time.

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 benchmark they can reach. They can save, borrow money, 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.

The immigration tariff is pushed by Nobel Prize winning economist Gary Becker, but its central concept dates back to the birth of modern economics. In The Wealth of Nations, Adam Smith endorsed a tax on wool exports. It's not that he supported the tax, but rather saw it as an improvement over Britain's outright ban on the export of wool that existed at the time. He was right. A tariff, while surely imperfect, is a great big step toward stimulating economic growth and raising revenue.

An immigration tariff would remove the need for people to hire immigration lawyers and improve a process riddled with administrative barriers, rent-seeking, corruption, and lotteries that determine who gets visas. Under this new system, people who have the most to gain from immigration will pay the price to immigrate.

The visa issuing authority -- the U.S. government -- has market power when it comes to visas. This means that the quantity of visas it decides to sell has a big impact on the price of those visas. Because of that, the price of visas should be controlled by the state but without a numerical limit on their issuance.

If 3 million immigrants entered the U.S. under an immigration tariff system similar to the one described here, the government could raise as much as $30 billion in revenue -- more than enough to cover the costs of the three major immigration regulation and enforcement agencies. If those agencies were downsized to deal with just enforcing a tariff and background checks then the net tariff revenue would be even greater, and the tariff could even be reduced.

A recent paper by economist Michael Clemens in the Journal of Economic Perspectives indicates just how pressing immigration reform is. According to Clemens's estimates, unlimited immigration would increase worldwide GDP by 50 to 150 percent. That's a whopping increase of $32.5 to $97.5 trillion in global yearly production which is sorely needed. Even slightly lessening American immigration barriers will boost American GDP by a lot. Every day we delay reform costs the economy