In March 2009, we wrote a blog on the DREAM Act (http://colesfirm.blogspot.com/2009/03/dream-economic-stimulus.html), a proposed federal law to address, in part, the issue of illegal immigrants in the U.S. Someone recently asked me for an update on the status of the Act. Thus far, the DREAM Act has stalled in Congress. Not surprising, frankly. In this economic climate, granting additional rights for illegal immigrants is hard to sell to constituents. Perhaps we are not selling (or packaging) the benefits of immigration reform properly.
Recently, I was asked why states are not involved in this issue. Historically, many changes in public policy began at the state level. As states lead the way, federal legislation often follows. Additionally, state level efforts often provide an opportunity to test and refine legislative proposals in a real-world environment. With that in mind, I realized state governments have an opportunity to address the illegal immigration problem, even in ways the federal government cannot. Arizona attempted to tackle the problem by threatening businesses with revocation of their license for knowingly employing illegal immigrants. The Arizona statute also mandates employers use the federal E-Verify system to verify if employees are providing legitimate documentation. While that proposal certainly satisfies the anti-immigration forces, I cannot say the new law actually changes anything. Add to that the fact that the E-Verify system has acknowledged flaws and inaccuracies, and the Arizona statute may be more window dressing than legislative action.
Here are a few ideas for state proposals that may have an impact on illegal immigration:
1. Public education – Currently, illegal immigrants attend public elementary and high schools across the country. Post-secondary education, however, is not as available. The authors of the DREAM Act intended to address this issue, but have been unable to do so. States can intercede and institute a number of policy and regulatory changes, including permitting illegal immigrants to enroll in post-secondary institutions and requiring the illegal immigrant students to (a) perform on-campus work, (b) volunteer for community organizations, (c) pursue degrees in industries with labor shortages, like nursing and teaching, or (d) repay the non-resident cost of tuition over a specified term. These policy and regulatory changes provide an opportunity for those illegal immigrants who often reside in the U.S. through no fault of their own and who seek opportunities for greater integration into mainstream society but find most avenues blocked due to a lack of education. This policy and regulatory approach acknowledges the futility of a pure deportation approach and instead seeks to address the underclass of laborers who provide an environment ripe for unscrupulous and predatory employers.
As an aside, states also could offer high school graduates the privilege of a driver’s license. States could provide a license for those students who enroll in post-secondary schools, maintained a certain grade point average in high school or college, and/or otherwise comply with the laws of the state.
2. Corporate taxes – Most states tax employers based on profit and typically permit employers to deduct their employee costs from their gross revenue. States could enact a law or regulation that makes clear that employers may not deduct the salaries paid to individuals without correct Social Security Numbers. States can elect to use the Social Security Administration’s database to determine which employees do not have valid Social Security Numbers. The salaries paid to those employees, as shown by the employer’s quarterly state unemployment tax filings, could be added to the employer’s otherwise taxable revenue to create a greater tax base and effective rate. In effect, the employer does not receive a tax credit for employing illegal aliens.
3. Automobile insurance – It is a commonly-accepted fact in some parts of the country that illegal immigrants create a population of uninsurable drivers. The tax-paying citizens of the state bear the cost of the accidents caused by these drivers. First, uninsured motorist coverage reflects the reality that insured drivers and their passengers need coverage in the event of an accident with an uninsured motorist. Second, county healthcare facilities (and, thus, the taxpayers in the county) often bear the cost of treating patients without insurance coverage. Third, hit-and-run accidents are to be expected when the driver fears deportation for a minor traffic offense.
To be clear, not all uninsured drivers are illegal aliens. That said, culling illegal aliens from that group would decrease the risk of an accident with an uninsured motorist and reduce the cost to taxpayers. But doing so would require states to issue illegal immigrants drivers licenses and mandate insurance companies offer automobile coverage without regard to the driver’s immigration status. States could enact a policy simply stating insurance companies may not charge discriminatory rates or refuse coverage to any driver in possession of (1) a valid license issued by the state and (2) a valid Social Security Number or Individual Taxpayer Identification Number (ITIN). This would encourage illegal immigrants to obtain an ITIN and further the common goal of reducing the cost of illegal immigration. Insurers certainly could charge rates using other factors which apply equally without regard to immigration status.
4. Unemployment tax rates – Most states tax employers 2-3% for unemployment taxes. This rate may be increased by an “experience rating,” which measures an employer’s history of unemployment claims. States could modify their formula to include an increase in unemployment tax rates for employers hiring illegal immigrants. Much like the corporate/franchise tax proposal, this proposal focuses on wages reported by employers and uses the state’s taxing authority to discourage hiring illegal immigrants.
As a final note, these proposals may not work in every state. Some laws and/or regulations currently in place may prevent a state from enacting such a law or pursuing such a policy or regulatory shift. The point of this blog is two-fold. First, we should work collectively and creatively to address a widespread issue that will not go away if we ignore it. Second, purely punitive efforts aimed at illegal immigrants typically punish the community and encourage the criminal.
Recently, I was asked why states are not involved in this issue. Historically, many changes in public policy began at the state level. As states lead the way, federal legislation often follows. Additionally, state level efforts often provide an opportunity to test and refine legislative proposals in a real-world environment. With that in mind, I realized state governments have an opportunity to address the illegal immigration problem, even in ways the federal government cannot. Arizona attempted to tackle the problem by threatening businesses with revocation of their license for knowingly employing illegal immigrants. The Arizona statute also mandates employers use the federal E-Verify system to verify if employees are providing legitimate documentation. While that proposal certainly satisfies the anti-immigration forces, I cannot say the new law actually changes anything. Add to that the fact that the E-Verify system has acknowledged flaws and inaccuracies, and the Arizona statute may be more window dressing than legislative action.
Here are a few ideas for state proposals that may have an impact on illegal immigration:
1. Public education – Currently, illegal immigrants attend public elementary and high schools across the country. Post-secondary education, however, is not as available. The authors of the DREAM Act intended to address this issue, but have been unable to do so. States can intercede and institute a number of policy and regulatory changes, including permitting illegal immigrants to enroll in post-secondary institutions and requiring the illegal immigrant students to (a) perform on-campus work, (b) volunteer for community organizations, (c) pursue degrees in industries with labor shortages, like nursing and teaching, or (d) repay the non-resident cost of tuition over a specified term. These policy and regulatory changes provide an opportunity for those illegal immigrants who often reside in the U.S. through no fault of their own and who seek opportunities for greater integration into mainstream society but find most avenues blocked due to a lack of education. This policy and regulatory approach acknowledges the futility of a pure deportation approach and instead seeks to address the underclass of laborers who provide an environment ripe for unscrupulous and predatory employers.
As an aside, states also could offer high school graduates the privilege of a driver’s license. States could provide a license for those students who enroll in post-secondary schools, maintained a certain grade point average in high school or college, and/or otherwise comply with the laws of the state.
2. Corporate taxes – Most states tax employers based on profit and typically permit employers to deduct their employee costs from their gross revenue. States could enact a law or regulation that makes clear that employers may not deduct the salaries paid to individuals without correct Social Security Numbers. States can elect to use the Social Security Administration’s database to determine which employees do not have valid Social Security Numbers. The salaries paid to those employees, as shown by the employer’s quarterly state unemployment tax filings, could be added to the employer’s otherwise taxable revenue to create a greater tax base and effective rate. In effect, the employer does not receive a tax credit for employing illegal aliens.
3. Automobile insurance – It is a commonly-accepted fact in some parts of the country that illegal immigrants create a population of uninsurable drivers. The tax-paying citizens of the state bear the cost of the accidents caused by these drivers. First, uninsured motorist coverage reflects the reality that insured drivers and their passengers need coverage in the event of an accident with an uninsured motorist. Second, county healthcare facilities (and, thus, the taxpayers in the county) often bear the cost of treating patients without insurance coverage. Third, hit-and-run accidents are to be expected when the driver fears deportation for a minor traffic offense.
To be clear, not all uninsured drivers are illegal aliens. That said, culling illegal aliens from that group would decrease the risk of an accident with an uninsured motorist and reduce the cost to taxpayers. But doing so would require states to issue illegal immigrants drivers licenses and mandate insurance companies offer automobile coverage without regard to the driver’s immigration status. States could enact a policy simply stating insurance companies may not charge discriminatory rates or refuse coverage to any driver in possession of (1) a valid license issued by the state and (2) a valid Social Security Number or Individual Taxpayer Identification Number (ITIN). This would encourage illegal immigrants to obtain an ITIN and further the common goal of reducing the cost of illegal immigration. Insurers certainly could charge rates using other factors which apply equally without regard to immigration status.
4. Unemployment tax rates – Most states tax employers 2-3% for unemployment taxes. This rate may be increased by an “experience rating,” which measures an employer’s history of unemployment claims. States could modify their formula to include an increase in unemployment tax rates for employers hiring illegal immigrants. Much like the corporate/franchise tax proposal, this proposal focuses on wages reported by employers and uses the state’s taxing authority to discourage hiring illegal immigrants.
As a final note, these proposals may not work in every state. Some laws and/or regulations currently in place may prevent a state from enacting such a law or pursuing such a policy or regulatory shift. The point of this blog is two-fold. First, we should work collectively and creatively to address a widespread issue that will not go away if we ignore it. Second, purely punitive efforts aimed at illegal immigrants typically punish the community and encourage the criminal.
Posts
