Existing Immigration Policy Needs Improvement

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THE PROBLEMS 

The problems today are several. We have an undocumented population the size of some nations, with many being here for decades with families. They cause an unfair financial burden on Americans across many sectors of the economy affecting areas such as education, healthcare, law enforcement, border security and job competition.

Many of them would like to visit home but our border security forces them to stay here, and some start second families. Trying to solve the problems with mass-citizenship would be a mistake doomed to failure because of our poor immigrant tax policies.

Enforcement of some immigrant taxes is complex and ineffective and carries with it serious unanticipated consequences. For example, we have a seldom-reported scandal in our Individual Tax Identification Number program (ITIN), which costs U.S. taxpayers $5 billion annually. Nearly 4 million undocumented immigrants—some with Social Security numbers—file these tax returns and game the system by declaring excessive childcare credits. The Treasury Inspector General for Tax Administration has written about this repeatedly, yet after a dozen proposed bills over the years, it still exists.

Another problem is that since the 1986 amnesty, our cash economy workers (domestics, trades, services) are almost encouraged to game the system because they have been given “independent contractor” status. It allows them to understate their annual incomes to avoid paying income taxes but they still contribute a small amount for Self-employment taxes and can receive Social Security and Medicare benefits of $200,000 to $300,000 in excess of their contributions—this is unsustainable.

Another issue is the seldom used nanny tax for domestic workers, which is not effective because many of these workers are employed by numerous homeowners during a year.

Finally, if we encouraged mass citizenship, little would change. We would still have crowded ER rooms, underfunded schools, competition for some jobs and law enforcement concerns. Many immigrants don’t come here seeking citizenship and retirement benefits as is verified by former Mexican president, Felipe Calderon.

 The following chart illustrates that retirement benefits beyond contributions for an average worker earning $22,500 per year can run between $240,687 and $333,405 each.  Self-employment taxes are 15.3% of wages. 

contribution-chart1

The following chart illustrates that retirement benefits beyond contributions for a cash economy worker earning $9,000 per year (no income taxes paid) can run between $217,494 and $278,082 each. Self-employment taxes are 15.3% of wages.