As We Face a "Fiscal Cliff" Let's Close Immigration-Related Tax Loopholes

By David North, December 24, 2012

Memorandum to: President Obama and Speaker Boehner
From: David North, CIS
Re: There's $100 billion available from immigration sources to avoid the "Fiscal Cliff"

Widespread press reports say that the two of you are about $100 billion apart, over a ten-year period, in your mutual efforts to increase revenue and reduce spending, both to reduce the federal deficit debt. The House Republicans want to avoid raising taxes on all Americans, including very rich ones, and the White House does not want to reduce entitlements (presumably for American voters).

Here's a way out of the logjam that reduces (undeserved) entitlements on illegal aliens, while increasing revenues, largely by appropriately taxing non-voting aliens (and some corporations hiring aliens). The total to be raised by a series of these fiscal actions would come to about the needed $100 billion, over ten years.

The best part is that virtually no voters would pay a dime.

Here's how we get $100 billion from a variety of untapped, and largely undiscussed sources, all related to immigration:

$15 billion more in Social Security Taxes: There are, as I wrote in an earlier report "How Employers Cheat America's Aging by Hiring Foreign Workers", numerous foreign worker programs, such as for alien farm workers (H-2A) and recent foreign college graduates (F-1), in which neither the alien nor the alien's employer pays Social Security, medicare, or federal unemployment taxes. Closing these loopholes would bring in more than $1.5 billion a year to the government, and that, times ten years, equals $15 billion.

$43 billion more in other taxes, fees and mandatory loans by aliens: CIS published two years ago a Backgrounder of mine showing in detail a variety of ways to tap into the flows of money that accompany international migration; among the new fees and taxes to be created would be higher immigration-management fees for the Departments of State, Labor, and Homeland Security; small fees for cars, trucks, buses, and passenger trains, as well as pedestrians, entering the country on land; and withholding 1 percent on all wire transfers of money sent overseas. (In the last scheme, the amount withheld would be an income tax credit, and thus would not cost the sender a penny – assuming that his or her taxes were paid in full, which is presumably not always the case.)

The $43 billion-over-ten-years estimate is based on a recent modification of the earlier annual estimate seen in the Backgrounder.

An investigative report on the
Child Tax Credit loophole

$42 Billion from closing a loop hole in the Additional Child Tax Credit Program: Depending on how you define it, this is either a reduction in entitlement spending, or an expansion in revenue by eliminating a tax break, but it will produce $42 billion over a period of ten years. The current, underlying problem is that many illegal aliens use Taxpayer Identification Numbers (ITNs), which are much easier to get than Social Security numbers, when completing their tax returns, and claiming ACTC benefits. This facilitates fraud in the program. The Federation for American Immigration Reform (FAIR) has called for a closing of this loophole and has calculated the prospective savings at the rate of $4.2 billion a year.

Perhaps the gap between the President's and the Speaker's positions is more like $200 or $300 billion, but the $100 billion contribution suggested above would go a long way toward solving the problem ... and virtually no voters would be effected.