"No — no fences, no drones, no more agents; you do not need them; if you want to limit the impact of unauthorized immigrants make it difficult for them to send money home; we have the technology to do that right now."
The source of this advice was an unexpected one; a Hispanic income tax consultant in a small, rural town on the Delmarva Peninsula; he was not terribly upset by the presence of lots of illegals in the workplace — "we need their labor," he said, but he was concerned about the financial ramifications of the illegals' presence in the country.
"Many of them come to America to send money back home; if you limited their ability to do that, a lot of them would not come. Make it mandatory that they can send money home only with an electronic card of some kind, set a limit on those payments, and punish the wire transfer companies if any individual sends too much," he continued.
My contact, who did not want to be given credit for the idea, suggested that a limit of $13,000 a year (an existing IRS upper limit for non-taxable gifts) would discourage illegals from coming to the United States. I think a rather lower limit would be more effective but I must say I was taken by the suggestion and its source.
Who would have thought that a remarkably innovative idea about international finance and migration would spring from a modest strip mall in the midst of corn and strawberry fields and chicken processing plants.
Those of us who live in or near big cities do not have a monopoly on policy creativity.
The suggestion would also, and my source did not mention this, limit one of the hidden — and rarely discussed — damages caused by illegal aliens: the massive outflow of remittances.
I am not an economist, but I suspect that the remittance system is a zero-sum game. Money sent by illegal aliens from the United States to Mexico is withdrawn from the American economy and pumped into the Mexican economy. Were a billion dollars earned in the United States to be diverted from remittances to Mexico and spent in the United States, the United States would be one billion ahead.
According to the World Bank, remittances from the United States to other nations came to $48.3 billion in 2009, and so they must have topped $50 billion a year or more in 2012.
Wouldn't it be a nice boost to the U.S. economy if some fraction of those billions were added to our economy, rather than being subtracted from it? It would be an admirable stimulus package that would cost the U.S. taxpayers nothing, and would inconvenience no one but some illegal aliens and Western Union (and other transmitters of these funds).
I suggest a remittance-control program with two parts; it would be designed to simultaneously reduce the damage to the U.S. economy of these fleeing dollars, and make a modest contribution to the Treasury — at no cost to any voter. Here's how it would work:
Part I. This would deal with international wire-transfers of money; if an individual wanted to send money and cannot be found on the E-Verify list, the person (an alien by definition) would need to obtain a wire-transfer card. The card would carry a photograph and a secure ID system, so that it could not be used by imposters. The card would also carry the equivalent of the Social Security number for aliens who cannot work, the Individual Taxpayer Identification Number (ITIN). These numbers are issued by the IRS. These records would facilitate federal income tax collections.
The card would also record all international financial transfers and would refuse to handle more than $5,000 a year, for example. All such transactions for (non-E-Verify) individuals would have to go through this system. There would be other, more relaxed rules for corporations.
The objectives would be to reduce the outward flow of moneys (i.e., remittances) and would create a record for the IRS for those that do take place. More money would stay in the United States, more taxes would be paid, and no citizen or green card holder or corporation would be effected. Obviously it could not be water tight; illegals could still carry cash back to the homeland, or take a chance by mailing cash or checks; but it would be a very big push in the right direction.
Banks and transmitters like Western Union, of course, would object that it would complicate their operations.
This program could stand alone, as described above, or could operate with Part II, below, inspired by an on-going state program in Oklahoma.
Part II. This is a simpler, less intrusive program than the proposed Part I, and might be put forward if Part I turned out to be too difficult politically.
All individuals not on the E-Verify list would have to accept a federal income tax withholding of 1 percent of all funds wired to an overseas location. This would cost nothing to people who pay their federal income taxes, as it would be a credit to their accounts. Only non-payers of the income tax would actually pay the 1 percent. It would not apply to genuine corporations or to citizens.
This is neither my idea, nor that of the Delmarva tax person: it is in effect in Oklahoma, as I reported in an earlier blog, and that state, which has only a small illegal alien population, is getting $9 million a year from it. The 1 percent fee there creates a credit toward the state income tax.
Policy Implications and Politics. The downside of these proposals is that they will not, alone, stop illegal immigration, though they are likely to diminish it. Further, they are not as dramatic — or as decisive — as a Border Patrolman stopping an illegal in the desert, or an ICE agent actually escorting a deportee out of the country.
On the other hand, the politics of it are very attractive. My sense is that while many people object to the very presence of illegal aliens, many do not. The totally valid argument that illegals are taking jobs that Americans should have, and are lowering wages at the bottom of the labor market, appeals to some, but not to the Establishmentarians who currently run the country.
But if the position is that we want to stop illicit tax breaks for illegal aliens, then many more Americans potentially would be interested. No fuzzy, romantic Statue of Liberty images work against this pitch; further, we are not asking that anyone be bounced from the country, excellent idea though this often is, nor are we "breaking up families" by actually enforcing needed deportations.
All we are doing through these two proposals is making sure that illegal aliens pay their fair share of taxes, and that is a hard argument to counter. In addition, the proposals, particularly Part I, would keep more American dollars, stemming from American employers, working within the American economy.
What could be more reasonable?
For other, earlier blogs of mine on remittances, see here and here.