Sunday, June 27, 2021

How to Solve Illegal Immigration: Tax Remittances

To address this problem seriously, jail employers and tax remittances

While everyone seems to agree that this is a problem, to my mind there is little or no national will to really address it.  So we can build border walls and otherwise attempt to police the inflow.  Or, we can look for smarter, more effective strategies.  When and if we ever decide to get serious about the problem, I have two proposals.

The first is easy:  Start jailing employers.  And make a lot of noise about it.  Keep it up until all employers of illegal immigrants constantly fear arrest.  I have zero sympathy for these people.  They all know exactly what they are doing, and often take advantage of the truly vulnerable immigrants.  I know employers who pay next to nothing and work the immigrants like slaves.  Maybe worse, I know an employer who has sex with all his immigrant female employees.  How can they say no?  And what does he care if they won't have sex with him, he simply won't hire them, and there's a line at the door.

That's easy enough if we have the will...and the decency.  My second proposal is a bit more complicated.

Most people believe that taxes are about raising revenue for government expenditure.  And they certainly can be.  But taxes can also be used to alter behavior.  For an example we are all familiar with:  If we tax cigarettes highly enough, many people will choose not to smoke, if for no other reason than they can no longer afford it.

I am not sure who said it, but I have always liked this line:  Remember, if you tax something, you will get less of it.  It may have been Milton Friedman, who had a genius for stating the obvious.

So let's first ask why people come to the United States today?  Do they come here for the same reason that people came through Ellis Island a century ago?  To build a new life and become Americans?  I am sure some do – But those folks mostly choose the legal immigration route.  Today most people coming to the United States illegally have other plans.  They come here, they work as long and as much as they can, then they go home.  That's the plan from the get go.  If you don't believe this is true, just strike up a conversation with any of them.

And while they are here, they send money home to their families.  This is the whole point  To send money home.

So I would like to propose a tax that will not raise any revenue.  Or not much anyway.  Believe me, I am not interested in giving the government more money from any source or from anyone.  Let me explain.

Proposal:  Tax remittances at 50%.

Let's use an example:

A person (US citizen, legal immigrant, illegal immigrant, anyone) walks into a Western Union, as typically found in most grocery and convenience stores, to send $1,000 overseas.  I don't care where, this would apply to all overseas countries.  Here's how it would work:  $500 would go overseas and $500 would go to the IRS.  Plus any transaction fee Western Union charges.

Now this $500 tax paid could be later used as a credit on income taxes.  So, the person gets it back in full.  And ultimately no tax is paid.

So why the rigamarole?  Well notice this:  In order to get the tax back, one does have to file income taxes.  So American citizens and legal immigrants end up not paying the Remittance Tax.  And rightfully so.  They've already paid income taxes on their money.  They can do whatever they like with it.

So who pays the Remittance Tax?  Anyone who does not file income taxes.  And who does not file income taxes?  Illegal immigrants.  Notice also:  The reason to set it up this way is so the clerks do not have to determine if the person is a taxpayer or not.  Everyone pays the Remittance Tax up front.  Makes it easy; I'm not trying to construct a mini-DMV here.

But of course, the illegals are not going to pay it either.  No one in his right mind would be willing to pay a 50% tax.  So remittances would stop.  But remember what  I said above, the whole reason they are here is to send money home.  If remittances are outrageously taxed, they are basically unavailable.  And if remittances are unavailable, there is no reason to be here.

Again, there would be no reason to be here.

Now is this a complete solution?  Certainly not.  I am a big believer in Thomas Sowell's injunction that there are no solutions, only tradeoffs.

People would still come here illegally; they would just look for other ways to get money home.  And the whole remittance process would be pushed underground.  Instead of going to the supermarket, illegal immigrants would find their way to the backroom of some shady convenience store, where some greasy guy and a couple of toughs would take his money, and for a fat fee, someone overseas would provide money to the family.  See Hawala.

Pricey.  And probably less than trustworthy.

So people would carry their own money and money for others.  No doubt, we'd see cash mules.  People would mail money.  I'm sure any number of ways would spring up to get money home.

So I am not suggesting that this proposal completely solves the problem.  But it does make it more inconvenient and more expensive to send money overseas (if you don't file income taxes).

Currently this much is certainly true:  No matter how easy or difficult it is for illegal immigrants to enter the US, sending money overseas is extremely easy and cheap for anyone.

It should not be.

Ultimately, a Remittance Tax would work like any other so-called sin tax.  If we tax remittances by illegal immigrants, we'll get less remittances by illegal immigrants.