A blog about U.S. immigration matters by Paul Szeto, a former INS attorney and an experienced immigration attorney and counsel. Contact Info: 732-632-9888, http://www.1visa1.com/ (All information is not legal advice and is subject to change without prior notice.)

Thursday, December 16, 2010

Congressional member proposes ending tax deduction for unauthorized workers' payroll

Employers will not be able to deduct payroll expenses of unauthorized workers for tax purposes, according to a plan outlined by Representative Steve King of Iowa. King, currently the senior Republican on the Judiciary subcommittee on immigration, is expected to chair the committee next year. According to a recent New York Times news article dated December 13, 2010, King will make this measure his priority as chairman of the immigration subcommittee.

This bill was introduced last year by King. His idea is that by taking away the incentive of tax deduction, employers will see that there is no financial benefits of hiring unauthorized workers. He estimated that instead of paying $10 an hour to hire somebody illegal, employer actually would have to shell out $16 an hour without the tax benefits. The result of his proposal, according to King, would be massive firings of unauthorized workers by employers across the nation and creation of new jobs for American workers.

Perhaps the most controversial aspect of the proposal is the removal of a privacy firewall that has protected the taxpayers' information stored at Internal Revenue Service from scrutiny of other government agencies. King's proposal requires that IRS shares its data and information with the Department of Homeland Security and the Social Security Administration. By comparing the taxpayers' private information such as names, dates of birth, social security numbers, etc., against the database of the SSA and DHS, the immigration officers would then be able to identify the taxpayers who are not legal in the country.

However, King's proposal goes against the long-standing privacy firewall that IRS has enjoyed. The mandate of IRS is to collect taxes and to generate revenues. The agency has kept taxpayers' data and information private for the most part. The fear is that if such private information is disclosed to third parties and other government agencies, taxpayers will be afraid to file tax returns and share their private information. Potentially this could cause a big drop in tax revenues. Under this economic environment and in the face of a government deficit in excess of $13 trillion, one may wonder whether this is a good time to introduce such a proposal.

Whether or not King's proposal would really result in less hiring of unauthorized workers is questionable. Many employers hire illegals not for the tax benefits. Some of them do it out of ignorance because they don't understand the legal requirements and are confused by the immigration documents. Some other employers resort to hiring unauthorized workers because they truly couldn't find enough American workers to work for them for various reasons.

The New York Times article also reported that King is an opponent of the Dream Act - a law that would allow minors who were brought into the U.S. under the age of 16 who have completed high school to have a way to be legalized, as long as they have no criminal record, pay all taxes, attend college or join the military, and met all all legal requirements. The Dream Act has enjoyed bipartisan support by members of both parties in Congress. In fact, House just passed one version of it recently. Many immigration scholars argue that the Dream Act should be passed so that all the tax payers' monies that went into educating these youngsters will not be lost with their deportation. King also considers implementing new measures in border enforcement including construction of more physical fence barriers to stop illegal immigrants from crossing the border.

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