Bryan Caplan  

Paying to Immigrate: Admission Fees vs. Surtaxes

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As a half-way measure, pro-immigration economists often argue in favor of charging immigrants an admission fee.  It's better than not letting them in at all.  But there are two big problems:

1. Admission fees are especially hard on low-skill immigrants.  Even though their lifetime wage boost will far exceed any plausible admission fee, they won't qualify for a loan without far more collateral than they'll ever get their hands on.

2. Admission fees probably sound a lot like "bribes" to American voters.  It almost sounds like we're selling Americanness - an egregious taboo.

A better half-way measure: Instead of a flat admission fee, admit immigrants who agree to pay a surtax.  E.g. they have to pay an extra 10 percentage points on their taxes.  Advantages:

1. It solves the collateral problem for low-skill immigrants.  They don't need to come up with a big lump-sum payment, just find a job.

2. For reasons I don't understand, voters are a lot less likely to see an immigration surtax as a "bribe."  Indeed, voters might even feel good to know that immigrants are "paying their dues."

I don't have much hope for either admission fees or surtaxes.  But surtaxes seem like better policy and better politics.  Am I wrong?



COMMENTS (22 to date)
Chris writes:

We already have admissions fees, they're paid to colleges -- in return you get F-1 status, and a few years to try to insert yourself into the labor market or to find a native to marry you. If you haven't made an effort to assimilate yourself in these ways, you won't get to stay. What's wrong with this system?

Clay writes:

"Am I wrong?" - no.

Robinson writes:

I'm not sure about better policy, but I highly doubt this would be popular with anti-immigration conservatives.

One of the most common complaints is against immigrants that come to America to take welfare, education and other benefits without getting a job. I'm certain this percentage (like, say, the percentage of the federal budget that goes to foreign aid) is much lower than the average voter estimates, but it is highly politically resonant. An immigration surtax would not charge these immigrants anything. In fact, it would lower the incentive for them to find work.

Of course, you've recently noted the tension between the "immigrants are on welfare" view and the "immigrants take American jobs" view before. And from an economic perspective, this would cause the welfare problem to get worse while making the job-stealing problem "better". My guess is that among people who are inclined against immigration, the former effect will dominate their thinking.

A.B. writes:

@Chris:

That's assuming you get an H1-B. There's only 85,000 of those available every year.

Fabio Rojas writes:

If you believe that voters have systematic biases, why do you believe that popularity of a policy will depend on anything other than the symbolic resonance of the policy?

As far as I can tell, and your work persuaded me of this fact, people simply have an irrational fear of immigrants. Any policy that makes it easier for any one at immigrate will face great opposition.

johnleemk writes:

Chris,

That works in any country in the Anglo-Saxon world except the US. Other countries generally give preference to immigrants who have higher education, especially when it is from an accredited university within their borders. The US has no such thing.

When you get your F-1 visa (I had one for just over three years) you commit to leaving the country after you study. You get 12 months to work in the US but only as "optional practical training" so in practice it's only worth a couple of internships.

In practice inserting yourself into the labour market is nigh on impossible; it's like playing the lottery. I know a Harvard graduate who joined a prestigious management consulting firm in the US, and had to leave the country because he lost the H1-B lottery. Many firms, including the one I work for, used to sponsor H1-Bs but now refuse to because the uncertainty of whether your new hire, no matter how qualified, will be around in 12 months or will have to leave, is just too high.

I went to an Ivy League; the international students I'm in contact with there tell me they can't find any firms that will sponsor them, except for a tiny handful like Goldman Sachs. So they are playing two lotteries: the lottery that they can get the job (a whole lot of applicants for only a few spots at big investment banks and consulting firms), and the lottery that their visa application's number will be randomly picked for approval if the measly visa quota is exceeded.

And don't get me started on marriage. That works fine if you're marrying a citizen (lots of red tape but at least you can stay in the country). I became a permanent resident just before I graduated because my aunt is a citizen and applied for my family to be granted visas two decades ago (it was just the luck of the lottery that we got it in time for me to find a job), and it will be hell if I marry a non-American.

If I marry my non-American girlfriend, she has to leave the country after she graduates (unless she wins the job and visa lotteries), and because of the even tinier quotas for green card-holder spouses, she won't be able to come back for at least five years. That's how long the existing backlog is. And that's the best case scenario -- if no paperwork gets lost, and if her country doesn't have any additional backlogs (thank goodness she's not a Chinese, Indian, Mexican or Filipino national), she can get her visa five years after we marry.

According to Wikipedia, the US is the only country in the developed world which makes permanent residents wait five years to see their spouses. The US immigration system is beyond broken. It speaks volumes about how great America is that despite everything, so many of us immigrants are still happy to be here. We may be happy. But that doesn't mean your system isn't completely borked. It is nowhere near as easy or awesome to immigrate here as so many Americans who've never taken a citizenship test or filled out police clearance forms for immigration might suppose.

Finch writes:

American citizens manufacture citizenships for immigrants in the same sense that Microsoft manufactures Word for sale. Isn't it in their best interest to maximize their profits?

Why not charge a monopoly price? (After all, nobody else makes American citizenships - for that matter, few developed nations make many citizenships at all.)

Why not use price discrimination and charge more according to willingness and ability to pay? Why not take costs into consideration and refuse to sell to unprofitable immigrants, or discount to potentially super-profitable immigrants?

I think the reason you're coming back to, though I'm not a perfect mind-reader so I might have this wrong, is that you are placing some weight on the well-being of people other than the people who are making this policy. I.e., there's a redistributive or charitable component in your reasoning. I don't find that argument appealing, but it's defensible. It's common in hard-left circles. If that's your real reasoning, could you be up-front about it?

To your question, I don't think it matters much whether the price must be paid in cash or is available via a government financed installment plan.

Thomas Sewell writes:

I've always liked the concept of immigrants posting a bond that covers their estimated welfare and government services requirements for some period of time, reduced by their paid taxes.

The cost of such a bond could be estimated actuarially by private sellers and take into account their job prospects, etc...

Of course, if it turned out that the expected cost was negative or very low and the bond was only expensive enough to cover the administrative costs, that wouldn't be such a bad thing, would it?

Hard to argue that someone is going to be a government services drain if all their services are pre-paid, isn't it?

Mike Rulle writes:

It won't help, unfortunately. Watching the GOP debates on illegal immigration was a tragic-comic exercise in who had the most idiotic ways to keep Mexicans out of the country. As soon as "the boots on the ground" and "predator drones" ideas came up, I was next expecting someone to say "if we really want to solve the problem we just need to nuke Mexico---plus we get the extra benefit of eliminating the drug cartels"

When things go economically bad, there is always a subset of the population looking for scapegoats. Depending on one's proclivities it could be "Wall Street", "illegals" (why can't they just say Mexicans?--- they don't because it gets too real, so they opt for the more generic "illegals"), "foreign aid", "millionaires and billionaires" and so on.

I assume this is human nature as history is filled with countless scapegoating travesties. When Reagan passed the amnesty bill in 1986, the most important thing to note about it is that it PASSED. It did because we were at the height of a economic boom, at least relative to the 1970s, so no need for scapegoats.

In reality, actions speak louder than words. As a nation, we really do want more immigration or we would in fact be much more agressive than we are in limiting it. Immigration has always been a tool in the politicians tool chest in the sense of using it in the most cynical of ways---each party has their ax at any point in time.

What drives me nuts, is that probably the single largest comparative advantage we have by far as a nation is our collective ability to assimilate any and all ethnic foreign groups in the expanse of less than a single generation. This was a core principle at our founding, hence the right of citizenship just by being born here. We should be tripling our quotas or more, and not just to the "PHDs". Our energy and constant renewal is largely influenced by immigation and in the past almost exclusively by it. Just think of Europe, Japan, China, and the Middle East by comparison.

For politicians to stoke the flames and play games with who gets in for what reason is as damaging as any other heavy handed regulatory policy we have.

We have always been against the new immigrants as a country, but we let them in anyway---going back to the 1800s. But our core values and Constitution has permitted advancement and now the speed at which Americanization occurs is amazing. Both parties have taken the opposite---from each other--- but worst sides of the immigration debate. (diversity versus culture for example---both red herrings).

When the economy is strong again, there will be an opportunity for movement on this issue. But not now.

Tom writes:

Have immigrants pay a larger percentage on their medicare taxes and sell it as a way to 'protect our seniors'

GIVCO writes:

I think its exactly opposite. Voters would love to dun rich people for $5,000,000 to come here and would love to protect (at least on on the surface) our own poor workers by limiting low-skill immigration; it also appeals to nativist voters (no more brown people!).

The surcharge doesn't change any of the current emotions. Are you really going to deport kids, or lifelong residents, when their parents get convicted for tax evasion, or for not paying? Will you really create a separate track for them?

Randall McElroy writes:

The main political target of nativist ire is Mexican and other Latin American immigration, and a great many of these workers get paid cash even when they are here legally. (At least where I'm from.) Thus the bulk of politically incorrect workers still won't be generating this revenue.

That is to say, a GOP-oriented economist might question your scheme, and in an atmosphere of weak support for reform among the people whose approval is needed, that would take them back to square one.

Mr. Econotarian writes:

"I know a Harvard graduate who joined a prestigious management consulting firm in the US, and had to leave the country because he lost the H1-B lottery."

I know a major company in my industry that had a heck of a time trying to keep a foreign national on as a worker, and it involved having to send him back and forth to his native country several times. This guy was a technological genius, but the government worked to mess up the ability of his company to keep him on because he was born in the wrong place.

Also my company was just screwed by US immigrations agents who didn't let a technician we needed from Canada cross the border to perform work in a northern US border city. This was a 100% legal operation, and has been performed many times, but for some reason the immigration officer decided without good reason to deny entry one day.

PrometheeFeu writes:

Bryan,

If you start arguing for charging me an extra 10% of my income, we aren't going to be good friends... Also, you can pay your way in the country already. It's the investor visa. You even get to keep the money.

If I had significant wealth, I would be happy to sponsor multiple immigrants. What my family experience of immigration has taught me is that immigration restrictions are a despicable thing and should be removed and that if I am ever in a position to help someone who wants to immigrate to the US, I will do so. I am always curious as to whether I will ever have the opportunity to serve on a jury examining the case of an illegal immigrant. Go go jury nullification.

Alex Tabarrok writes:

You are almost right. The correct policy is a citizen discount!

quadrupole writes:

Why not simply treat visas as property, and auction them off at a rate established by law.

By treating visas as property, you allow the formation of a market (including a secondary market), it effectively *becomes* the bond referred to above, because its a salable asset of the immigrant (only salable after they've left the country mind you).

Let the market determine the pricing for visas, and allocate them to their highest value use.

kyle8 writes:

I don't understand what the big deal here is, Why not (1) boost the numbers of legal immigrants, enlarge the INS if necessary
and (2) crack down on hiring illegal immigrants.

It seems to me that this is common sense, we can benefit from legal immigration, and eliminate some of the problems stemming from not knowing who is entering the country.

Nathan Smith writes:

I still like my policy mix best:

1. A deposit to preimburse the government for sending a person home, on their own request, if they become destitute.
2. A surtax.
3. A forced savings program which goes into a special account until some threshold is reached, e.g., $50K. This can be forfeited upon becoming a citizen, or withdrawn in cash in the immigrant's home country.
4. Proceeds of surtaxes and forfeited savings are distributed to native-born Americans and previously naturalized immigrants.

This would be an ADDITIONAL path to immigration. All current paths of immigration remain open as is.

If the new policy variables-- the surtax, the forced savings account, and the policies for distributing the revenues-- are set carefully, everyone will be held harmless. It's roughly Pareto-superior to current policy (yes, I know you can never strictly satisfy the Pareto criterion).

But it won't pass because the borders are a blindfold. Americans would feel bad about themselves if they saw very poor people and didn't help them. So they recruit men with guns to keep the poor people out. And the tired, the poor, the huddled masses yearning to breathe free pay the price for the cowardly squeamishness of a welfare-state society.

Ari T writes:

It doesn't really matter, you might aswell be advertising Obamacare to republicans or evolution to creationists. Evidence won't matter. When people dig into these opinion holes, they're remarkably resistant. It only happens if you can make them accountable for their opinions somehow.

In my opinion to change from anti-immigration to pro-immigration, one has to overcome some psychological barriers like risk averse people, who avoid losses at all costs, have to aswell if they want to good RoI.

Douglass Holmes writes:

Are illegals not already paying coyotes at least $3000 to get smuggled into the country? Clearly the unskilled are able and willing to pay to get here.

Are they not effectively paying a surtax when they have payroll tax withheld that they have no hope to recover in the form of Social Security?

Anonymous writes:

"Also, you can pay your way in the country already. It's the investor visa. You even get to keep the money." EXACTLY.

It's amazing how few people know about this...It's an EB-5 visa, you get a conditional green card and get to bring your dependents for investing in a new or troubled U.S. business which can include a sole-proprietorship. In other words, if you have $500K to start a business in the U.S. you can come now.

Open a fast food restaurant, a convenience store, a motel, a nail salon, etc. and put a few people to work in low paid jobs and you can "buy" your way into the U.S. without even giving up the money.

A.B. writes:

I strongly second what johnleemk said. I know many extremely qualified people holding masters or PhD in hard sciences from Ivy league schools. They had six figure job offers lined up before they graduated. Many wound up having to return to their home country because firms were reluctant to process an H1-B.

It's extremely hard to immigrate into the US.

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