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How Open Borders Can Benefit All Americans

By Lancelot Finn

 

Instead of restricting immigration, we should tax it.

 

My motives for proposing this are freedom, justice, and self-interest—and I expect that to strike a lot of readers as a weird combination of motives.  So instead of explaining them at this point, let me start with the the concrete proposal for change.

 

The Plan

 

1.                          Declare that the United States recognizes the right of all persons, wherever born, to live and work in the United States—insofar as this is judged by the legislature to be compatible with “the national security interest and compensation for those affected.”  A new, “universal” visa will be issued in addition to all the visas that exist at present.

2.                          As a substitute for a social safety net, all applicants for the “universal” visa must “pre-imburse” the federal government for the cost of deporting them to their home countries.  The deposit will vary from country to country, and it should be equal to the cost which the federal government would incur by deporting them—say, $5000 for an immigrant from China.  After paying this deposit, immigrants acquire the right to be deported to their home countries at the US government’s expense.  The deposit continues to be the immigrant’s property, deposited in an account with the US government.  If they return home using other resources, they can collect the full dollar value of the deposit from the US consulate.

3.                          Once universal-visa immigrants arrive in the US, they are free to work and earn money.  However, they will pay a special surtax on the wages they earn.  The surtax is structured as follows: at the lowest incomes it is zero; it kicks in at a certain threshold specified by law, e.g. $25,000; and a fixed percentage of income above that threshold, e.g. 25%, is payable in tax, in addition to other taxes.  Thus, the surtax will not burden low-income universal-visa immigrants, but they will face high marginal tax rates—probably well over 50%—as they enter the middle class.  However, only a portion of the surtax is a pure tax.  A fixed share of the total surtax paid—and I would recommend a higher percentage, e.g. 70%—is channeled into the account that was created for the immigrant by the US government when they made their initial deposit.

4.                          As the amount of money deposited in their accounts increases, universal-visa immigrants have two options.  If they return home, all the funds in their accounts are reimbursable.  If they stay, they cease paying the surtax after the amount deposited in their account rises above a specified threshold—say, $60,000.  They can then become citizens at will.  In becoming citizens, they lose the money in their immigrant accounts: this is “price” of naturalization.

5.                          If immigrants use public services, the government can debit their accounts for an amount equivalent to the cost of the public services they use.

6.                          The program as a whole will be a net generator of revenue for the US government.  Assume for the moment that Social Security reform passes so that all workers possess personal accounts.  (Without Social Security reform, personal accounts could be created for this purpose.)  Each year, there will be an intake of surtaxes, offset by payouts to re-emigrants.  The excess of surtaxes over payouts will then be deposited in the personal accounts of American-born adults, in a manner preferential to the young and poor.

 

How it would work—a (fictional) personal story

 

Vijay Singh was born to a middle-class family in Karnataka province in India, in 1988.  After the universal visa is created by the Open Borders Act of 2005, Vijay decides to realize his dream of going to America.

Vijay does some research on the web and discovers that it will cost about $1000 to travel to America; and that in order to acquire the universal visa, he must deposit $6000 at the US consulate.  He also anticipates that it will take $1000 to get started in America.  So he must raise $8000.  He does some work for his father for a couple of years and raises $2000, but it will be years before he can earn $8000.  So he begs his parents, uncles, aunts, and grandparents to help him.  He tells them that even if he fails in America, he can repay the money because he can return to India for far less than $6000 using his own funds, and then collect his deposit at the consulate to pay back his relatives.  At first, they are not convinced, so Vijay keeps working and earning money.  But eventually, his parents and his grandmother borrow the money using their homes as collateral.  Vijay pays the deposit with the money they give him, and goes to America in 2009, at the age of twenty-one.

Vijay has already been in touch, via e-mail, with some members of the Indian community in New York, and he settles in with them and begins working.  But his first job pays only $6/hr, and he can survive only by sharing a room with five other immigrants who are in the same situation he is, and by cutting a bit into his savings.  Vijay loves New York, finding it a spectacular and exhilarating place.  But he is haunted by the fear that his savings will run out, he will become destitute, and he will have to request deportation, thus forfeiting his deposit and causing his parents and grandmother to lose their homes.  Fortunately, by talking to other immigrants he soon discovers that there are better opportunities around for a healthy, clever young man who (unlike some of the universal-visa immigrants he meets) knows English well.

Within a few months Vijay finds a job that pays $10/hr.  He also gets an opportunity to live with an elderly couple of Indian background, who are not wealthy but who has a substantial pension, and who let him stay in their apartment for free in return for cooking, cleaning and running errands.  Vijay now has a bit of extra money, so he send some money back to his parents in India to pay off part of what he owes them, and he also buys a laptop computer, and begins to take occasional trips, to Boston, to Washington, to the Appalachians.

Online, Vijay discovers that rooms are much cheaper in other parts of the US than in New York.  So after a year and a half in New York, Vijay quits his job and gets a Greyhound bus to Des Moines, Iowa, where the job market is strong and housing is cheap.  He finds a job within a few days that pays the same as his New York job-- $10/hr—and rents his own apartment.  Now that his evenings are free, he begins to take online courses to improve his job qualifications.  After a few months, Vijay finds a new job as a computer technician, which pays more than twice as much as Vijay made before.  Vijay now earns $20/hr, or $40,000 a year.

With his new salary, Vijay is now subject to the universal-visa immigrant surtax.  Each of his bi-weekly paychecks is $1,666 before tax.  About $200 of that goes to normal federal and state taxes, which all Vijay’s colleagues pay.  But he also pays $156.25 per month in immigrant surtax.  His paycheck tells him that $109.38 of that is deposited with the US government in his name, and that he can either collect it or apply it to the price of naturalization later on.  But naturalization seems very far off, and Vijay sometimes resents his colleagues, who not only do not have to pay surtaxes for years in order to be eligible for citizenship, but who receive monthly “dividends” which are paid out of his hard-earned tax dollars.  But Vijay reminds himself that, if he were in India, his wages would be far lower even than his after-surtax wage in the US.  If it weren’t for the universal-visa program, he would not be in the US at all.

Vijay stays in Des Moines for four years.  He makes friends.  He gets better at his job and is given several more raises.  He is now 26 and earns $55,000 per year.  He dates a local girl for a while, but he has trouble imagining himself marrying her because of differences of culture.  They break up.  Vijay realizes that the time has come to think about where his permanent home will be—America, or India?  So far, his universal-visa account has about $16,000 in it.  To be eligible for citizenship, he calculates, he will have to work in America for at least five or six more years.  Whereas he knows that if he returns home, he’ll be a rich man.

He knows that he has experienced and changed a lot since he left India, so he no longer trusts his memories of it.  So he saves his money and makes a one-month visit home.  He is amazed at how rich he has become by local standards—in Iowa he was far from rich—and at how beautiful the girls are.  By the end of the month, Vijay has decided to return home.

Vijay returns to Des Moines and works for a few more months.  Now, planning his return, he spends almost nothing, he saves every penny.  And he sells off whatever he can.  Meanwhile, he calls his parents and his uncles and aunts frequently.  His mother is busily, and happily, looking for a girl for him to marry; he tries to discourage her gently.  Meanwhile, his uncles look for a line of business where Vijay could put his skills and his capital to work.

In 2015, after seven years in America, Vijay Singh returns to India, collects $18,000 from the United States consulated, and, using that money in addition to $4,000 he saved on his own in America, builds a house and, on his uncles’ advice, opens a drugstore.  Within a year his mother marries him off, and soon Vijay has been absorbed into the life of an Indian husband and father, very different from what he left behind in America.  His memories of America are not entirely pleasant, but at the least, his time there made him a wealthier man; and they also changed his outlook, his ideas of what a successful nation should be, and what his country should, in some ways at least, try to emulate.

 

Everyone’s a gainer

 

By taxing immigration, we can make sure that everyone is a gainer by the change.  Or, at any rate, that all major, identifiable social groups are gainers.  The universal-visa program would alter the returns to factors of production in the US.  Land would earn more; labor would earn less; returns to capital would probably rise, and the effect on returns to entrepreneurship are hard to discern.  The most problematic effect of the universal-visa program is that it would almost surely depress wages, perhaps dramatically.  Labor, after all, is the most evenly distributed of all the factors of production.  But, to offset that, there are the “dividends.”

Under the universal-visa immigration reform, politicians would lose all direct control over the rate of immigration.  But there would still be four variables with which they could manage this rate:

 

1)      the threshold where the surtax kicks in

2)      the surtax rate

3)      the proportion of the surtax classified as pure tax, as opposed to deposited in the immigrants universal-visa account

4)      the “price” of citizenship

5)      the formula for disbursing dividends.

 

By controlling these five variables, policymakers could have great influence over the outcomes of the policy.

Dividends would disproportionately help America’s poor and those with little access to opportunity.  For the middle and upper middle classes, dividends would be slight compared to other sources of income.  But for poor families, infusions of capital into their personal accounts would allow them to attend college, to buy homes or pay the deposit for a rental unit, and to make the micro-investments that would help them to get by and raise their standard of living.  It might also encourage some of them to become entrepreneurs.  At the same time, many would suffer from competition with immigrant labor, and would see their wages fall, or jobs become harder to come by.

The affluent, who possess more human and financial capital, would benefit from the universal-visa policy in a different way.  The dividends would affect them little—or not at all, if all the immigrant surtax revenues were channeled to poorer and younger Americans.  But homeowners would benefit because immigrants would increase demand for real estate and push prices up.  Consumers of labor-intensive services—disproportionately the rich, who go to more restaurants, attend more operas, hire servants, and so on—would benefit from service-sector deflation as labor became more abundant.  More labor, and more customers, would also help businesses turn profits.  Industries like tourism and higher education would benefit from an influx of non-working foreigners, for whom the universal visa would be an easier way to travel to the US.  And the entrepreneurial and innovative talents of new immigrants would enrich the country in a wide range of ways.

The immigrants, meanwhile, would obviously benefit from the policy, despite the burden of the surtax.  Those who did not stand to benefit would not come.

The universal-visa policy would also be a potent form of foreign aid.  The partial reimbursement of the surtax to re-emigrants creates a strong financial incentive for universal-visa immigrants to go home after a few years.  They will return home with new skills, new international connections, and most importantly, capital.  Perhaps as important, they may absorb some American norms and mores that will benefit their home countries, such as intolerance for corruption, a critical and freethinking attitude, democratic citizenship values, and so on.  And their exposure to ideas and technologies in the US will precipitate change at home.

The universal-visa policy would also be a form of public diplomacy at a time when America sorely needs it.  Even among those who never come to America, the knowledge that they could will likely give them a more favorable view of a country that they have good reason to resent as long as it excludes them.  Those who return home may or may not bring a favorable impression of America home with them, but they are likely to fear America less, to understand America better, and to reject the possibility of enmity or war with the United States.

 

Freedom and justice

 

All this brings me back to the topics I put to one side earlier: the relationship of freedom and justice to the national interest.  Whether my immigration proposal is clever and advantageous is one question: but even if it is, a lot of people might react, “Interesting… but no, thanks.”  If I could prove that immigration reform is morally imperative, my case would be stronger, and the “interesting, but no, thanks” answer would be out-of-bounds.  Can I claim that this proposal is morally imperative?  But by outlining an immigration proposal that serves the self-interest of all Americans, while charging immigrants a heavy surtax and thus in essence exploiting them, I may seem to have forfeited any hope of claiming that we must implement it on grounds of abstract freedom of justice.

And yet I thought up the immigration proposal above not just as an advantageous policy innovation, but as an attempt to solve a pressing moral question.

Millions of foreigners live illegally in the US.  Millions of others live here legally, and in some ways their position may be worse; they may, for example, be at the mercy of the employer who provided the visa for them.  Illegal immigrants, and to some extent legal immigrants as well, form a kind of underclass.  Is this acceptable in a society dedicated to the principle of equality before the law?  Yet we would have to adopt draconian measures, and make significant economic sacrifices to change this situation.

But it gets worse.  The problem is not just that we would have to adopt draconian measures that would be unpleasant and undermine the practice of civil liberties; the problem is that those who enforce the law would be in the wrong, and those who defy it would be in the right.  Immigrants are trying to feed their families, to get better lives for themselves, to pursue a dream, to be part of a country they admire—and they are doing so peacefully, harming no one.  What they do may be a crime in law but, unlike murder or theft, it is not a crime in nature.  When human law deviates from conscience, from natural law, it becomes tyranny.  And the effect of immigration restrictions is manifestly unjust: we enforce a global caste system, in which those who are born in rich, free countries are destined for lives far richer materially and in opportunities and liberties than those who are born elsewhere.  Morally, we have no ground to stand on.

And yet we must not minimize the social upheaval that would result from opening the borders.  Immigrants would pull wages down; they would disrupt the friendly solidarity of many homogeneous neighborhoods; they would burden public services.  The affluent would be able to cushion themselves against the changes.  The less affluent would be at their mercy.

In the past, the Marxists demanded that the bourgeoisie be disinherited.  I do not want to follow in their footsteps.  America’s less educated, its working classes, may be seen a privileged caste from an abstract point of view: they live, after all, in far more comfortable material circumstances than 90% of the world’s population.  But this classification seems abstract and surreal.  American workers don’t see the 90% of humanity next to whom they are privileged; they compare themselves to the affluent in America.  Inasmuch as their world depends on the unjust exclusion of the foreign-born from US territory, it will have to be disrupted.  But we should try to cope with the disruption as best we can.  The bourgeoisie had a worth that the Marxists did not understand; so does the blue-collar lower-middle class.  We should design change, as nearly as possible, in a manner that they would consent to, or at least so that they can preserve their way of life.

My immigration proposal does not seek to end injustice.  I do not believe that injustice can be abruptly ended without wreaking great distruction.  It offers a path towards the gradual amelioration of injustice.  Without it, we will continue to go the wrong way.

 

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