Suspending the Payroll Tax Would End OPT Subsidy

By David North on March 12, 2020

The president has proposed to suspend payroll taxes for both employers and employees for the rest of the year to boost the coronavirus-depressed economy.

Personally, I think this is a perfectly terrible idea, for non-migration reasons. The Social Security and Medicare trust funds are under-resourced as it is; with the loss of many billions in revenues there would be an effort to reduce benefits further, increasing the already yawning gap between the rich and the poor. For these reasons I suspect that such a proposal would never pass the House of Representatives.

On the other hand — and I have seen this nowhere in writing — such a tax cut would wipe out the current subsidy in the Optional Practical Training program now being paid to employers who discriminate against U.S. college graduates in favor of former foreign students who have graduated from U.S. colleges. Currently such employers get an about 8 percent subsidy in the shape of no payroll taxes when they hire the alien (who, in a legal fiction, is still considered a student) rather than the American, as we have reported previously.

But if there were no payroll taxes — at all — for any employers because of the president's proposal, then the subsidy would disappear.

This would, by definition, create a level playing field for citizen college graduates as they seek jobs in competition with the aliens, who currently provide the advantage of the OPT subsidy.

The president's payroll tax proposal — presumably unknown to him — would thus create a hidden silver lining lodged within a rotten pumpkin of an idea.