A Snitch in Time Can Help Deport Nine

Summary

The Trump administration's drive to remove some of the millions of aliens illegally present in the country will inevitably be limited in scope, underscoring the importance of goading self-deportations for perceptibly reducing these aliens’ numbers by curtailing their employment opportunities. Based in part on Britain’s experience with eradicating child labor in the nineteenth century, the article proposes a scheme of private enforcement for rendering unemployable a large proportion of unauthorized aliens in the United States labor market today. The proposal comprises enacting a punitive tax on all compensation paid for the personal services or labor of such unauthorized aliens and enabling private enforcement of this tax. Implementing that proposal would require only minor amendments to the Internal Revenue Code and the False Claims Act. But together, those amendments would constitute a low-cost way of compelling employers to comply with E-Verify, which, in turn, would prod unauthorized aliens to self-deport. The article spells out and discusses the text for making those legislative changes, which could be adopted in a budget reconciliation bill. Noting that the proposal presented can be developed further to protect domestic wages from legally imported cheaper labor, the article urges deferring any such extensions until there is greater political consensus on curbing legal immigration.

I. Introduction

Some estimates put the number of aliens illegally present in the country at around 22 million, though the actual figure could be higher or lower.¹ Notwithstanding its “shock and awe,” a forcible deportation drive is unlikely to make a dent in that vast population. For this, the law against hiring these aliens would have to be strictly enforced. Britain’s experience with child labor in the nineteenth century shows that government enforcement action, constrained by the limitations of budgetary resources and state apparatus, is unlikely to succeed by itself in removing from the labor market large numbers of willing and able workers. Indeed, resting on public enforcement alone could even make things worse by simply pushing unauthorized aliens to seek employment in the less visible sectors of the economy. By comparison, enabling private enforcement should be much more effective. In this article, I propose such a private enforcement scheme for reducing the employment opportunities available to unauthorized aliens. The proposal would impose a punitive tax on all who pay for the personal services or labor of unauthorized aliens and let private citizens sue to collect this tax. The ubiquity of snitches, as compared to the distant possibility of government action, is likely to put the fear of God in employers. Most, if not all, would then willingly embrace E-Verify, a free online tool for verifying a prospective hire’s work-authorization status. The resulting inability to obtain employment should induce large numbers of unauthorized aliens to return home. I point out that giving effect to this proposal would only require minor amendments to the Internal Revenue Code and the False Claims Act, amounting to little more than 650 additional words of statutory text — changes that can be made in a budget reconciliation bill.

The remainder of this article is organized as follows. Part II emphasizes the importance of prompting self-deportations, given the sparse enforcement of current employer mandates against and sanctions for hiring unauthorized aliens, which are discussed in Part III. Part IV starts by drawing lessons from Britain's nineteenth-century efforts to abolish child labor, applying these insights to develop a private enforcement model for removing unauthorized aliens from the United States labor market today. Part IV begins by extracting lessons from Britain’s nineteenth-century history in ultimately eradicating child labor for developing a private enforcement model aimed at removing unauthorized aliens from the labor market in the United States today. The second half of Part IV fleshes out the contours of that model, proposing a punitive tax on the compensation paid for an unauthorized alien’s services, with private actors allowed to sue for the collection of this tax. Part V discusses the statutory text for enacting this proposal, which is set out in an appendix. Part VI notes that the proposed text could be adopted via budget reconciliation in 2025 and briefly touches upon some possible extensions of the model presented. Part VII concludes.

II. Encouraging Self-Deportation in Conjunction With Forcing Removal

Focusing on the number of aliens who illegally crossed into the United States after he left office — based on border encounters, estimated to be more than 7.2 million² — was a literal lifesaver for Donald Trump during his successful campaign to reclaim the White House. A last-second head tilt by Trump at the rally in Butler, Pennsylvania, on July 13, 2024, to point to a chart showing the number of illegal border crossings since Biden assumed the presidency, resulted in the would-be assassin’s bullet grazing Trump’s ear instead of piercing the back of his head.³ Reversing the trend shown on that chart and removing a substantial number of those illegal entrants during his second term may well define his legacy.

Trump has signaled an aggressive approach to deporting illegal aliens, announcing his intention to invoke for this purpose the Alien Enemies Act of 1798,⁴ and naming Tom Homan, former acting director of Immigration and Customs Enforcement (ICE), as incoming “border czar”.⁵ Homan, for his part, has gone on a public relations offensive, warning state and local officials in several media appearances to refrain from impeding ICE personnel in conducting deportations,⁶ and reminding such officials that under current law, anyone who “conceals, harbors, or shields from detection” illegal aliens could be guilty of a felony.⁷

But even Homan has steered clear of suggesting that ICE deportation efforts would extend to all aliens who are in the country illegally.⁸ Instead, he has repeatedly stated that his first priority will be removing national-security threats and other aliens with criminal records, numbering around 670,000.⁹ The next logical priority would be the approximately 1.3 million aliens who, having exhausted administrative and judicial review of their asylum claims, are now the subject of removal orders but nonetheless remain in the country for want of enforcement action.¹⁰ Satisfaction in full of these two priorities would still leave the overwhelming majority of all illegal aliens untouched. But it remains far from clear that Homan will succeed in achieving even his stated modest goals. The American Civil Liberties Union and other open-border advocates announced that they would be ready with legal challenges on day one of any deportation drive.¹¹ And as a deportation push gets underway, expect wall-to-wall media coverage, replete with images of families being separated, children in cages, and activists, including Democrat lawmakers, confronting ICE personnel and shedding tears, all for the benefit of the cameras.

Designing a deportation program that is effective in removing a significant number of illegal aliens in the country, most of whom Homan’s priorities do not even seek to target, would entail spurring self-deportation rather than deploying ICE. And that would require reducing incentives for these aliens to remain in the country but doing it in a manner that does not draw lawsuits and adverse reporting in the media.

III. IRCA’s Employer Mandates — Honored More in the Breach

By far, the largest such incentive for illegally entering and remaining in the country is the prospect of gaining and retaining employment.¹² To be sure, the Immigration Reform and Control Act of 1986 (IRCA) made it unlawful to hire an alien knowing that he or she is not authorized to work in the United States.¹³ IRCA requires employers to comply with a federal employment verification system.¹⁴ Using a prescribed form, Form I-9, employers “must attest” that they have “verified” that any new employee, regardless of citizenship or nationality, “is not an unauthorized alien” by examining approved documents, e.g., a United States passport or an alien registration card.¹⁵

Employers are subject to civil and criminal sanctions for violating IRCA.¹⁶ Civil penalties assessed against employers can be as high as a $10,000 fine for each unauthorized alien hired.¹⁷ Individual employers engaging “in a pattern or practice of violations” may be guilty of a misdemeanor and face up to six months in prison.¹⁸

Civil enforcement of the ban on hiring illegal immigrants has been rare, and criminal enforcement almost non-existent.

But liability under IRCA, whether civil or criminal, arises only if an employer hires an alien “knowing the alien is an unauthorized alien.”¹⁹ And an employer’s good-faith compliance with IRCA’s verification requirements provides an affirmative defense to an allegation of knowingly hiring an unauthorized alien.²⁰ In other words, all an employer has to do to escape liability under IRCA is to make an attempt in good faith at completing the Form I-9, and therefore, at verifying that any new employee is not an unauthorized alien by examining the documents approved for this purpose.

But the effectiveness of even this limited mandate depends exclusively on government enforcement.²¹ IRCA directs the Attorney General to establish a single set of procedures for receiving complaints, investigating those complaints that “have a substantial probability of validity,” and prosecuting violations.²²

Civil enforcement of these provisions is rare and criminal enforcement almost non-existent.²³ Civil enforcement comprises an administrative hearing with the ultimate goal of issuing a cease-and-desist order.²⁴ Criminal enforcement involves prosecution with convictions, fines, and imprisonment as the end goals.²⁵ Both civil and criminal enforcement typically begin with an “administrative inspection,” or raid, of the worksite, conducted by ICE.²⁶ According to Homeland Security Investigations, a directorate within ICE, such raids seek to penalize “employers who knowingly hire unauthorized workers,” as well as to “deter employers who want to hire unauthorized workers.”²⁷ These raids, however, are expensive to conduct, disruptive of everyday workplace practices, and a lightning rod for negative press.²⁸ Little wonder then that over the years few such raids have actually been carried out, resulting in the abysmally low levels of civil and criminal enforcement actions under IRCA’s employer mandate and sanction provisions.

In addition to these obvious design flaws, the statutory scheme has gaps in it. Some have claimed that IRCA’s employer mandates and sanctions do not prohibit a state or local governmental unit in a sanctuary jurisdiction from hiring unauthorized aliens. The issue was brought to the fore by the University of California system’s recent abortive attempt to hire unauthorized alien students.²⁹ Activists seeking to “regularize” illegal aliens have also urged sanctuary jurisdictions to circumvent IRCA’s employer mandates and sanctions by hiring unauthorized aliens as independent contractors rather than wage-earning employees.³⁰

IV. Developing a Private Enforcement Model

Enforcement of IRCA’s employer mandates and sanctions, or any government enforcement action against those who hire unauthorized aliens, constitutes demand-side intervention in the market for these aliens’ labor. The supply in this market is generally insensitive to the wage rate, or as economists term it, highly price inelastic.³¹ The large number of working-age illegal aliens, the absence of work authorization, and consequently their inability to organize, all combine to make it so. On the other hand, because illegal aliens generally lack technical skills, demand for their labor should be much more sensitive to the wage rate, or substantially price elastic.³² In any such market, whether of services or goods, characterized by highly inelastic supply and much more elastic demand, trying to bar transactions by government enforcement on the demand side rarely translates into the desired outcome; indeed, such government enforcement alone is likely to make things worse. That does not mean, however, that all attempts to shut down transactions in these markets are doomed to failure. To distinguish the circumstances and features of such attempts that miss the mark from those that hit it, let us look at the legislative efforts to eradicate child labor in nineteenth-century Britain, which ultimately bore success after decades of failure.³³

A. Lessons from Regulating Child Labor in Nineteenth-Century Britain

Cracking down on the demand side in any market introduces a new cost of conducting transactions — that of avoiding detection.³⁴ A buyer will disregard government enforcement and proceed to purchase in this market only if the total price to acquire, including the cost of avoiding detection, exceeds the benefit. At least as a first-order effect, then, these transactions usually migrate to less visible channels, where the likelihood of detection is small and therefore the cost of avoiding it low. Economists term this phenomenon, in which demand-side government enforcement drives transactions to unregulated jurisdictions, displacement effect,³⁵ or more cynically, regulatory arbitrage.³⁶

In a labor market with sufficiently elastic demand, if the law forbids employers from employing a certain kind of worker, an employer will flout the law and hire one of these workers only if the sum of the wage paid and the cost of avoiding detection exceeds the productivity of that worker. And if the supply of the outlawed labor is largely inelastic, the illegally hired worker would end up bearing almost the entire cost of avoiding detection in the form of a reduced wage.³⁷ That is because each employer has an incentive to cheat but only at a wage that is far enough below the market wage to cover the amount it costs to avoid detection. But inelastic supply means that the worker will be willing to work at whatever wage is offered.³⁸ Perversely, the more intense the level of government enforcement against employers, the higher the cost of avoiding detection, and the lower the wage that the outlawed labor would be offered. Because government enforcement can only target large visible workplaces, smaller, less-visible employers stand to gain in the wake of such enforcement by taking on some of these now-laid off workers at lowered wages.

This displacement effect was all too evident in the first half of the nineteenth century in Britain as efforts got under way to limit child labor, which exhibited highly inelastic supply.³⁹ By comparison, demand for such labor, as is the case with demand for any largely unskilled labor, was quite elastic.⁴⁰ Cotton and other textile mills were the largest employers of children in the organized sector of the British economy of that time,⁴¹ and Parliament targeted those employers in the Factory Act of 1833.⁴² The legislation regulated the ages and hours of children working in all textile factories.⁴³ Parliament revised some of those restrictions and strengthened the role of worksite inspection a decade later,⁴⁴ in the Factory Act of 1844,⁴⁵ the scope of which, however, remained limited to textile manufacturing. The employment of children outside the textile industry, often in smaller manufacturing facilities, continued to be beyond the purview of regulation until Parliament passed the Factory Act of 1874,⁴⁶ which covered printing, bleaching, dyeing and other processes and establishments.⁴⁷

The parallels between child labor in nineteenth-century Britain and unauthorized aliens in the United States labor market today are striking.

While it is undisputed that the Factory Acts of 1833 and 1844 reduced child labor in the textile industry,⁴⁸ there is no evidence that child labor across the entire British economy declined. “Children did not leave textile factories for schools.”⁴⁹ Primary education enrollment and literacy rates remained unchanged.⁵⁰ Quite simply, the “child labor evil” had migrated to other as-yet unregulated manufacturing,⁵¹ often with even more hazardous working conditions, such as “calico print works.”⁵² In the Factory Act of 1874, by seeking to regulate child labor in some of these other industries, Parliament was belatedly trying to play catch up.⁵³

Those arguing that illegal aliens be allowed to work in the United States draw attention to such a displacement effect, claiming that as a result of government enforcement, illegal aliens often confront unsafe working conditions and exploitation at the hands of mostly unregulated small employers.⁵⁴ It is true that government enforcement will largely be confined to the bigger employers in the formal sectors of the economy. But it doesn’t necessarily follow from this that unauthorized aliens should inevitably be able to secure employment in sectors of the economy lying below the radar screens of government enforcement. Britain’s eventual success at eradicating child labor in the latter half of the nineteenth century refutes such a conclusion.

Early enforcement of the British Factory Acts was unimpressive. Inspections under the Factory Act of 1833 didn’t begin until 1835,⁵⁵ and even then, were initially not very successful in detecting cheating that was widely known to be rampant.⁵⁶ A critical reason for the ineffectual rollout was Parliament’s decision to rely exclusively on public enforcement,⁵⁷ which lacked both funding and infrastructure.⁵⁸ Neither in the original 1833 legislation nor in any subsequent enactment aimed at regulating child labor did Parliament explicitly empower private enforcement.⁵⁹ This contrasted with the earlier-enacted animal cruelty laws,⁶⁰ which enabled and largely relied on the enforcement efforts of private parties rather than public prosecutors.⁶¹ A charitable organization, then known as the Society for the Prevention of Cruelty to Animals, funded entirely by non-governmental contributions, formed shortly after the first of these laws was passed,⁶² quickly became and remains to date, for most actions brought under them, “the de facto prosecutorial authority.”⁶³

The absence of a similar private enforcement mechanism hampered preliminary efforts to implement child labor regulation.⁶⁴ Gradually, however, informal private enforcement initiatives emerged that assisted the government in achieving greater compliance. Whistleblowers and anonymous tips aided factory inspectors to catch violators.⁶⁷ And over time, private “prosecuting societies” sprang up organically to help enforce some child labor regulation, although “their activities were never as coordinated or as extensive” as those of the societies enforcing the laws against animal cruelty.⁶⁶

Ultimate success in eradicating child labor in nineteenth-century Britain, however, required a supply-side intervention, the Elementary Education Act of 1870,⁶⁷ which made education of children both free and compulsory.⁶⁸ That, coupled with the increasing “soft power” wielded by social reformers, who stigmatized the hiring of children, forced employers to look elsewhere for cheap labor.⁶⁹

The parallels between child labor in nineteenth-century Britain and unauthorized aliens in the United States labor market today are striking. And so are the lessons to be drawn for trying to render the latter unemployable. In the face of adequately elastic demand for child labor in nineteenth-century Britain,⁷⁰ even though supply was essentially inelastic,⁷¹ compulsory and free primary education effectively reduced that supply to cause market wage levels to rise.⁷² And private enforcement efforts, albeit informal, made up for some of the shortfalls in government enforcement funding to enhance the possibility of detection and therefore the cost of avoiding it. When the cost of bearing the social stigma of employing children was added to it, most employers across Britain deemed child labor to be a losing proposition.⁷³

Demand for the labor of unauthorized aliens in the United States should likewise be amply elastic.⁷⁴ Resultantly, a perceptible increase in the price that employers must pay to hire these aliens should motivate them to opt for less expensive substitutes. But unlike compulsory and free primary education in nineteenth-century Britain, there are no simple supply-side solutions here. The scope of the only possible intervention on the supply side, forcible deportations, would be inherently limited for the reasons laid out above.⁷⁵

On the demand side, it is unclear whether we can add to the costs of hiring an unauthorized alien by trying to stigmatize an employer for such an action. Vociferous segments of public opinion support affording employment opportunities to illegal aliens.⁷⁶ And in any case, unlike children, unauthorized aliens are not easily identifiable in the workplace. The absence of any significant non-monetary costs confronting an employer contemplating hiring unauthorized aliens is an argument in favor of imposing a monetary “toll charge” hefty enough to deter such hiring. That brings us to the cost of avoiding detection as the last variable that we can try and control. As with factory inspections under the British Factory Acts, ICE worksite raids can only hope to uncover a tiny fraction of all violations.⁷⁷ And that is an argument for not just relying informally on private enforcement, as in the implementation of the British Factory Acts, but to take a leaf out of British animal cruelty legislation and formally enshrine private enforcement action in the law.⁷⁸ Finally, to properly incentivize private actors to proceed with enforcement, they should be entitled to share in any monetary recovery.

Putting those policy implication together, meaningfully reducing employment opportunities for unauthorized aliens would require an approach combining the following features: (1) subjecting employers to a large monetary penalty on detection; (2) extending authority for detection beyond government agencies to all others in that economic space — not just other employers but the populace at large, even the unauthorized aliens themselves; and (3) setting aside for these private enforcers a portion of the monetary penalty collected.

B. A Privately Enforced Punitive Tax to Compel Compliance with E-Verify

The proposal delineated here effectuates that approach. In short, I argue for legislation to raise the costs of hiring unauthorized aliens by levying a commensurately sizeable fee and for incentivizing private actors to police the collection of this levy. Specifically, Congress should: (1) impose a punitive tax based on the gross compensation paid for an unauthorized alien’s personal services or labor, whether as an employee or independent contractor; (2) affix liability for this tax on all those paying such compensation, whether in the for-profit, non-profit, or government sectors; and (3) to the extent any such tax is not voluntarily assessed and paid over, let “private attorneys general” — in reality, snitches or whistleblowers, but formally called relators — sue to recover a multiple of it.

Congress would merely have to enact the tax on the gross compensation paid for an unauthorized alien’s services, by adding a section to the Internal Revenue Code (IRC),⁷⁹ and enable its private enforcement, by tweaking the False Claims Act.⁸⁰ Following that legislative exercise, the federal government can simply step aside. No federal agency need lift another finger, or spend another dime, to crack down on the hiring of unauthorized aliens. Strict liability for a sufficiently high tax on the gross compensation paid for an unauthorized alien’s services, coupled with the greed of the private citizenry, more particularly that of relators and their lawyers,⁸¹ would render unemployable a significant proportion of all unauthorized aliens in the labor market.

The threat of forking over several multiples of this punitive tax in a private enforcement action would effectively coerce every employer to closely scrutinize all potential hires with respect to their work-authorization status in the United States and ferret out any unauthorized alien. Less than complete success in this task could prove to be prohibitively expensive. Any unauthorized alien in fact hired and compensated would be almost always eventually detected. Indeed, nothing would preclude the unauthorized alien from himself blowing the whistle and acting as a relator to collect several times the gross compensation paid for his services. This would be especially true if, as is usually the case, the unauthorized alien is not assured of a long-term employment relationship with that particular employer.

Whether or not an unauthorized alien does actually proceed against his employer, there would always exist the live possibility of him doing so. And that would suffice to make that alien, along with all other unauthorized aliens, proverbially radioactive for a potential employer.

The proposed punitive tax should not apply if compensation is paid for the services of an individual whom E-Verify identifies as authorized to work.

Imposing strict liability on employers for making compensation payments to unauthorized aliens may seem at first glance to portend a chilling effect on all hiring decisions, and therefore, on economic activity in general. The proscription on child labor, for example, is not susceptible to such a charge because an employer can readily distinguish a child, who may not be hired, from an adult, who can be. In sharp contrast, were an unauthorized alien to present himself before an employer as a prospective hire, it would not be immediately apparent to that employer that the alien is a member of a prohibited category.

But E-Verify, an Internet-based program, operated by the U.S. Citizenship and Immigration Services (USCIS), offers all employers a costless means of rapidly verifying any potential hire’s authorization to work in the United States.⁸² Debate about the accuracy of E-Verify, led by proponents for free movement of workers across borders, such as the Cato Institute,⁸³ has predictably focused almost entirely on the program’s failure to confirm work-authorization status for those who are, in fact, authorized to work in the United States, so-called false negatives. These critics have virtually ignored the program’s likelihood of inaccurately confirming work-authorization status for an unauthorized alien, a false positive.

A 2012 study commissioned by the USCIS found that of the 8.2 million queries submitted to E-Verify in fiscal year 2009, the program incorrectly flagged a properly authorized alien as unauthorized to work in the United States about 6 percent of the time, but follow-up by the employer and/or the alien brought that false-negative error rate down to less than 1 percent.⁸⁴ On the other hand, “approximately half of the cases submitted to E-Verify for unauthorized workers were incorrectly found to be employment authorized,” false positives resulting largely due to the program’s inability to detect identity theft and fraudulent documents.⁸⁵

A false negative would be upsetting to those who maintain that any lost employment opportunity robs the economy of productivity. In reality, though, a native worker would almost always be available to step in immediately to take up a job not offered to an authorized alien for lack of verification by E-Verify. But for purposes of the proposed punitive tax on the gross compensation paid for an unauthorized alien’s services outlined above, a false positive would be much more concerning. It would mean that even relying on E-Verify wouldn’t necessarily shield any given employer from liability for such a tax.

Already by 2012, USCIS believed that adding photo-matching capability had cut down on the rate of false positives,⁸⁶ a trend that would have only accelerated since then with the availability of biometric information and artificial intelligence capabilities. Nonetheless, to circumscribe the extent of diligence required of any employer, the proposed punitive tax should not apply if compensation is paid for the services of an individual whom E-Verify identifies as authorized to work in the United States. This should hold even if the individual is subsequently determined to be an unauthorized alien under IRCA and not actually authorized to work in the United States. Putting it another way, a positive response from E-Verify, whether true or false, should be dispositive for negating liability for the tax.

Such a provision would eliminate liability arising from E-Verify’s false positives. And it would shift the burden of complying with E-Verify on to the employer. Because relying on E-Verify would offer a foolproof way of avoiding the new excise tax, this provision should effectively ensure universal compliance with the program, which is presently mandated only for federal contractors and for states that have chosen to do so.⁸⁷ Moreover, in the event of E-Verify inaccurately identifying an authorized alien as unauthorized, the employer would now have an heightened incentive to follow up with E-Verify and establish the alien’s correct status, thus reducing false negatives even further.⁸⁸

V. Proposed Legislation

Imposing this proposed tax on anyone who makes a compensation payment for an unauthorized alien’s services as well as enabling the private enforcement of the tax would be a straightforward legislative exercise. Congress can easily piggyback on legislative constructs already in place.

A. Enacting the Punitive Tax

For the tax itself, an ideal model to replicate would be the 6.2 percent excise tax on the employer’s portion of the Social Security tax imposed on wages under IRC section 3111.⁸⁹ This tax is sweeping in its scope, applying to all employers — individuals, for-profit business entities (including pass-through entities), and otherwise tax-exempt entities, such as non-profit organizations and state and federal government agencies.⁹⁰ The only exceptions it admits are for de minimis amounts, specified differently for agricultural labor, domestic services, and other services,⁹¹ and for non-employee compensation; i.e., payments to independent contractors.⁹²

Akin to the section 3111 tax on wages, the proposed new tax on the gross compensation paid for an unauthorized alien’s services would be an excise tax.⁹³ But because the new tax would be punitive in nature, seeking to deter hiring unauthorized aliens rather than raising additional revenue, its rate would be much higher; say, 100 percent. And its base would be even broader, eliminating the exceptions for de minimis payments and for independent contractors. As a result, the new tax would apply to any compensation paid for any quantum of personal services of an unauthorized alien, whether such services are used in income-producing activities (e.g., labor at a manufacturing plant) or in consumption activities (e.g., landscaping for a household).

Congress can easily piggyback on legislative constructs already in place.

The accompanying appendix spells out the text for a new section of the IRC imposing this excise tax on any individual or entity making compensation payments for an unauthorized alien’s services. The section is modeled after IRC section 3111, would immediately follow that provision, and be numbered section 3111a.⁹⁴ The proposed legislative language makes clear that liability for the new excise tax, like liability under IRC section 3111, would be strict. And it also makes clear that unlike the section 3111 tax, liability for the new excise tax would arise from payment of compensation “on account of” personal services of an unauthorized alien, instead of solely from paying wages.⁹⁵ As a result, an employer could not hide behind the independent contractor status of any unauthorized alien to evade the new excise tax. Further, more than one payor could be liable for the same underlying payment.

To see this, consider a business that outsources its direct labor requirements by contracting with a staffing company, which, in turn, engages an unauthorized alien (whether as an employee or as an independent contractor) to perform services for the business. In this case, the payment made by the business to the staffing company and the payment made by the staffing company to the unauthorized alien will both constitute compensation paid on account of the alien’s personal services. Consequently, both payments will be subject to the new excise tax, without any set off. Again, because this new excise tax would be punitive in purpose, imposed with the objective of deterring hiring unauthorized aliens and not raising revenue,⁹⁶ multiple layers of taxation on the same economic activity would be a virtue rather than a vice of the scheme.⁹⁷

As with most taxes at the federal level, administering the new excise tax would rely on self-reporting and self-assessment.⁹⁸ Facilitating such self-reporting and self-assessment at minimal administrative costs could be accomplished by making minor adjustments to current forms published and processed by the Internal Revenue Service (IRS or Service).⁹⁹ For taxpayers already filing employment tax returns, an additional line on such returns for reporting the new excise tax would suffice. This group of taxpayers would include any individual or entity that pays wages beyond the applicable de minimis thresholds specified in IRC section 3111, and therefore, cover the vast majority of potential hirers of unauthorized aliens. Of the remaining — taxpayers who don’t file employment tax returns — many (but not all) do file income tax returns. For them, the IRS could provide an additional line on the applicable income tax returns for reporting the new excise tax. Certain taxpayers such as pass-through entities and non-profit organizations don’t file income tax returns but instead file information returns. For these taxpayers, the applicable information returns could contain an additional line for reporting the new excise tax. Only for those exceedingly few taxpayers who don’t file employment tax, income tax, or information returns would the IRS have to devise a new reporting form.

Like the employment tax under IRC section 3111, and as the proposed statutory text makes clear, the new excise tax would be both assessable and divisible.¹⁰⁰ The former means that in the event of a disagreement between the taxpayer and the IRS over whether and what amount of the new excise tax is properly owing, the taxpayer wouldn’t have recourse to “deficiency procedures”; i.e., the right to a judicial review prior to the tax being assessed and becoming due and payable.¹⁰¹ In short, the taxpayer’s judicial remedy would be limited to first paying the tax and then suing for a refund.¹⁰² But the divisibility of the tax would ensure that the taxpayer be required to pay only a divisible portion rather than the full amount of any assessed tax liability to go to court. For this new excise tax, the divisible portion would be the tax assessed for any one year for the gross compensation that the IRS determines the taxpayer had paid in that year for the services of a given unauthorized alien. After the dispute between the taxpayer and the IRS is resolved in court with respect to that one litigated year, the terms of that judicial resolution would then govern the treatment of all other years in dispute.

B. Enabling Private Enforcement

But judicial resolution of a dispute between the taxpayer and the IRS would be an academic point. Disputes that would in actuality be litigated in court would be between the taxpayers and relators — private citizens suing on behalf of the United States.

Enabling private citizens to sue for enforcing this new excise tax would be even more straightforward than enacting the tax. All Congress would have to do is tweak the False Claims Act to allow actions against non-payment of this tax. Signed into law in 1863 by President Lincoln to combat rampant fraud against the military during the Civil War,¹⁰³ and revitalized by Congress in 1986, the False Claims Act (FCA) is by far the most used federal scheme for the enforcement of public laws by private citizens.¹⁰⁴ It permits a so-called qui tam action, one in which a private plaintiff — a relator — proceeds on behalf of the federal government against another individual or entity for falsely obtaining or withholding funds from the government. Success in the action renders the defendant liable to the government for a civil fine of up to $27,894, adjusted periodically for inflation, as well as damages in the amount of three times the loss to the government, with the relator sharing in any ultimate recovery.¹⁰⁵

All Congress would have to do is tweak the False Claims Act to allow actions against non-payment of this tax.

Once a relator initiates a qui tam action, the federal government can do one of three things: (1) If it deems the action meritless, it can move to dismiss it, insulating the defendant from liability; (2) If it deems the action worthy of expending public resources, it can take over the action and litigate it on its own; or (3) If it is ambivalent about the action’s merits or chooses not to spend time and resources in investigating them, it can step aside and let the relator litigate the action.¹⁰⁶ If the action succeeds with the government litigating it, the relator still gets between 15 and 25 percent of the recovery, along with all costs and fees she may have incurred.¹⁰⁷ If, however, the relator litigates and succeeds with the action, her share of the recovery can range between 25 and 30 percent, again with all costs and fees. Qui tam actions under the FCA most often involve healthcare and government contractor fraud.¹⁰⁸ An express “tax bar” in the FCA currently precludes qui tam actions for non-payment of taxes and other violations of the IRC.¹⁰⁹

To allow private enforcement of the proposed excise tax on the gross compensation paid for an unauthorized alien’s services, Congress would have to amend the FCA’s tax bar provision to permit a qui tam action for violating new IRC section 3111a. And to maintain the strict liability regime for this tax, Congress would have to relax the FCA’s current liability provision, which requires “knowingly and improperly” retaining government funds,¹¹⁰ to encompass unknowingly but improperly retaining funds owing to the government under new IRC section 3111a. The accompanying appendix shows the very slight amendments to the statutory text of just one section of the FCA that would accomplish both goals.

Those changes would ensure that the proposed new excise tax would be rigorously enforced even in the absence of any action by the IRS. Far from investigating an individual or entity that may have paid compensation for an unauthorized alien’s personal services, the Service wouldn’t even have to look at such a payor’s tax returns.¹¹¹ It could rest assured that anyone with knowledge of the hiring and payment would have a powerful monetary incentive to become a relator and bring a qui tam action. The relator could well be an estranged family member, neighbor, or competitor of the payor, or the unauthorized alien himself, if he is sufficiently disgruntled with his employment conditions.

And once such an action is brought, the IRS can simply let the relator proceed and not expend any of the agency’s own resources to investigate the merits of that action. Success in the qui tam action would render the one paying the compensation for an unauthorized alien’s services liable for more than three times the excise tax. Because the excise tax itself would equal 100 percent of the gross compensation, a successful qui tam action would mean the payor’s liability exceeding three times that gross compensation.

Critically, every payor would be aware that it is at the mercy of such a qui tam action by a relator if a hire turns out to be an unauthorized alien. That would sharply increase the incentive for every payor to verify each prospective hire’s status for authorization to work in the United States. And discovery of the prospective hire’s status as an unauthorized alien would drastically shrink his employment opportunities.¹¹²

VI. Implementation and Extensions

The legislative exercise of enacting a new excise tax on the gross compensation paid for an unauthorized alien’s services and of enabling its private enforcement, outlined above and detailed in the accompanying appendix, consists of adding exactly 653 new words of statutory text to the United States Code. That text can be added in a budget reconciliation bill, which would require only simple majorities in the House and Senate.¹¹³ Several temporary changes to the IRC, affecting individuals and households as well as businesses, made as part of the Tax Cuts and Jobs Act (TCJA) of 2017,¹¹⁴ are scheduled to expire at the end of 2025. To avert a “Tax Armageddon,” a term coined to describe economy-wide disruptions emanating from the abrupt lapse of tax breaks, Congress is widely expected to pass a budget reconciliation bill making most, if not all, of these expiring TCJA provisions permanent.¹¹⁵ The legislative language set out in the accompanying appendix could easily be made part of such a bill, thus implementing in full the proposal presented here.

This proposal would require adding only 653 new words of statutory text to the U.S. Code, and can be added to a budget reconciliation bill, which would require only simple majorities in the House and Senate.

The result would leave almost every individual and entity in the country — from wage earners to self-employed businessmen, and from large and small corporations to churches and synagogues — strongly averse to hiring unauthorized aliens. That aversion would stem not from the threat of workplace raids or the specter of any other enforcement action by the federal government, but the likely prospect of being the target of a private lawsuit driven by the most potent of animating forces in a capitalist society — greed. The evisceration of the employment opportunities of an unauthorized alien would thus be achieved without any visible role played by federal government agencies, least of all by ICE. With no government agents to spotlight, there would be little to report and even less to protest. And with employment looking increasingly unattainable, many unauthorized aliens would seriously consider self-deportation. Again, a phenomenon that commands few eyeballs and even fewer clicks.

I have presented above a simply designed, easy to administer, and effective way of “motivating” large numbers of illegal immigrants, including those who may not have committed any crimes since crossing the border, to return to their native countries. This proposal could be implemented regardless of the success of any attempts at forcible deportations. The latter, in any case, are likely to be limited to a tiny fraction of all illegal aliens in the country.¹¹⁶ Because the only goal I posited was impelling self-deportations, I kept the proposed measure clear-cut and uncomplicated, with a single high level of tax on the gross compensation paid for any unauthorized alien’s services.

But the same approach could be refined and calibrated to achieve the broader objective of protecting the domestic workforce from wage depression brought about by legally importing workers. For this, the proposal presented here could be expanded on to provide for multiple layers of taxation on the gross compensation paid out for the services of any non-U.S. citizen worker, including those that are authorized to work. Thus, for example, in addition to the proposed 100 percent excise tax on the gross compensation paid for an unauthorized alien’s services, a lower, say 50 percent, excise tax could be enacted for the gross compensation paid for the services of those on temporary work authorization, such as an H-1B visa. And an even lower, say 20 percent, excise tax on the gross compensation paid for the services of those with employment-based green cards.¹¹⁷ Because the tax would be imposed on those paying the compensation, this would serve to reduce or remove any incentives for bringing in cheaper labor from abroad.

Similarly, the push toward self-deportation for an unauthorized alien could be reinforced by expanding the base of the excise tax proposed here from beyond just gross compensation to also include transfer payments, such as gifts by charities and non-governmental organizations.¹¹⁸ Again, the tax would be imposed on the payors, and thus constrain them into internalizing some of the many externalities imposed by the presence of illegal aliens in the country.

Adding these extensions to the proposal made here would, of course, introduce complexities in designing and enacting the excise tax as well as in enabling its private enforcement.¹¹⁹ Trump’s win following an uncompromising stand against illegal immigration during the election campaign, and Republican control of both chambers of Congress for the next two years, have together combined to offer up a promising, albeit fleeting, opportunity to devise a legislative scheme that can both help reduce the number of those already present in the country illegally and act as a durable deterrent against those tempted to cross the border illegally in the future. That opportunity is best seized with a short and straightforward measure, devoid of complications, such as the one proposed here. Embellishments can await a shift in the “Overton Window”,¹²⁰ further away from the present levels of unsustainably high immigration.¹²¹

VII. Conclusion

Republicans today have the legislative and executive authority to fully implement the proposal presented here. This implementation would require adding little more than some 650 words to a budget reconciliation bill. And its consequence would force all employers nationwide to comply with E-Verify. If GOP lawmakers in control of both chambers of Congress refrain from even this undemanding legislative task, their electorate would be justified in concluding that they accord a higher priority to not placing even the slightest added burden on employers than they do on removing illegal aliens.

Appendix

Proposed Statutory Text

I. Insert the following new section after current 26 U.S.C. § 3111:

United States Code Annotated

  Title 26. Internal Revenue Code

     Subtitle C. Employment Taxes

     Chapter 21. Federal Insurance Contributions Act

     Subchapter B. Tax on Employers

§ 3111a. Excise tax on gross compensation paid for personal services of unauthorized alien.

(a) Excise tax imposed. — In addition to other taxes, there is hereby imposed on every “covered person,” as defined below in subsection (c), an excise tax in the amount of 100 percent of the gross compensation paid by or on behalf of such covered person during the taxable year on account of personal services or labor performed or purported to be performed in the United States by any individual who is an “unauthorized alien,” as defined below in subsection (c).

(b) Strict and several liability. — The excise tax imposed by subsection (a) shall be paid by the covered person regardless of whether:

1. the covered person was aware of such individual’s status as an unauthorized alien;
2. the covered person had reasonable or other cause to be unaware of such individual’s status as an unauthorized alien;
3. the payment of gross compensation constituted wages, non-employee compensation, or some other form of remuneration;
4. the personal services or labor performed or purported to be performed in the United States by such individual were for the benefit of the covered person;
5. another covered person is liable for the excise tax imposed by subsection (a) with respect to the same set of personal services or labor performed or purported to be performed in the United States; and
6. the payment of gross compensation was claimed as a deduction.

(c) Definitions

(1) Definition of “covered person.” — As used in this section, the term “covered person” means:

(A) a United States person, as defined in section 7701(a)(30);

(B) any other domestic organization exempt from tax under this title;

(C) a State, political subdivision of a State, and any agency or instrumentality of a State or political subdivision of a State; and

(D) any instrumentality of the United States.

(2) Definition of “unauthorized alien.” — As used in this section, the term “unauthorized alien” means an individual who:

(A) would be deemed an unauthorized alien under 8 U.S.C. § 1324a(h)(3) if he were seeking employment; unless

(B) at the time of the payment of gross compensation referred to in subsection (a), the individual was definitively identified as authorized to work in the United States by E-Verify, the employment verification program jointly administered by the United States department of homeland security and the social security administration, or any of its successor programs.

(d) Reporting on annual return. — The excise tax imposed by subsection (a) shall be reported by each covered person on its annual employment tax, income tax, or other applicable return, including an applicable information return, and if no return is otherwise applicable, on such return as prescribed by the Secretary, and shall become due and payable no later than the due date (without regard to extensions) of such return.

(e) Instrumentality of the United States. — Notwithstanding any other provision of law (whether enacted before or after the enactment of this section 3111a) that grants to any instrumentality of the United States an exemption from taxation, such instrumentality shall not be exempt from the excise tax imposed by subsection (a) unless such other provision of law grants a specific exemption, by explicit reference to this section 3111a, or the corresponding section of any subsequent law.

(f) Deficiency procedures not to apply. — Subchapter B of chapter 63 (relating to deficiency procedures for income, estate, gift, and certain excise taxes) shall not apply in respect of the assessment or collection of the excise tax imposed by subsection (a).

(g) Divisible tax. — The excise tax imposed by subsection (a) shall constitute a “divisible tax,” within the meaning of section 6331(i)(2).

II. Insert the following italicized text in current 31 U.S.C. § 3729:

United States Code

  Title 31. Money and Finance

     Subtitle III. Financial Management

        Chapter 37. Claims

           Subchapter III. Claims Against the United States Government

§ 3729. False claims

(a) Liability for certain acts. —

(1) In general. — Subject to paragraph (2), any person who —

. . .

(G) knowingly makes, uses, or causes to be made or used, a false record or statement material to an obligation to pay or transmit money or property to the Government, or knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government, or only with respect to the excise tax imposed under 26 U.S.C. § 3111a(a), knowingly or improperly conceals or avoids or decreases an obligation to pay or transmit money or property to the Government,

...

(d) Exclusion. — This section does not apply to claims, records, or statements made under the Internal Revenue Code of 1986, except those under 26 U.S.C. § 3111a, as set out in subsection (a) above.

End Notes

¹ See Mohammad M. Fazel-Zarandi, Jonathan S. Feinstein & Edward H. Kaplan, The Number of Undocumented Immigrants in the United States: Estimates Based on Demographic Modeling with Data from 1990 to 2016, 13 PLoS One e0201193, at 8 (Sept. 21, 2018) (estimating the mean number of illegal aliens present in the country as of 2016 to be 22.1 million, “essentially twice the current widely accepted estimate,” with a ninety-five percent probability interval ranging from 16.2 million to 29.5 million). Since then, at least 10 million aliens have been “encountered” at the southern border by U.S. Customs and Border Protection. See Christa Case Bryant & Caitlin Babcock, How Biden and Trump Compare on Border Crossings and Immigration, Christian Sci. Monitor (Apr. 16, 2024); see also infra note 2. Compare Steven Camarota, Foreign-Born Population Grew by 5.1 Million in the Last Two Years, Center for Immigration Studies (May 13, 2024); Robert Warren, US Undocumented Population Increased to 11.7 Million in July 2023: Provisional CMS Estimates Derived from CPS Data, Center for Migration Studies (Sept. 6, 2024).

² See Chris Pandolfo, 7.2M Illegals Entered the US Under Biden Admin, An Amount Greater Than Population of 36 States, Fox News (Feb. 20, 2024). Compare Jordan Liles, 7.2M Migrants Have Illegally Crossed US Border Under Biden, Exceeding the Populations of 36 States?, Snopes (Feb. 22, 2024) (“This claim was true, in that the number of more than 7.2 million immigrants specifically reflected border encounters with U.S. officials, according to data provided on the U.S. Customs and Border Protection website — not an increase of that magnitude in the immigrant population.”).

³ See, e.g., Monica Sager, Trump Says He Only Dodged Bullet Because He Turned His Head To Read Screen, Newsweek (July 14, 2024).

⁴ Codified as 50 U.S.C. §§ 21–24.

⁵ Mike Ives, Trump Names Thomas Homan ‘Border Czar’ With a Wide Portfolio, The New York Times (Nov. 11, 2024).

⁶ See, e.g., Billal Rahman, Trump’s Border Czar Issues Warning to Democrats, Newsweek (Dec. 9. 2024).

⁷ 8 U.S.C. §1324(A)(1)(A)(iii).

⁸ See, e.g., Melissa Cruz, Tom Homan vs Stephen Miller: Who will decide Trump’s mass deportation agenda?, USA Today (Dec. 1, 2024) (quoting Homan describing ICE deportation efforts to be undertaken under his watch as “targeted arrests” rather than “a mass sweep of neighborhoods”).

⁹ See, e.g., Rep. Tony Gonzales Confirms Over 662,000 Noncitizens With Criminal Histories Released in U.S. Communities, Press Release (Sept. 27, 2024); ICE Acknowledges that 647,000 Aliens with Criminal Charges or Convictions are Roaming Freely in the U.S., Federation for American Immigration Reform (Sept. 27, 2024).

¹⁰ See, e.g., Hans A. von Spakovsky, What Everyone Is Missing in the Argument Over Mass Deportation, The Heritage Foundation (Nov. 21, 2024).

¹¹ See, e.g., ACLU Statement on Trump’s Plan to Use Military to Mass Deport Immigrants, Press Release (Nov. 18, 2024).

¹² See, e.g., Gordon H. Hanson, Illegal Migration from Mexico to the United States, 44 J. Econ. Lit. 869 (2006) (concluding that expectation of higher earnings drives most illegal immigration across the United States-Mexico border); Gordon H. Hanson & Antonio Spilimbergo, Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border, 89 Am. Econ. Rev. 1337 (1999) (same).

¹³ P.L. 99-603 (codified, as amended, at 8 U.S.C. §§1324a–1324b); see 8 U.S.C. § 1324a(a)(1) (outlawing knowingly hiring an “unauthorized alien); § 1324a(h)(3) (defining an “unauthorized alien).

¹⁴ 8 U.S.C. § 1324a(b); accord Kansas v. Garcia, 589 U.S. 191, 195 (2020).

¹⁵ 8 U.S.C. § 1324a(b)(1)(A).

¹⁶ 8 U.S.C. § 1324a(e)(4) (outlining civil penalties); 8 U.S.C. § 1324a(f)(1) (outlining criminal penalties).

¹⁷8 U.S.C. § 1324a(e)(4); accord Chambers of Com. of the U.S. v. Whiting, 563 U.S. 582, 589 (2011).

¹⁸ 8 U.S.C. § 1324a(f)(1); accord Whiting, 563 U.S. at 589.

¹⁹ 8 U.S.C. §§ 1324a(a)(1)(A) (emphasis added).

²⁰ 8 U.S.C. § 1324a(a)(3); accord Maka v. U.S. I.N.S., 904 F.2d 1351, 1359 (9th Cir. 1990), amended, 932 F.2d 1352 (9th Cir. 1991).

²¹ See 8 U.S.C. § 1324a(e).

²² 8 U.S.C. § 1324a(e)(1).

²³ See, generally, Brian Owsley, Supply and Demand in the Illegal Employment of Undocumented Workers, 71 Cath. U. L. Rev. 227, 255–75 (2022).

²⁴ 8 U.S.C. § 1324a(e)(4), (5).

²⁵ 8 U.S.C. § 1324a(f)(1).

²⁶ U.S. Immigration and Customs Enforcement, Worksite Enforcement, Guide to Administrative Form I-9 Inspections and Civil Monetary Penalties 2 (Nov. 25, 2008).

²⁷ See, e.g., Cassie L. Peterson, An Iowa Immigration Raid Leads to Unprecedented Criminal Consequences: Why Ice Should Rethink the Postville Model, 95 Iowa L. Rev. 323, 332–34 (2009) (discussing the logistics and aftermath of an ICE raid of a poultry-processing plant in Postville, Iowa, which involved 900 agents and 697 arrest warrants, and resulted in the detention of 389 unauthorized alien workers, mostly from Guatemala).

²⁸ Labor Exploitation, Homeland Security Investigations (last updated Apr. 22, 2024).

²⁹ See, e.g., Blake Jones, Gavin Newsom Vetoes a First-in-the-Nation Attempt to Employ Undocumented Students, Politico (Sept. 22, 2024); George Fishman, California Dreamin’: Can California state universities legally hire illegal aliens?, Center for Immigration Studies (Nov. 28, 2022).

³⁰ See, e.g., Recent Legislation, Local Government, Vt. Stat. Ann. Tit. 24 App., Ss 3-8 to -8a (2024), Burlington Expands Voting in Municipal Elections to Certain Immigrants, 137 Harv. L. Rev. 2432, 2438 (2024) (“While immigration laws prevent employers from knowingly hiring immigrants without work authorization, they do not change that independent contractors need only a social security number (SSN) or individual taxpayer identification number (ITIN) to work.”). But see 8 U.S.C. § 1324a(a)(4) (explicitly extending IRCA’s employer mandates and sanctions to “a person or other entity who uses a contract, subcontract, or exchange . . . to obtain the labor of an [unauthorized] alien in the United States”).

³¹ See George J. Borjas and Hugh Cassidy, The Wage Penalty to Undocumented Immigration, 61 Labour Econ. 101757, at 1 (2019) (concluding that “labor supply elasticity of undocumented men was close to zero, suggesting that their labor supply is very inelastic”).

³² See Andreas Lichter, Andreas Peichl & Sebastian Siegloch, The Own-Wage Elasticity of Labor Demand: A Meta-Regression Analysis, 80 Eur. Econ. Rev. 94 (2015).

³³ The United States does not provide a comparable historical model to assess the impact of legislation targeted at checking child labor for several reasons. For sure, using children as a source of unskilled labor was also endemic in the United States during the nineteenth century. See Walter I. Trattner, Crusade For The Children: A History of the National Child Labor Committee and Child Labor Reform in America 22 (Quadrangle Books 1970); Caroline G. Trinkley, Child Labor in America: An Historical Perspective, 13 In Pub. Interest 59, 67–68 (1993). Further, progressive movements seeking to put a stop to this practice emerged contemporaneously in the United States and Britain. See Trattner, supra, at 28–29. But unlike in Britain, where opposition centered around the dreadful conditions under which children worked, opposition in the United States focused on the resulting lack of educational opportunities for the children. See id. More importantly, in the United States, the “pressures of interstate commerce and the lack of federal regulation discouraged the development of the state laws to protect child laborers.” Trinkley, supra, at 79. Even watered-down federal legislation specifying limits on the ages and working hours of child laborers and prohibiting the interstate transportation of articles produced in violation of such standards was struck down as violative of state rights and exceeding congressional powers under the Commerce Clause. See Hammer v. Dagenhart, 247 U.S. 251 (1918), overruled by United States v. Darby, 312 U.S. 100 (1941). In fact, it was not until 1938 that Congress passed the Fair Labor Standards Act, P.L. 75-718, the first federal legislation to seek direct regulation of child labor. See Trattner, supra, at 204. By then, however, the problem had largely resolved itself in response to socio-economic factors, with less than five percent of children between the ages of ten and fifteen employed full-time nationwide. See Carolyn M. Moehling, State Child Labor Laws and the Decline of Child Labor, 36 Explorations in Economic History 72, 78 (1999).

³⁴ This outcome is most frequently evident in the context of banning sales of contraband items, such as drugs. See, e.g., Jeffrey A. Miron & Jeffrey Zwiebel, Alcohol Consumption During Prohibition, 81 AEA Papers and Proceedings, 242, 245 (1991) (“Prohibition increases supply costs, as these must include the cost of evading detection and the potential cost of punishment.”).

³⁵ See Joseph Deutsch, Simon Hakim & J. Weinblatt, Interjurisdictional Criminal Mobility: A Theoretical Perspective, 21 Urb. Stud. 451 (1984); Simon Hakim, Arie Ovadia, Eli Sagi & J. Weinblatt, Interjurisdictional Spillover of Crime and Police Expenditure, 54 Land Economics 200 (1979); Thomas A. Reppetto, Crime Prevention and the Displacement Phenomenon, 22 Crime & Delinq. 166 (1976); see also Richard A. Posner, Economic Analysis of Law 667 (Aspen Publishers 6th ed. 2003); Uriel Spiegel, Economic Theoretical View of Criminal Spillover, in Crime Spillover 48, 49–53 (Simon Hakim and George F. Rengert, eds., Sage Publications 1981).

³⁶ Regulatory arbitrage may be loosely defined as engaging in transactions designed to capture profit opportunities created by differential application of laws. Cf. Herbert V. Morais, Fighting International Crime and Its Financing: The Importance of Following a Coherent Global Strategy Based on the Rule of Law, 50 Vill. L. Rev. 583, 619 (2005) (commenting on the tendency of those seeking to violate a proscription to move “to a jurisdiction with weaker laws and law enforcement regimes”); Frank Partnoy, Financial Derivatives and the Costs of Regulatory Arbitrage, 22 J. Corp. L. 211, 227 (1997) (focusing on trading strategies designed to exploit varying treatments of economically equivalent transactions).

³⁷ Economists refer to how this cost, or the cost of any imposition, including a tax, on a transaction, is borne as the “economic incidence” of that imposition. When demand is relatively elastic and supply is relatively inelastic, the economic incidence will fall largely on the supplier. On the other hand, when demand is relatively inelastic and supply is relatively elastic, the economic incidence will fall largely on the buyer. See generally, e.g., Harvey S. Rosen, Public Finance 273-301 (McGraw-Hill/Irwin 7th ed. 2005); David A. Besanko and Ronald R. Braeutigam, Microeconomics: An Integrated Approach 25-73 (Wiley 2002). An example of the economic incidence of an imposition falling on the buyer was the higher prices for alcohol paid by consumers during Prohibition. See infra notes 53 & 73.

³⁸ In addition to the experience with regulating child labor in nineteenth-century Britain, discussed infra, another example of such an outcome from modern-day labor markets with mostly inelastic supply and robustly elastic demand is the demand-side enforcement of laws against prostitution. See Scott Cunningham and Manisha Shah, Economics of Sex Work and Policy Considerations, at 9, in Handbook of Labor, Human Resources and Population Economics (Klaus F. Zimmermann ed., Springer 2021) (observing that “if supply is relatively inelastic, then criminalizing demand may cause sex workers to provide higher risk services and or lower prices due to greater competition for the declining pool of clients”).

³⁹ See Jane Humphries, Childhood and Child Labour in the British Industrial Revolution 24–30 (Cambridge University Press 2010) [hereinafter Childhood and Child Labour]; Kartik Basu, Child Labor: Cause, Consequence, and Cure, with Remarks on Labor Standards, 37 J. Econ. Lit. 1083, 1084, 1101–02 (1999) (surveying economists’ models of child labor and describing a vertical, or perfectly inelastic, supply curve for child labor when the prevailing wage rate for adults brings in below-subsistence-level income for the household) [hereinafter Child Labor: Cause, Consequence, and Cure]; see also Kaushik Basu, The Economics of Child Labor, Sci. Am. (Oct. 2003), at 84, 88 (same).

⁴⁰ See Humphries, Childhood and Child Labour, supra note 39; Basu, Child Labor: Cause, Consequence, and Cure, supra note 39, at 1102, 1106; Kaushik Basu & Pham Hoang Van, The Economics of Child Labor, 88 Am. Econ. Rev. 412, 417 (1998).

⁴¹ Clark Nardinelli, Child Labor and the Factory Acts, 40 J. Econ. Hist. 739, 740, 741–44 (1980) (stating that in 1835, 56,000 children under the age of 13 were employed in textile mills, constituting 15.9 percent of the total workforce in those mills).

⁴² 3 & 4 Will. 4, c. 103 (UK).

⁴³ Nardinelli, Child Labor and the Factory Acts, supra note 41, at 741 (silk mills were subject to less stringent regulation).

⁴⁴ Id.

⁴⁵ 7 & 8 Vict., c. 15 (UK).

⁴⁶ 37 & 38 Vict. c. 16 (UK)

⁴⁷ Patrick Joyce, Work, Society and Politics: The Culture of the Factory in Later Victorian England 75–102 (Rutgers University Press 1980).

⁴⁸ By 1838, the number of children under the age of 13 in textile factories had fallen to 33,000, making up only 7.9 percent of those factories’ total workforce. Nardinelli, Child Labor and the Factory Acts, supra note 41, at 743. Compare supra note 41.

⁴⁹ Nardinelli, Child Labor and the Factory Acts, supra note 41, at 751 (1980).

⁵⁰ Id.

⁵¹ A.J. McKelway, The Child Labor Problem—a Study in Degeneracy, 27 The Annals of the American Academy of Political and Social Science 54, 62 (1906) (noting that the “period between 1845 and 1861 was largely occupied with the inclusion of these other industries, by one, within the law that had applied only to the cotton factories”).

⁵² Nardinelli, Child Labor and the Factory Acts, supra note 41, at 751.

⁵³ A similar displacement effect was observed in the United States during the Prohibition era of the 1920s, when even as saloons were shut down, liquor flowed freely in small-sized speakeasies in hidden locations that sprung up in places that had previously been “dry.” See Clark Warburton, The Economic Results of Prohibition 206 (Columbia University Press 1932). The market for alcohol during Prohibition was characterized not by inelastic but rather highly elastic supply. See Nat’l Research Council (US) Panel on Alternative Policies Affecting the Prevention of Alcohol Abuse and Alcoholism, Alcohol and Public Policy: Beyond the Shadow of Prohibition 62 (Mark H. Moore & Dean R. Gerstein eds., 1981) (spotlighting the emergence during Prohibition “of a vigorous illegal supply network”); Rufus S. Lusk, The Drinking Habit, 163 Annals Am. Acad. Pol. & Soc. Sci. 46, 53 (1932) (observing that Prohibition “has not lessened the amount of liquor consumed”). But given stubbornly inelastic demand, see supra note 37 & infra note 73, enforcement action on the demand side would give rise to a similar displacement effect as in a market with inelastic supply and elastic demand.

⁵⁴ See, e.g., Tisha R. Tallman, Liberty, Justice, and Equality: An Examination of Past, Present, and Proposed Immigration Policy Reform Legislation, 30 N.C. J. Int’l L. & Com. Reg. 869, 879-80 (2005).

⁵⁵ Nardinelli, supra note 41, at 743.

⁵⁶ See id.; A.E. Peacock, The Successful Prosecution of the Factory Acts, 1833-55, 37 Econ. Hist. Rev. 197–98 (1984) (citing sources for the view that early Factory Act enforcement was not effective); see also Jerry L. Anderson, Protection for the Powerless: Political Economy History Lessons for the Animal Welfare Movement, 4 Stan. J. Animal L. & Pol’y 1, 58 (2011) [hereinafter Protection for the Powerless] (“Early Factory Acts were limited to the most egregious abuses, but even those failed due to lack of enforcement and implementation.”).

⁵⁷ See Jerry L. Anderson, The Origins and Efficacy of Private Enforcement of Animal Cruelty Law in Britain, 17 Drake J. Agric. L. 263, 287–88 (2012) [hereinafter Origins and Efficacy of Private Enforcement].

⁵⁸ See Anderson, Protection for the Powerless, supra note 56, at 58 (concluding that there was an absence of a “solid organizational structure,” after observing that “the budget for factory ... inspection remained a paltry amount even twenty years after the 1833 Factory Act imposed its requirements,” that “[a]ge limitations could not be enforced without a reliable system of age verification,” and that “[e]mployers quickly became adept at finding ways to evade the legislative edicts”).

⁵⁹ See Anderson, Origins and Efficacy of Private Enforcement, supra note 57, at 287–88.

⁶⁰ See id. at 269–77 (discussing the so-called Martin’s Act, Cruel Treatment of Cattle Act of 1822, 3 Geo. 4, c. 71 (UK), and its progeny, Cruelty to Animals Act of 1835, 5 & 6 Will. 4, c. 59 (UK)).

⁶¹ See id. at 277–80.

⁶² Id. at 265–66, 310 (nothing that in In 1840 the Society acquired the patronage of Queen Victoria and added “Royal” to its name, and that in Scotland, the Scottish Society for the Prevention of Cruelty to Animals (SSPCA) serves a similar function).

⁶³ Id. at 266.

⁶⁴ See id. at 287–88 (observing that allowing for private enforcement would have “avoided the tedious political process of convincing government officials to provide more funds and undertake more vigorous enforcement”).

⁶⁵ Nardinelli, supra note 41, at 743.

⁶⁶ Id. at 288.

⁶⁷ 33 & 34 Vict., c. 75 (UK).

⁶⁸ See Philip Gardner, The Lost Elementary Schools of Victorian England 14–15, 21–23, 188 (Croom Helm 1984); Jonathan Rose, The Intellectual Life of the British Working Classes 154–57 (Yale University Press 2001).

⁶⁹ See Humphries, Childhood and Child Labour, supra note 39, at 28, 35–36 (discussing social stigma), at 306–65 (discussing schooling); see also Hugh Cunningham. The Children of the Poor: Representations of Childhood Since the Seventeenth Century 201–03 (Blackwell, 1992) (emphasizing the role of compulsory elementary education in reducing child labor). By comparison, in the United States, it is uncertain whether compulsory attendance laws actually led to either a decrease in child labor practices or an increase in educational attainment. One study, looking at the impact of such compulsory school attendance laws on educational attainment from 1915 to 1939, concluded that “compulsory attendance and child labor laws appear to have caused the level of education to increase, not vice versa.” Adriana Lleras-Muney, Were Compulsory Attendance and Child Labor Laws Effective? An Analysis From 1915-1939, 45 J.L. & Econ. 401, 402 (Oct. 2002).

⁷⁰ Basu & Pham, The Economics of Child Labor, supra note 40, at 417.

⁷¹ See supra note 39 and accompanying text.

⁷² The supply curve would have shifted leftward and intersected the downward sloping demand curve at a higher point. See generally, e.g., Robert S. Pindyck & Daniel L. Rubinfeld, Microeconomics 48 (Pearson 8th ed. 2013).

⁷³ By comparison, Prohibition in the United States failed, in large part, because the demand for alcohol was extremely inelastic, with consumers willing to pay the premium demanded by the introduction of the additional cost of avoiding detection. See Miron & Zwiebel, Alcohol Consumption During Prohibition, supra note 34, at 246 (finding that “[c]hanges in consumption during Prohibition were modest given the change in price”). Moreover, the social stigma of consuming alcohol was not large enough to add another significant transaction cost. See id. (suggesting that “[s]ocial pressure and respect for the law did not go far in reducing consumption during Prohibition”).

⁷⁴ Demand for unskilled labor is generally highly elastic. See sources cited in supra note 40.

⁷⁵ See text accompanying supra notes 8–11.

⁷⁶ See supra note 30 and accompanying text.

⁷⁷ See supra note 28 and accompanying text (discussing the administrative expense of conducting such worksite enforcement actions).

⁷⁸ Increasing the probability of detection would also increase the expected monetary sanction that an employer faces, given by the product of the nominal amount of the monetary sanction and the probability of being required to pay it. See A. Mitchell Polinsky & Steven Shavell, The Economic Theory of Public Enforcement of Law, 38 J. Econ. Lit. 45, 49 & n.15 (2000) (pointing out the endogeneity of probability of detection and expected sanctions); Arun S. Malik, Avoidance, Screening and Optimum Enforcement, 21 RAND J. Econ. 341 (1990) (discussing incurring costs to avoid detection).

⁷⁹ 26 U.S.C.

⁸⁰ 31 U.S.C. §§ 3729–3733.

⁸¹ See, e.g., U.S. ex rel. Stillwell v. Hughes Helicopters, Inc., 714 F. Supp. 1084, 1092 (C.D. Cal. 1989) (noting that “a plaintiff’s lawyer in a false claims action ... [is] invariably working on a contingency fee basis”).

⁸² Congress instituted the program now known as E-Verify in the Illegal Immigration Reform and Immigrant Responsibility Act of 1986, Pub. L. No. 104-208, codified in various sections of 8 U.S.C. and 18 U.S.C. Available nationwide, E-Verify “is currently the best means available to electronically confirm employment eligibility.” Verify Employment Eligibility (E-Verify), Homeland Security (last updated Oct. 5, 2022). See also Whiting, 563 U.S. at 590 (discussing the origins of E-Verify).

⁸³ David J. Bier, E-Verify Has Delayed or Cost Half a Million Jobs for Legal Workers, Cato Institute (May 16, 2017).

⁸⁴ Westat, Evaluation of the Accuracy of E-Verify Findings, Report Submitted to U.S. Department of Homeland Security 14, 22, 39 (July 2012).

⁸⁵ Id. at 44.

⁸⁶ Id. at 44–45.

⁸⁷ See Exec. Order No. 13465, 73 Fed. Reg. 33286 (2008) (requiring a federal contractor to use E-Verify to check the work-authorization status of all individuals assigned to work on contracts in the United States); Whiting, 563 U.S. at 608 (reserving to the states the right to sanction employers not complying with E-Verify).

⁸⁸ According to USCIS, for fiscal year 2024, 1.86 percent of the over 20.5 million case inquiries submitted to E-Verify were initially reported to be unauthorized to work in the United States. But follow-up by the employer and/or employee reduced that category to 1.67 percent. Of these, there was no follow-up action of any kind in 0.62 percent cases. E-Verify Performance, USCIS (last updated March 14, 2024).

⁸⁹ 26 U.S.C. § 3111.

⁹⁰ IRC sec. 3112, 26 U.S.C. § 3112, explicitly extends liability for the section 3111 employment tax to all instrumentalities of the United States, overriding “any other provision of law (whether enacted before or after the enactment of this section) which grants to any instrumentality of the United States an exemption from taxation.”

⁹¹ See IRC sec. 3306, 26 U.S.C. § 3306.

⁹² Independent contractors, like all self-employed individuals, pay both the employee and employer portions of the social security tax. See IRC sec. 1401, 26 U.S.C. § 1401 (specifying a self-employment tax “equal to 12.4 percent of the amount of the self-employment income”).

⁹³ As contrasted with taxes on income, codified in subtitle A of the IRC, or on gratuitous transfers, codified in subtitle B (estate and gift taxes), excise taxes are taxes on transactions and are codified in subtitle C (employment taxes), subtitle D (miscellaneous excise taxes), and subtitle E (alcohol, tobacco, and certain other excise taxes).

⁹⁴ The proposed text incorporates the language of IRC sec. 3112, 26 U.S.C. § 3112, extending liability to all instrumentalities of the United States. See supra note 90.

⁹⁵ As more fully set out in the proposed statutory text in the accompanying appendix, liability for the new excise tax would require that a payment of compensation be made “on account of personal services or labor performed or purported to be performed in the United States by any individual who is an ‘unauthorized alien.’” Even though liability would be strict, it would nonetheless be predicated on: (1) a payment of compensation being made; and (2) this payment being made “on account of personal services or labor performed or purported to be performed” by an individual who turns out to be an unauthorized alien. Any reasonable construction of the phrase “on account of” would require a specific showing that the payment at issue was intended as compensation for the personal services or labor of the particular individual who has now been determined to be an unauthorized alien. See United States v. Quality Stores, Inc., 572 U.S. 141, 148 (2014) (construing the phrase “on account of,” which appears repeatedly in IRC sec. 3121, 26 U.S.C. § 3121, defining wages, as introducing a “list of specific exemptions from the definition of wages” and remarking that the “specificity of these exemptions reinforces the broad nature of ... [the statutory] definition of wages”); Cf. I.N.S. v. Elias-Zacarias, 502 U.S. 478, 482 (1992) (declining to read the phrase “on account of” broadly and requiring a direct link to the precipitating cause). At a minimum, then, the person held liable for the new excise tax should have had actual or constructive knowledge at the time of making the payment that the payment would serve as compensation for the services or labor of the certain individual who was subsequently found to be an unauthorized alien.

⁹⁶ Exactations “intended to affect individual conduct,” rather than “raise considerable revenue,” are routinely sustained as a valid exercise of Congress’ taxing power. Nat’l Fed’n of Indep. Bus. v. Sebelius, 567 U.S. 519, 567 (2012) (discussing federal and state taxes on cigarettes, marijuana, and sawed-off shotguns in upholding the now-repealed penalty for not maintaining mandatory minimum health insurance imposed by the Affordable Care Act of 2010, P.L. 111-148).

⁹⁷ Those engaging staffing companies to meet their personal services or labor requirements would then have the proper incentive to make sure that the latter verify the work-authorization status of the individuals they supply for this purpose. The provision to disregard the worker’s independent contractor status may be seen as a heightened version of the substance-over-form test that the IRS currently applies for employment tax purposes under Treasury Regulations. See 26 C.F.R. § 31.3121(d)-1(a)(3) (“If the relationship of employer and employee exists, the designation or description of the relationship by the parties as anything other than that of employer and employee is immaterial.”). The new excise tax would simply ignore the form of independent contractor any time an unauthorized alien is compensated. This would frustrate any attempts to circumvent the new excise tax by hiring unauthorized aliens as independent contractors rather than wage-earning employees. Compare supra note 30 and accompanying text (discussing proposals that sanctuary jurisdictions resort to such stratagems to sidestep IRCA’s employer mandates and sanctions). Likewise, the provision to hold more than one payor liable for the new excise tax with respect to the same underlying compensation payment can also be seen as enlarging the scope of current practice. The IRS routinely asserts its authority to collect employment taxes from a transferee of the employer if a creditor could proceed against the transferee under state law, either pursuant to IRC sec. 6901, 26 U.S.C. § 6901 (providing for transferee liability), or as successor in interest. See TFT Galveston Portfolio, Ltd. v. Commissioner, 144 T.C. 96, 109 & n.6 (2015). The new excise tax would create such liability, under federal law, for any intermediary interposed in between the unauthorized alien and the user of his services. This would frustrate any attempts to circumvent the new excise tax by using thinly capitalized intermediaries. But the reasonably narrow construction of the phrase “on account of,” see supra note 95, will insulate from liability any payor who lacked both constructive and actual knowledge of his payment eventually serving as the source of compensation for this unauthorized alien. Thus, there shouldn’t be any concerns of, for example, liability attaching to a household that contracts with a landscaping company that unbeknownst to the household engages an unauthorized alien (whether as an employee or as an independent contractor). Assuming no other complicating details, such a household would not have made a compensation payment “on account of” the services performed by that unauthorized alien.

⁹⁸ See, e.g., Flora v. United States, 362 U.S. 145, 176 (1960) (observing that at the federal level, the “system of taxation is based upon voluntary assessment and payment”).

⁹⁹ Such a reporting regime could be implemented by the IRS with the issuance of an administrative notice, sparing the time and expense of full-blown notice and comment regulations.

¹⁰⁰ To maintain correspondence with the employment tax under IRC sec. 3111, the new excise tax could also be made non-deductible. IRC sec. 275, 26 U.S.C. § 275, bars deducting, either for personal or business purposes, certain taxes, including the employment tax under IRC sec. 3111, and the proposed new excise tax could be added to that list. This would serve to increase the cost of the proposed new excise tax borne by payors of compensation for an unauthorized alien’s services, thus enhancing the punitive effect of the tax.

¹⁰¹ Assessment “refers to the official recording of a taxpayer’s liability, which occurs after information relevant to the calculation of that liability is reported to the taxing authority,” and is a pre-requisite to collection, which “is the act of obtaining payment of taxes due.” Direct Mktg. Ass’n v. Brohl, 575 U.S. 1, 9, 10 (2015); see also IRC sec. 6203, 26 U.S.C. § 6203 (“assessment shall be made by recording the liability of the taxpayer in the office of the Secretary in accordance with rules or regulations”).

¹⁰² See Flora, 362 U.S. at 175 n.38 (observing that “excise tax assessments may be divisible into a tax on each transaction or event”).

¹⁰³ See, e.g., Sean Hamer, Lincoln’s Law: Constitutional and Policy Issues Posed by the Qui Tam Provisions of the False Claims Act, 6 Kan. J.L. & Pub. Pol’y 89, 90 (1997) (discussing President Lincoln's encouragement for implementing a law designed to prevent and dissuade profiteers from selling overpriced and defective supplies to the government).

¹⁰⁴ See Avco Corp. v. U.S. Dep’t of Justice, 884 F.2d 621, 622 (D.C. Cir. 1989) (discussing the 1986 amendments and characterizing the amended FCA as “the government’s primary litigative tool for the recovery of losses sustained as the result of fraud against the government”).

¹⁰⁵ 31 U.S.C. § 3739(a)(1) (flush language); see also 28 C.F.R. § 85.5(d) (adjusting civil fines for FCA violations occurring after November 2, 2015).

¹⁰⁶ 31 U.S.C. § 3730(b), (c).

¹⁰⁷ 31 U.S.C. § 3730(d).

¹⁰⁸ See, e.g., Joel D. Hesch, Understanding the Revised Reverse False Claims Provision of the False Claims Act and Why No Proof of A False Claim Is Required, 53 UIC J. Marshall L. Rev. 461, 477–78 & n.89 (2021) (discussing 2009 amendments to the FCA making it easier to prevail in qui tam actions against Medicare providers and military contractors “knowingly and improperly” retaining government funds).

¹⁰⁹ Added by the False Claims Amendments Act of 1986, Pub. L. No. 99-562, § 2, and now codified as amended at 31 U.S.C. § 3729(d). “Those courts that have considered the Tax Bar have concluded that it was intended to codify case law existing before the 1986 amendment, which reserved discretion to prosecute tax violations to the IRS and barred FCA actions based on tax violations.” United States ex rel. Lissack v. Sakura Global Capital Mkts., Inc., 377 F.3d 145, 152 (2d Cir. 2004).

¹¹⁰ 31 U.S.C. § 3729(a)(1)(G).

¹¹¹ If it chose to do so, the IRS would have available to it sufficient data to at least investigate possible non-compliance with the proposed new excise tax. Pursuant to Treasury Regulations, 26 C.F.R. § 301.6109-1(d)(3)(ii), beginning July 1, 1996, the IRS has required every unauthorized alien, ineligible for a social security number, to apply for an individual taxpayer identification number (ITIN) on IRS Form W-7, for supplying to employers and others making compensation payments to the unauthorized alien and for filing the alien’s own federal income tax return. IRC sec. 6103, 26 U.S.C. § 6103, prohibits the IRS from sharing such “return information” with other federal agencies, and therefore with USCIS. But the IRS would be perfectly entitled to use this information to detect whether a payor of compensation for an unauthorized alien’s services has properly reported that compensation payment and the resulting excise tax on it proposed here. If the unauthorized alien has filed an income tax return of his own, reporting the receipt of compensation for his services, such a return would provide the IRS with the identity of the payor. The IRS could then cross-check the payor’s return to determine if it too has properly reported that payment. Conversely, if a payor properly reports that payment, that will aid the IRS in verifying the accuracy of the unauthorized alien’s return. The reporting regime for the payor, see text in between supra notes 99 & 100, would, at a minimum, require the payor to report the ITIN of the unauthorized alien for whose services the compensation payment was made. This would enable the IRS to look up and examine the accuracy of the unauthorized alien’s return.

¹¹² Essentially, an unauthorized alien would have to be willing to work for less than a quarter of the prevailing wage rate for the job in question. A payor who does not know the unauthorized alien’s status and therefore does not self-report and pay the proposed new excise tax would be at the risk of paying over four times the agreed compensation — once to the alien and over three times that amount to resolve the inevitable qui tam action that follows. On the other hand, a payor who does know the unauthorized alien’s status and still goes ahead and hires and pays him and self-reports and pays the proposed new excise would pay only twice the agreed compensation — once to the alien and yet again to the IRS as the tax on it. But this payor would now be deprived of any affirmative defense to a civil or criminal action under IRCA. See supra notes 16–18 and accompanying text. The ensuing sanctions would be an even greater deterrent than treble damages in a successful qui tam action.

¹¹³ Adding a provision in the IRC imposing a new excise tax would, by definition, produce a change in revenues and thus comply with the Byrd Rule, codified at 2 U.S.C. § 644(b)(1)(A), which deems any provision in a reconciliation bill extraneous if it “does not produce a change in outlays or revenues.” Permitting qui tam actions to enforce that new excise tax would likewise be a revenue-enhancing measure and withstand any Byrd Rule challenge.

¹¹⁴ P.L. 115-97.

¹¹⁵ See, e.g., Jay Timmons and Rep. Vern Buchanan, Congress Must Act to Prevent ‘Tax Armageddon,’ Washington Examiner (July 19, 2024).

¹¹⁶ See supra Part II.

¹¹⁷ Such non-citizen workers are admitted to the country ostensibly to make up for a shortage of work skills among the citizen workforce in certain sectors of the economy. Hence, the requirement that before an alien is authorized to work in the United States, the sponsoring employer, in the case of an H-1B visa applicant, file a “labor condition application,” see 8 U.S.C. § 1182(a)(5)(A)(i), and in the case of an employment-based green card applicant, obtain a “labor certification.” See 8 U.S.C. § 1153(b)(2) and (3)(C); 8 U.S.C. § 1182(a)(5)(A)(i). The purpose of each is to make a showing that the job involved is one for which there are not sufficient domestic workers qualified, willing, able, and available, and for which there will not be an adverse impact on workers already similarly employed in the United States. A levy on the gross compensation paid for the services of such non-citizen workers could be justified on the ground of funding programs for enhancing the work skills of citizens. Indeed, in the American Competitiveness and Workforce Improvement Act of 1998, P.L. 113-128, Congress imposed a fee of $1,500 on every employer sponsoring an H-1B visa applicant (reduced to $750 for small employers), see 8 U.S.C. § 1184(c)(9), with the amounts so collected to be used for funding job training and scholarship programs benefitting domestic workers. See 8 U.S.C. § 1356(s).

¹¹⁸ Though the IRC imposes a gift tax only on individuals, see 26 U.S.C. § 2501(a), it does impose excise taxes on certain transfers by corporations. See, e.g., 26 U.S.C. §§ 4999 (excess parachute payment excise tax), 4985 (excise tax on stock compensation of insiders in expatriated corporations), 5000C (excise tax on certain foreign procurements), and 5881 (greenmail payment excise tax). A similar excise tax could be devised and imposed on payments by otherwise tax-exempt organizations to unauthorized aliens.

¹¹⁹ Among other objections, varying the rate of the proposed new excise tax depending upon the visa status of the work-authorized alien may invite a constitutional challenge, based on the argument that such a tax discriminates against certain classes of persons, thereby denying them equal protection of the law in violation of the Equal Protection Clause of the 14th Amendment. Courts have generally been loath to invalidate a tax on equal protection grounds, requiring only that the classification drawn by the legislature rest on some rational basis. See, e.g., Gen. Motors Corp. v. Tracy, 519 U.S. 278 (1997).

¹²⁰ The concept “Overton Window,” named after the policy analyst Joseph Overton (1960-2003) who developed it, refers to the range of ideas that at any given moment in political history are considered “safe” by the mainstream, while those “outside the window” are deemed unacceptable. See generally A Brief Explanation of the Overton Window, Mackinac Ctr. for Pub. Pol’y (2019).

¹²¹ That shift might be occurring sooner than I had anticipated when I began writing this article. See, e.g., Mark Krikorian, Where the Tech Right and Restrictionists Can Agree, Compact (Dec. 26, 2024) (citing a “Chicago Council on Global Affairs survey in September 2022,” according to which, “two-thirds of Republicans who expressed a favorable view of Donald Trump specifically wanted legal immigration reduced”).