It surprises me to learn that a great many of my countrymen are unaware of how they pay taxes. Ronald Reagan was apparently right when he denounced withholding for making tax collection invisible.
According to news stories, the Bush Administration pushed for stripping the new immigration bill of a requirement that illegal aliens pay two of their past three years’ back income and FICA taxes as a condition for Z Visa status. For that the President has been loudly vociferated. Yet, whatever the broader merits or demerits of the bill, this particular decision is eminently rational.
Most income and virtually all Social Security tax is withheld from workers’ wages, not paid with income tax returns. If José Subrosa uses a phony Social Security number, the government still gets its money. José simply doesn’t get any credit for having paid it. Most likely, he overpays, as he isn’t likely to know how (or have the nerve) to file Form W-4 to claim all of his withholding allowances, much less apply for the earned income credit.
Forcing José to file a de facto income tax return in order to get his Z Visa would make that document far less attractive, stultifying its goal of bringing illegals out of the shadows, and wouldn’t produce any revenue, once the IRS had diverted resources to matching visa applicants with hitherto unaccounted for tax receipts. The Administration rightly saw this process as a money-losing administrative burden.
But what about those aliens who escape withholding by working “off the books”, engaging in self-employment or outright fraud (tactics not peculiar to illegals, of course)? Their tax liability remains exactly the same, with or without a Z Visa. They don’t get a tax amnesty. The IRS can still audit them and can try to collect delinquencies, with the standard penalties and interest. It probably won’t do much, but that’s because the economics of auditing low income taxpayers are unfavorable to the fisc, not because of any special break for working illegally.
There are, I think, tenable arguments against the immigration reform du jour. The absence of a back taxes provision isn’t one of them.
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