Thread: a brilliant tax solution to illegal immigration

APR. 12, 2006: AN IDEA FOR HOUSE REPUBLICANS
A brainy NRO reader proposes this ingenious self-executing response to companies that use illegal labor:

"If you really want to stop hiring of illegals cold without having to boost the ranks of enforcement staff by huge amounts, simply make this simple change to the tax code:

'Expenditures for wages and benefits of employees shall be deductible for tax purposes only for those employees that the employer can prove are legal residents of the US.'

"To make this work, the government must set up a database for matching an employee's name with his social security number that could be easily checked by employers. Confirmation numbers, similar to those issued by hotels and airlines, would be issued and kept in employee files along with the current I-9 forms that require picture ID and proof of legal residency. Exceptions have to be made for excellent forgeries, etc., etc. But you get the idea.

"We won't criminalize hiring of illegal immigrants. We'll just make it equivalent to persons who use their business expense accounts for procurement of personal benefits (alcoholic beverages, household items, lap dances, etc.) You can buy it. It's not illegal. Just ensure that you use your after-tax dollars to indulge in this activity."

08:13 AM

An interesting turn of events should this scenario ever play out.

APR. 16, 2006: NO TAX DEDUCTIBILITY FOR ILLEGALS
Last week, I posted a note from a reader who urged that businesses not be allowed to deduct wages of workers who cannot prove their legal status in the United States.

I didn't post the reader's name at the time, but he has since given me permission to give credit where credit is due: His name is David Barulich, and he is a financial professional in Pasedana, California.

Meanwhile, another reader - who prefers anonymity - offers this addition to Mr. Barulich's concept:

"Your reader's suggestion to modify the Internal Revenue Code, so that employers could only expense employee wages if they verified their legal employment status, has ramifications that go much deeper than you may have realized.

"If this were implemented, mid-sized to large companies would not be able to have illegal employees and also use their accounting software, because the law would require categorizing employees into those that they could expense and those they could not. No accounting software company would dare add a feature to permit companies to pay some workers without expensing their wages, as this would be a de-facto accommodation for companies intentionally hiring illegal workers.

"Furthermore, the Sarbanes-Oxley Act (SOX) comes into powerful play here. Once employment of illegals becomes a matter of the accuracy of the income statement, then companies that issue stock on any U.S. stock exchange would be forced to stop hiring illegals.

"SOX section 302 requires the principal executive and financial officers of a company filing periodic reports to certify in each quarterly and annual report that the report is not misleading in the way it represents the financial condition and results of operations of the company. The law makes these two officers civilly and perhaps criminally liable if the report contains financial information that the officers reasonably should have known was false.

"A financial statement that included tax expenses for employee wages would be implying that all of these workers were legal. If in fact the company were hiring illegal workers and claiming their wages as business expenses, then they would be submitting false financial statements.

"Furthermore, SOX Section 404 requires each annual report of an issuer to contain an 'internal control report', which shall:

"(1) state the responsibility of management for establishing and maintaining an adequate internal control structure and procedures for financial reporting; and

"(2) contain an assessment, as of the end of the issuer's fiscal year, of the effectiveness of the internal control structure and procedures of the issuer for financial reporting.

"Each issuer's auditor shall attest to, and report on, the assessment made by the management of the issuer.

"So the bottom line is that if the Internal Revenue code were modified as your reader suggested, then, in order to satisfy SOX Section 302, the CEO and CFO would have to certify in the company's quarterly and annual reports that the company was only claiming expenses for legal workers. Section 404 would require them to assess the adequacy of their business control procedures for making certain that they were only expensing for legal workers, and it would require their external auditor to attest to the adequacy of such controls. This would mean that the major auditing companies would have to develop standards for the auditing of companies' hiring practices. It would bring the hiring of illegal workers to an abrupt halt in companies that issue stock on U.S. exchanges."

- Let me add one final comment here. Opponents of enforcement of the immigration laws have a way of throwing up their hands as if enforcement were simply hopelessly impracticable. And yet the United States manages to operate many far more complex regulatory regimes, from the Internal Revenue Code on down. None are enforced perfectly - but then, few things other than a nuclear power plant need to run perfectly. But in most areas of the law, most of the time, people are expected to follow the rules - and are held accountable if they do not. Immigration is treated as some unique exception. Why?

09:31 PM

Brilliant!

seems the average citizen comes up with better plans than those that are paid to do just that

kneemow,

If you would post the link to the source, I'd be happy to forward it to my Congressman. I did manage to obtain a personal e-mail and phone # for his press secretary, and we talk twice a week. If I can source the material, I KNOW he'll listen.

Originally Posted by PinestrawGuys

kneemow,

If you would post the link to the source, I'd be happy to forward it to my Congressman. I did manage to obtain a personal e-mail and phone # for his press secretary, and we talk twice a week. If I can source the material, I KNOW he'll listen.

Sure thing. http://frum.nationalreview.com/

I'm Steve by the way.

Thanks. That one went to my A list.