The Costs of E-Verify - and the Immigration Laws

In my paper, “Electronic Employment Eligibility Verification: Franz Kafka’s Solution to Illegal Immigration,” I analyzed a number of different factors that would frustrate a national employment eligibility verification system. Most of them had to do with responses that undermine the functioning of the verification system itself. But I also talked about avoidance. Under a national electronic employment eligibility system, I wrote, “[w]ork ‘under the table’ would increase, and, along with it, other forms of illegality.”

Strong validation of that notion came from an interesting source last week: the Congressional Budget Office. CBO and the Joint Committee on Taxation estimate that the SAVE Act (the “Secure America Through Verification and Enforcement Act”), a bill to take E-Verify national, would result in lost federal revenue of $17 billion over 10 years. That is because more undocumented workers would be paid outside the tax system. That’s a lot of work under the table.

Those who have fixated on immigration law enforcement often cite the rule of law, which is certainly an important thing. But the rule of law thrives when the law is at peace with the people, not when it’s a cudgel. As I also wrote:

Proponents of internal enforcement and electronic employment verification surely stand on a sound principle—the rule-of-law ideal that people should enter the country legally. But current immigration law is a greater threat to the rule of law than any of the people crossing the border to come here and work. Our immigration policies have fostered the illegality so common in the employment area.

Some Myth-Busting Is Quite Revealing

After DHS Secretary Chertoff’s testimony to the Senate Judiciary Committee this week (at which he was apparently rebuked for “bullying” states on REAL ID compliance) he sat down with a group of bloggers to discuss things.

Congratulations are due the Secretary for making himself available in an open forum like this, especially because it allows us some insight into his thinking. It makes more clear why he and his colleague Stewart Baker feel a need to engage in so much REAL ID “myth-busting.” Though I have assumed their comprehension of the problems with REAL ID, perhaps I have been mistaken, as Secretary Chertoff does not exhibit a good sense of information technology or the information economy.

Here’s the myth that Secretary Chertoff purports to bust:

I had someone say to me today, “Well, when you have these REAL ID licenses with a machine-readable zone … it’s gonna be used to track people. People can skim it. And they can steal it. And then they can use it to follow you around.” Now this is a fantasy. This is just not true.

The Secretary overstates the argument and so shades into attacking a straw man, but the context is conversational. So let’s look at what the real argument is, and then at the Secretary’s responses. I touched on the question of tracking in my testimony to the Senate Homeland Security and Governmental Affairs Committee:

There are machine-readable components like magnetic strips and bar codes on many licenses today. Their types, locations, designs, and the information they carry differs from state to state. For this reason, they are not used very often. If all identification cards and licenses were the same, there would be economies of scale in producing card readers, software, and databases to capture and use this information. Americans would inevitably be asked more and more often to produce a REAL ID card, and share the data from it, when they engaged in various governmental and commercial transactions.

In turn, others will capitalize on the information collected in state databases and harvested using REAL ID cards. Speaking to the Department of Homeland Security’s Data Privacy and Integrity Advisory Committee last week, Anne Collins, the Registrar of Motor Vehicles for the Commonwealth of Massachusetts said, “If you build it they will come.” Massed personal information will be an irresistible attraction to the Department of Homeland Security and many other governmental entities, who will dip into data about us for an endless variety of purposes.

This is not an argument that the currently proposed REAL ID license would be read surreptitiously, as might happen with an RFID-chipped card. (The Secretary says that REAL ID currently does not require RFID, but neglects to mention that the “Enhanced Driver’s License,” which satisfies REAL ID, has one.) The argument is that a great deal more data about us will be collected.

This will include “meta-data” - information about the collection of information, such as time, place, purpose, collecting entity, and so on. Combined identity data and meta-data form footprints about our comings and goings. These footprints, collected in interoperable databases, combine to form tracks.

Perhaps it’s a complicated argument, but it’s a coherent one: REAL ID would lead to tracking of law-abiding Americans.

Nothing the Secretary says conveys that he’s aware of meta-data or actual data collection processes. He says that the machine-readable zone (or MRZ) is “nothing more than the information on the face of the license. I already have a reader for the license - it’s called my eye - and I can read what’s on your license. So therefore there’s nothing I’m going to get out of the MRZ that I can’t get from the face of the license.”

Alas, even this isn’t quite true. The regulation prescribes certain minimum data elements for the MRZ, but doesn’t restrict the use of others, and it doesn’t require states to restrict the content of the MRZ to only what is on the face of the license. The MRZ could lead to tracking of people and their activities based on their race, for example, a data element many states currently include in their MRZs. Despite receiving comments concerned with this during the rulemaking process - oh, and in congressional testimony - DHS declined to prohibit including race in the MRZ of REAL IDs.

Card readers are not just little electric eyeballs. They record information in digital form. This means that identical copies of these records are easy to store, easy to compile, easy to transfer, and easy to reuse. Collecting information in digital form is materially different from collecting information in analog form. Most people who work with technology know that implicitly. To be credible on identification technology issues, one must know this and acknowledge its significance.

Finally, the Secretary says that the DHS is not going to create a lot of databases using REAL ID. That may be his intention, but he’s in office for about ten more months. And whether DHS creates them or not, databases of information harvested using REAL ID would likely be available to DHS.

It is very hard to design information technology systems that do not collect and retain information. The current secretary’s personal opinion about databases just isn’t good evidence of whether or not there will be databases of information about the comings and goings of law-abiding Americans. Chances are very good if REAL ID is implemented that there will be.

Will Hungary Finally Join the Flat Tax Club?

Unlike most of its neighbors, Hungary is still saddled with a discriminatory tax regime, leading to high tax rates on productive behavior and a big underground economy. Fortunately, the collapse of the current Hungarian government may pave the way for a flat tax:

Small Hungarian opposition party the Hungarian Democratic Forum Thursday said it would attempt to force the introduction of a flat tax after a coalition split this week raised the prospect of a minority government. “The withdrawal of the (junior coalition) Alliance of Free Democrats has opened up the possibility of introducing a flat tax from 2009, since this gives the parliamentary majority for the decision,” the party said in a statement. Free Democrat leader Ibolya David called for opposition parties to attend talks on April 15 to work out details of a bill to submit to parliament by May. The party wants to emulate regional peers such as Slovakia and Romania by introducing a flat 18-per-cent personal income tax to reduce a tax burden it called “unfairly high.” The Free Democrats and main opposition party Fidesz - along with its allies the Christian Democrats - have said in the past that they would favour a flat tax. …The Socialist Party has only 190 seats in the 386-seat parliament, meaning that the opposition parties could force through a flat tax bill by banding together. Hungary is ranked as having the second-highest tax burden for single people, behind Belgium, amongst the members of the Organization for Economic Cooperation and Development (OECD). Many feel the high burden - made worse in 2006 when the government hiked taxes as part of its economic reforms - hits Hungary’s regional competitiveness. …The tax burden also credited with maintaining the huge black economy. Estimates of the size of the black economy vary from the official figure of 18 per cent of gross domestic product to as high as 50 per cent among some analysts.

Illinois Politicians Hatch Scheme to Kill State’s Flat Tax

There’s good news and bad news in the Land of Lincoln. Starting with the bad news, a handful of state politicians want to impose a so-called progressive tax scheme that will double the tax burden for productive citizens. The good news is that this requires an amendment to the Illinois Constitution, which requires both three-fifths support from the legislature and - more important - three-fifths support from state voters:

A group of House Democratic lawmakers announced Thursday they want to ask voters to amend the state constitution to double the income tax burden on Illinoisans who earn more than $250,000 a year. …”I believe a flat rate income tax is a regressive tax, it’s an unfair tax and by moving to a progressive tax - one that taxes those who earn more at a higher rate - we can accomplish some of these goals that have eluded the state for a number of years,” Smith said at a press conference at the capitol. Smith said about 107,000 of the more than 5 million taxpayers in Illinois would be affected by the proposed increase. In order for the Illinois Constitution to be amended, both chambers of the General Assembly must approve the proposal by a three-fifths majority. Afterward, 60 percent of voters must vote in favor of the amendment on a referendum that will appear on the ballot in the next election.

Superlative REAL ID Editorial

The Orange County Register has an editorial on the REAL ID Act this morning that captures the issues magnificently. Among other gems:

The big trouble is that there’s no evidence that this Draconian act, even if fully implemented, would be more than a minor inconvenience for a determined terrorist. But having all that information – including copies of birth certificates and Social Security cards – available in one database would make an irresistible target for identity thieves. And it would be a major inconvenience for millions of innocent Americans and a major expense for state governments – meaning taxpayers.

The Register’s conclusion? Congress should “bite the bullet and repeal this useless, intrusive, money-wasting law.”