Chapter 10: Don’t Restrict Immigration, Tax It

May 13, 2020 • Publications
By Nathan Smith

This chapter is a part of 12 New Immigration Ideas for the 21st Century.

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Many economists—including Nobel laureate Gary Becker—favor taxing immigration because charging a “price” can produce a more efficient result than restricting it with government‐​established caps or quotas. Good immi­gration policy ought to bring the greatest good to the greatest number, subject to the constraints of being compatible with human rights and incentives and of making many people better off without making others worse off. Consistent with those principles is a proposed policy called “Don’t Restrict Immigration, Tax It.”

Don’t Restrict Immigration, Tax It

Congress should create a new Don’t Restrict Immigration, Tax It (DRITI) visa that would be available to most foreign‐​born adults with restrictions based on current inadmissibility criteria concerning public safety and health. DRITI visa applicants would have to pay modest deposits equal to the cost of removal. Deposits would be placed in DRITI accounts, which would have two special rules: no withdrawals except by account holders physically present in their countries of citizenship and no withdrawals that bring the balance below the initial deposit except with the surrender of the DRITI visa. Destitute DRITI immi­grants would then, instead of welfare, have a right to be sent home at the cost of sacrificing their DRITI deposits and retiring their DRITI visas.

The deposit requirement would exclude some poor people. But it would not create an incentive to immigrate illegally, because a DRITI deposit would usually be much less than the financial, let alone opportunity, cost of illegal entry and would be reimbursable in the immigrant’s home country if he returned permanently. In this way, a DRITI visa could be expected to practically eliminate adult illegal immigration because virtually all foreigners aspiring to enter the United States would prefer to come using a DRITI visa rather than illegally. Moreover, the natural punishment for illegal immigration would be less drastic and consequently easier to implement. Illegal immigrants, if caught, could be fined and issued DRITI visas. Employers who now employ illegal immigrants would employ DRITI immigrants instead.

Once in America, DRITI immigrants would be as limited as lawful permanent residents in their activities. They could work, get driver’s licenses, and otherwise freely participate in the American economy and society as well as enjoy the protection of their rights by the government. But they would not be able to officially participate in civic life through voting or other political activities, serving on juries, or receiving federal public assistance.

Most importantly, DRITI immigrants would be subject to two special taxes and charges in addition to their current taxes:

  • 20 percent of their pay would be withheld from each paycheck and sent to the federal government as a DRITI tax.
  • Another 20 percent of their pay would be withheld and deposited in their DRITI accounts.

DRITI accounts would encourage DRITI immigrants to maintain ties with their home countries and/​or eventually return there with capital to invest. The funds in a DRITI account would promote international development and incentivize DRITI immigrants to return home lawfully. But DRITI accounts could also serve as a pathway to citizenship. If an account reaches a certain value, say $80,000, the DRITI immigrant could trade it for a green card and the chance to eventually naturalize. This is earning citizenship since, after the initial deposit, only withheld wages could be deposited in DRITI accounts. Those who assimilate into American culture would tend to stay and naturalize, while those just wanting wealth would tend to go home.

DRITI immigrants would also pay income, payroll, property, and all other taxes like citizens do, with income after DRITI withholding serving as the income tax base. However, they would be ineligible for refundable tax credits. Like many illegal immigrants today, they would pay Social Security payroll taxes without becoming entitled to benefits. Generally, DRITI immigrants would probably keep about $0.50 per $1.00 of earnings.

DRITI revenues would be huge. Gallup polls indicate that 150 million people or so would immigrate to the United States without any immigration restrictions.104 In the long run, other estimation techniques in economic models suggest that a billion or more immigrants would come under a regime of pure open borders over a very long time.105 DRITI taxes would dramatically lower those estimates by charging a price. As a back‐​of‐​the‐​envelope calculation, I assume that 45 million DRITI immigrants could arrive within the first 10 years, with labor force participation rates of 65–70 percent and average wages of $30,000 per year. Without changing any other laws, that would translate to $180 billion in extra revenue from DRITI taxes per year, plus more from the surrendered DRITI accounts of those who become citizens and more still from currently existing taxes. Tax revenues would increase dramatically as more DRITI immigrants arrive.

DRITI’s Impact on Americans

DRITI would impact Americans through the labor market and through its effect on government finances. DRITI immigrants would disproportionately contribute inexpensive, low‐​skill labor and likely reduce the raw wage for substitutable workers while raising the value of capital, real estate, and complementary workers. Overall wage levels in the economy would not change in the long run. But some Americans would face more wage competition, and others would see their wages rise.

In response, Congress could use DRITI revenues to finance an expanded earned income tax credit, a larger child tax credit, or a tax cut for lower‐​skilled Americans.106 These transfers and changes in tax policy would be manageable with hundreds of billions in additional DRITI revenue.

Answers to Other Objections

Another objection to DRITI is that it would treat foreigners harshly by levying higher taxes on them and withholding so much of their incomes. But most foreigners from developing countries could more than double their incomes by immigrating to the United States, making them better off in the short run as DRITI immigrants and much more in the long run as U.S. citizens or back home with thousands of dollars of American savings. Having additional options is never bad. Those who see no benefit from a DRITI visa would not apply. Any proposal that treats immigrants more generously but admits fewer of them is inferior to DRITI, since it would benefit fewer people, benefit U.S. citizens less, and arbitrarily favor some foreigners over others.

Many DRITI immigrants might try to work cash jobs to avoid DRITI withholding, but the disadvantages to both employers and employees of operating clandestinely would limit the scale of this problem. Employers would have little reason to employ legal workers under the table, and DRITI immigrants would be loath to jeopardize their lawful status. Indeed, in some ways, DRITI would create a more favorable environment for encouraging employers to abide by labor laws, since DRITI immigrant employees could report abusive employers without fear of deportation.

The most serious objection to DRITI involves family unification. DRITI is designed to attract immigrants to work but also incentivizes them to eventually return home. Child immigrants do not fit into this model very well. They cannot pay their way but instead must consume schooling. Being in their formative years, they cannot reasonably be expected to return to their countries of origin, which would seem foreign to them. And yet the natural rights to family formation and family togetherness must be respected.

One solution might be to require DRITI immigrant parents to pay higher DRITI taxes to cover the cost of their children’s education, say an extra 5 percent for each child. Public schools would be required to accommodate DRITI immigrant children under current Supreme Court precedent, but the federal government could redistribute some of the revenue to local school districts where the DRITI immigrant children live.107 Minor children brought in by DRITI immigrants would become DRITI immigrants themselves upon reaching adulthood. But, of course, U.S.-born children of DRITI immigrants would be U.S. citizens under the 14th Amendment, so an increase in mixed‐​status households could be expected.

DRITI’s potential impact on the United States would most closely resemble how the migration policy of Qatar has affected that country. Qatar currently admits so many expatriate workers that the Qataris themselves comprise barely 10 percent of the population.108 Educated Western expats run modern institutions such as the Qatar‐​based media giant Al‐​Jazeera and teach in universities, while laborers from developing countries perform construction, domestic service, and other lower‐​skill labor. The Qatari system has some major problems, and an American DRITI would better protect immigrants’ rights, offer a possible path to citizenship, attract fewer migrants as a share of population, and be regulated by a tax rather than immigration quotas. But DRITI would resemble Qatar in raising Americans’ living standards with the help of immi­grant labor.

Half Measures and Compromise

As described so far, DRITI would be a unilateral and global policy. But it could be instituted, especially at first, only for countries with which Americans feel culturally comfortable, such as Canada or Australia. It could also be instituted through bilateral deals, whereby the United States would apply taxes instead of restrictions to citizens of the European Union in return for the European Union applying taxes instead of restrictions to U.S. citizens. DRITI tax rates need not be the same for every country but could be proportioned to the perceived or real negative externalities that immigrants from different countries bring with them.

Eventually, the DRITI principle might even become the basis for a World Migration Organization, similar to the World Trade Organization (WTO). The WTO has had success in promoting free trade. But its key principle—“most favored nation” rules or nondiscrimination, reasonable in trade policy—does not make sense for migration, where immigrants of different nationalities impose different degrees of real or perceived negative externalities on host countries. Multilateral negotiations could gradually establish the principle that migration controls should be nonarbitrary and justified by quantifiable negative externalities and should take the form of taxes rather than denials of entry.

More immediately, DRITI could address the problem of illegal immigration in a uniquely practical, efficient, human rights–compatible way. Current immigration enforce­ment produces systematic, intolerable human rights violations. Yet it still cannot get illegal immigration under control. The government holds children in detention, separates families, and condemns millions of illegal immigrants to living in fear. And it exposes some deportees to violent death. But there are millions of illegal immigrants in the United States.

Any genuine reform of the immigration system should shift illegal immigrants toward the legal immigration system. For example, public opinion has long recognized the moral necessity of creating a path to citizenship for the Dreamers, but an amnesty for Dreamers could spur many foreign parents with young children to illegally immigrate in hopes their children would get a path to citizenship. A regional version of the DRITI policy, focused only on Mexico and Central America (MCA), could largely solve this problem without risking rapid influx of tens of millions of immi­grants that the global version of the DRITI policy would likely cause. To deal with non‐​MCA illegal immigrants, including visa overstayers, DRITI programs with relatively small quotas could be introduced for other countries.

DRITI could also be applied to borderline asylum cases as a way to err on the side of human rights while mitigating taxpayer cost. In obvious asylum cases, DRITI would not be appropriate and the current system would suffice. For instance, the government would not be able to send genuine asylees home if they don’t want to pay the DRITI visa due to the danger of repatriation. But in marginal cases, offering asylum seekers DRITI visas could be a nice alternative to a flat denial and deportation. The need for a plausible asylum claim would curtail the number of DRITI immigrants, and the United States would get some revenue while promoting global human rights.


Policymakers should seek to replace migration restrictions with migration taxes wherever they can because the price mechanism allocates almost everything more efficiently than hard government‐​imposed numerical caps, quotas, and regulations. Migration taxes implemented for narrow purposes would prove their worth and be adopted for other purposes, such as cutting red tape, raising revenue, and bringing greater freedom of migration.

About the Author

Nathan Smith is a PhD economist and author of several books and many articles in publications such as Foreign Affairs, The Freeman, The Federalist, and the Imaginative Conservative, among others. He has blogged at the Free Thinker, Open Borders: The Case, Reinventing Economics, and Roadless Revolution. His 2010 book, Principles of a Free Society, adapts classical liberal political philosophy to modern criticisms and developments.


104 Neli Esipova, Anita Pugliese, and Julie Ray, “More Than 750 Million Worldwide Would Migrate If They Could,” Gallup, December 10, 2018.

105 Nathan Smith, “The Global Economic Impact of Open Borders,” April 3, 2015, https://​ssrn​.com/​a​b​s​t​r​a​c​t​=​2​5​89733.

106 “Federal Returns with EITC: 1999 to 2017,” Statistics, Tax Policy Center, October 7, 2019, https://​www​.tax​pol​i​cy​cen​ter​.org/​s​t​a​t​i​s​t​i​c​s​/​f​e​d​e​r​a​l​-​r​e​t​u​r​n​s​-eitc.

107Plyler v. Doe, 457 U.S. 202 (1982).

108 Human Rights Watch, “Country Summary: Qatar,” January 2017, https://​www​.hrw​.org/​s​i​t​e​s​/​d​e​f​a​u​l​t​/​f​i​l​e​s​/​q​a​t​a​r​_​1.pdf.