Out with the Old Tax Code, In with this ‘New IDEA’

You probably hear it said every New Year’s Eve. As the clock strikes midnight, and the New Year is ushered in, someone will offer a New Year’s resolution punctuated with the statement “out with the old, in with the new!”

Well, in Congress, every October 1, we have a Fiscal New Year. This year, many in Congress resolved to work to produce the first major tax reform package in 30 years. Figuratively, these Members expressed a clear desire to be “out with the old tax code, and in with new ideas.” Well, I have got a “New IDEA” for their consideration.

I have introduced legislation, H.R. 176- the New IDEA (Illegal Deduction Elimination Act), that needs to be included in H.R. 1- the Tax Cuts and Jobs Act. Not only does HR 176 advance important public policy goals, it does something else important too: it generates more than a quarter of a trillion dollars in revenues from unscrupulous employers of illegal aliens.

Currently, employers of illegal aliens deduct as a business expense the wages and benefits paid to illegal alien workers. No employer should be rewarded with a tax deduction for illegal activity. New IDEA would end this practice.

How big a hole does the existing deduction scheme blow in our budget? According to the Center for Immigration Studies, eliminating deductions taken for illegal alien employees would increase federal tax revenues by $25.4 billion a year, or $254 billion over ten years. That’s a lot of money, and these savings will reduce a lot of red ink in the new tax bill.

Right now, the House Ways and Means Committee is trying to stay within budget restraints by targeting a number of popular deductions for elimination. Here are some of the personal and business deductions that H.R. 1, in its current form, would eliminate to achieve savings:

• State and Local Income or Sales taxes;
• Student Loan Interest;
• Medical Savings Accounts;
• Moving Expenses; and, ironically,
• Tax Preparation Fees

How can Congress justify eliminating these popular tax deductions while preserving the equivalent of a federal subsidy for employers who hire illegals?

New IDEA would also make the federal E-Verify program permanent. The E-Verify system is the federal program that allows employers to quickly and efficiently check the employment eligibility of alien workers to ensure they aren’t hiring illegal aliens. Making E-Verify permanent would work hand-in-glove with the elimination of the tax deduction targeted by New IDEA to protect American jobs for American workers and to provide safe harbor for scrupulous employers.

I do not think there is another proposal that advances as many important public policy goals while also providing such a significant and positive budgetary impact. To this end, I recently sent a letter to Ways and Means Chairman Kevin Brady (signed by 11 of my colleagues) encouraging him to include New IDEA in the tax reform legislation. Let’s keep our resolutions on tax reform by ushering in New IDEA to the tax legislation this fiscal year.