Eliminating the Diversity Visa Lottery the Right Way

To: Interested Parties
From: Heritage Action for America
Date: November 08, 2017

On October 8, 2017, the White House released a letter from President Trump to Congress outlining several “principles” for immigration reform. The letter called for ending “extended-family chain migration by limiting family-based green cards to spouses and minor children” and replacing these policies with a “merit-based system that prioritizes skills and economic contributions over family connections.” The letter also called for elimination of the diversity visa lottery.

The Halloween terrorist attack in New York City drew attention to a decades old immigration program known as the Diversity Immigrant Visa Program because the 29-year old suspect, Sayfullo Habibullaevic Saipov, used it to migrate to the United States from Uzbekistan. Following the attack, President Trump reiterated his support for eliminating the Diversity Immigrant Visa Program, or “diversity visa lottery.”

The Heritage Foundation has long opposed the diversity visa lottery, calling for its elimination and replacement with a system that favors employment-based visas and merit-based applicants. While the terrorist arrested in the New York City attack used the visa system to enter the United States nearly a decade ago, this is not a failure of the current vetting system in general or the suspect’s visa in particular.

Saipov is a homegrown terrorist who was radicalized in America subsequent to his legal entry. James Carafano, an expert in national security and foreign policy at Heritage, makes this point in The Daily Signal: “No visa program per se represents a particular terrorist threat if proper vetting and security practices are in place,” adding:

Proper measures are determined by competent risk assessments. Terrorists have tried every manner to come to the U.S. that can be imagined. If we banned a method of travel because a terrorist tried to use it, we would have to ban all travel to the U.S. The president was right to criticize the lottery visa—it’s not a useful or efficient or appropriate tool for determining who should immigrate here. We need a merit-based system.

Brief History

The U.S. State Department, which administers the diversity visa lottery using U.S. Citizenship and Immigration Services (USCIS) vetting processes and data, explains that Section 203 of the Immigration and Nationality Act (INA) provides for a category of immigrants known as “diversity immigrants” from countries with historically low rates of immigration to the United States.

The diversity category was added to the INA by the Immigration Act of 1990 and awards green cards, or legal permanent residence, to eligible applicants among six geographic regions with no single country receiving more than 7 percent of the total available visas in any one year. The State Department recently stated that 50,000 diversity visas will be available for fiscal year 2019, the application period of which closes on November 22, 2017.

Like numerous other government programs that award a valuable commodity – in the diversity lottery’s case, green cards or legal permanent residence – the program is subject to fraud and abuse. The U.S. Government Accountability Office found pervasive fraud in the program, concluding in a 2007 report:

Since its inception, the DV [diversity visa] program has facilitated thousands of individuals from countries currently underrepresented in the U.S. immigrant pool to immigrate to the United States. However, consular officers at 5 of the 11 posts we reviewed reported that fraud in the DV program is a major challenge […]. While fraud is an issue across all immigrant visa categories, there are specific aspects of the DV program […] that make it particularly vulnerable to manipulation from an unscrupulous visa industry in some countries.

As the State Department’s Office of Inspector General (IG) plainly summarized in a warning years earlier, “The DV [diversity visa] program is subject to widespread abuse.”

A Better Approach

As noted above, the application period for the next round of diversity visas closes on November 22, 2017. Recent media reports suggest that the president and several Senate Republicans will meet to discuss “progress on Capitol Hill thus far of any legislative fix to the end of the Deferred Action for Childhood Arrivals [DACA] program” or a potential “DACA fix.” Another report suggests Senate Republicans are “looking to move an immigration bill to the floor early next year.”

Any proposed deal to simply swap elimination of the diversity visa lottery with blanket amnesty for DACA recipients should be a nonstarter. Neither of these policies would address the underlying problems in our current family-based, or chain-migration, system which prioritizes immediate relatives before meeting the more pressing needs of our country – including demand for high-skilled migrant applicants seeking employment-based visas.

Congress could simply amend the Immigration and Nationality Act to eliminate the diversity immigrant program altogether. Rep. Bill Posey (R-Fla.) proposed a bill to do just that (H.R.1178). Indeed, as the Congressional Research Service (CRS) outlined, recent Congresses have attempted to eliminate the diversity visa lottery. Legislation similar to H.R.1178 passed the House in 2005 after a thorough committee process. However, the effort was subsequently blocked by Senate Democrats.

Beyond eliminating this misguided and pervasively fraudulent program, a rational immigration policy – one that makes sense for our nation’s economic needs – would reallocate the 50,000 visas in favor of awarding visas to foreign-born graduates of U.S. universities who earn advanced degrees in science, technology, engineering, and mathematics – or STEM.

According to State Department statistics on numerically-limited immigrant categories, as of November 1, 2016, the number of applicants on waiting lists in employment-based preference categories totaled 4,367,052. In other words, Congress mandated that USCIS and State – agencies it has tasked with administrative responsibilities to meet our nation’s immigration needs – vet and award thousands of visas annually under the moniker of “diversity” while leaving millions of prospective workers on a waiting list.

Conclusion

Lawmakers should take concrete steps to end the Diversity Immigrant Visa Program and begin reforming our legal immigration system to serve American interests in the 21st century. Specifically, Congress should reduce costly, low-skilled immigration, eliminate blanket family-based chain migration, and move toward a rational, merit-based migration system.

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Letter Supporting Scott Garrett to Lead Export-Import Bank

Heritage Action sent the following letter in support of former Rep. Scott Garrett’s nomination to lead the Export-Import Bank to Senate Banking Chairman Mike Crapo:

October 27, 2017

Dear Chairman Crapo:

We urge you and your fellow committee members to support the nomination of former Representative Scott Garrett (PN 673) to serve as President of the Export-Import Bank (Ex-Im Bank) of the United States. To be clear, we do not believe the Ex-Im Bank needs additional board members; however, if the Trump administration insists on refilling the board then the committee should confirm a reform-oriented leader, and Mr. Garrett is perfect for that job.

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Heritage Action Supports Jones Act Repeal Efforts

In the wake of Hurricane Maria’s damage to Puerto Rico, the Trump administration waived the restrictions the Merchant Marine Act of 1920, commonly known as the Jones Act, imposes on shipping to the island. The Jones Act is an outdated WWI protectionist law that regulates domestic U.S. shipping practices by mandating any good shipped by water between two points in the U.S. must be transported on a U.S. built, U.S.-flagged, and at least 75 percent U.S.-crewed vessel.

In effect, the Jones Act drives up shipping costs for American consumers by creating a government monopoly for U.S. only shipping commerce. According to a Heritage Foundation report, Sink the Jones Act: Restoring America’s Competitive Advantage in Maritime-Related Industries:

“Foreign companies carry more than 80 percent of traffic in American international liner commerce. The Jones Act keeps otherwise uncompetitive elements of the American shipping industry afloat, but this legislative gift to the shipping industry carries a stiff price. The Jones Act harms the U.S. economy by driving up shipping costs. It increases energy costs, stifles competition, and hampers innovation that is essential to the long-term competitiveness of the U.S. shipping industry, and the national security argument for the Jones Act is weak at best.”

For the island of Puerto Rico, the Jones Act has a significantly worse effect given its dependence on the shipping industry to transport goods and services. According to the Federal Reserve Bank of New York, the Jones Act is especially harmful to Puerto Rico:

“It costs an estimated $3,063 to ship a twenty-foot container of household and commercial goods from the East Coast of the United States to Puerto Rico; the same shipment costs $1,504 to nearby Santo Domingo (Dominican Republic) and $1,687 to Kingston (Jamaica)—destinations that are not subject to Jones Act restrictions…Shipping goods to and from Puerto Rico costs considerably more than shipping to and from the Island’s regional peers, imposing an important cost on Puerto Rican businesses and dampening the economy’s competitiveness. Much of this relatively high cost of shipping is widely attributed to the Jones Act.”

Thankfully, legislative efforts to repeal the Jones Act for the island of Puerto Rico have gained momentum. Sen. John McCain introduced a bill to exempt Puerto Rico from the coastwise laws of the United States (commonly known as the “Jones Act”) (S. 1894) that would repeal the Jones Act for the island of Puerto Rico. In the House, Rep. Gary Palmer introduced the Puerto Rico Humanitarian Relief Act (H.R. 3966) that would exempt Puerto Rico from the Jones Act for five years.

There are three American territories currently exempt from the Jones Act, including the U.S. Virgin Islands, which was exempted in 1992. Ideally, Congress should pass legislation permanently repealing the Jones Act for the entire country, but the legislative efforts by Sen. McCain and Rep. Palmer represent a good first step toward ending this damaging and outdated law. At a minimum, Congress should include a provision to repeal the Jones Act on upcoming disaster relief legislation.  

Heritage Action supports Jones Act repeal legislation, encourages Representatives and Senators to support it, and reserves the right to key vote in the future.

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Internet Sales Tax Should be Dead on Arrival

The internet is one of the most exemplary free market and innovation success stories of our life time. Over the last few decades, it has helped grow the economy, expanded opportunities for entrepreneurs, and enhanced consumer choice for all Americans by allowing unprecedented access to online goods and services.

Unfortunately, internet freedom is under attack by politicians willing to distort markets and tilt the playing field toward their favored businesses at the expense of the vast majority of Americans who benefit from online marketplaces.

The latest attack on the internet and its users is internet sales taxation. Earlier this year, Reps. Kristi Noem (R-S.D.) and John Conyers Jr. (D-Mich.) introduced the “Remote Transactions Parity Act” (H.R. 2193) while Sens. Mike Enzi (R-Wyo.), Dick Durbin (D-Ill.), Lamar Alexander (R-Tenn.), and Heidi Heitkamp (D-N.D.), introduced a similar bill titled the “Marketplace Fairness Act” (MFA) (S. 976).

Although they vary slightly, both proposals allow state governments to tax out-of-state sales on internet-based transactions. If enacted, an internet sales tax of this kind would disrupt the free flow of commerce, impose revenue collecting compliance costs for millions of businesses, and brazenly violate the classic American principle of “no taxation without representation.”

The U.S. Constitution, as confirmed by the Supreme Court’s 1992 decision in Quill Corporation v. North Dakota, was designed to protect interstate commerce from this sort of federal intrusion among states. James L. Gattuso, Senior Research Fellow in Regulatory Policy at The Heritage Foundation, explains:

“Under Quill, states can require businesses to collect their sales taxes only if those businesses have a physical presence (a building, warehouse, or employees) in their state. For instance, if a customer living in Virginia buys a product from a retailer with a physical presence only in Maryland, the customer pays no sales tax because Virginia can’t force the Maryland retailer to collect the tax.”

Supporters of the internet sales tax seek to overrule Quill, and the Court noted in its decision that Congress has authority to do so under the commerce clause. However, related legislative proposals thus far are severely misguided.

Identifying the political factors at play is critical to informing policy solutions. As Heritage Action previously outlined:

“The MFA is simply a political ploy to line the pockets of revenue hungry state governments that don’t want to cut spending. Worse, major retailers are playing politics to drive out competition from small, Internet-based competitors. Many big businesses have a physical nexus in several states and already collect remit sales taxes for online sales specifically because of their physical nexus in a variety of states. They are working to convince small brick-and-mortar companies that they are on the same team — a team that wants to ensure small, online businesses have to bear greater tax burdens.”

Businesses like Amazon, who have a physical presence in almost every state, are also in favor of a convoluted federal internet sales tax scheme because it aligns with their current business model. The company announced earlier this year it would voluntarily collect sales taxes in every state that has a sales tax.  The various internet sales tax bills in Congress would not hamper big online retailers, but would punish small startup businesses and mom-and-pop remote sellers. As Sen. Ron Wyden (D-Ore.) warned in 2013, “an Oregon business would have to collect taxes for New York, but Chinese firms wouldn’t have to collect taxes for any State.” Wyden predicted that “people are going to end up calling” the internet sales tax scheme “the shop China bill.”

In addition to the mounting evidence that an internet sales tax would be economically detrimental, there is a generational divide among Americans. A 2013 Gallup poll found that 73 percent of Americans between 18 and 29 opposed an internet sales tax. 62 percent of those between 30 and 49 felt similarly. However, only 46 percent of those 50 and older opposed an internet sales tax. The RNC’s Growth and Opportunity report from 2012 urged lawmakers to “Promote forward-looking, positive policy proposals that unite young voters” whose “perception of the two parties was born during the Barack Obama era.”

Republicans in Congress should reject misguided efforts to pass an internet sales tax and instead focus on fulfilling their campaign promise to enact comprehensive tax reform that cuts rates and helps grow the economy. Passing an internet sales tax, especially in the context of a larger tax reform package, does the opposite. Heritage Action will continue to work with members of Congress to oppose internet sales taxation, and would key vote against a proposal should it come for a vote.  

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Pro-Growth Tax Reform: Myth vs. Fact

The Trump administration and Republican congressional leaders released a long awaited tax reform outline that would finally fix our broken tax code. If passed, this recent proposal would grow the economy, create jobs and increase wages for American workers by 1) lowering and simplifying individual tax rates for all Americans, 2) cutting taxes for large and small businesses alike, 3) permitting tax-free entrepreneurship, 4) ridding the tax code of special interest handouts, and 5) ending the practice of double-taxing overseas profits made by U.S.-based companies who want to invest in America.

Myth: The GOP tax plan is a big tax cut for the wealthy.

Fact: The GOP tax plan is a tax cut for all Americans. Under the proposed tax framework, the current seven bracket system with rates of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent, and 39.6 percent is reduced to just three brackets at simpler and lower rates of 12 percent, 25 percent, and 35 percent. In addition, this plan nearly doubles the standard deduction to $12,000 for single filers and $24,000 for married couples, resulting in an expanded zero percent bracket. This means that a family does not have to pay tax on the first $24,000 they earn. This is the biggest benefit to low and middle class families. Other details will come as tax-writing committees begin drafting the actual legislation.

Myth: The GOP tax plan is pro-business, not pro-worker.

Fact: The GOP tax plan cuts taxes for all businesses and that will benefit the American workers. Most empirical estimates conclude that labor bears between 75 percent and 100 percent of the corporate tax burden. Corporations pass the cost of the tax burden to their workers in the form of lower wages or to their customers in the form of higher prices. U.S. corporations employ 54.8 million hard-working individuals, more than half of Americans invest in the stock market, and almost 40 percent of corporate stock is owned through retirement plans. By cutting the corporate tax rate from 35 percent to 20 percent, and the pass-through rate from 39.6 percent to 25 percent, the GOP tax plan would result in higher wages for American workers and more return on investment for the millions of Americans saving for retirement and investing in our economy.

Myth: The GOP tax plan will blow a hole in the federal debt.

Fact: The primary driver of America’s growing debt is the federal government’s addiction to spending. Over the last ten years, the federal government has spent at a higher level than it ever has in American history. In fiscal year 2015, the federal government spent a total of nearly $3.7 trillion or almost $30,000 per U.S. household. The current rise in federal spending has resulted in $20 trillion in total national debt. Federal debt held by the public is now equivalent to 74 percent of the entire U.S. economy. While some politicians blame the rise of the national debt on lower taxes, (tax revenue as a percent of GDP is well above the historic average and baseline projections will continue to increase over the next 20 years), the problem is clearly irresponsible federal spending. The federal government has a spending problem, not a revenue problem.

Additionally, the GOP tax plan will generate economic growth that leads to increased federal revenue. Specifically, the GOP tax plan cuts the corporate tax rate, the small business tax rate, and allows for full and immediate expensing. These provisions will lead to higher levels of savings and investments – the two key components of economic growth. According to recent analysis, pro-growth tax reform has the potential to grow the economy by 10 percent over the next 10 years and increase the average American family’s wages by more than 7 percent or about $4,000 for someone earning $50,000 a year. At the end of the day, the purpose of tax reform is not to give the federal government more money, but to give the American people more jobs and higher paychecks. Increased federal revenue is a side effect of pro-growth tax reform, but the best way to reduce debt is to reduce spending.     

Myth: Doubling the standard deduction will undermine the mortgage interest deduction, hurting homeowners and the real estate market.

Fact: Doubling the standard deduction benefits everyone including homeowners. While doubling the standard deduction will encourage homeowners to take the standard deduction over the mortgage interest deduction (MID), it does not necessarily mean homeowners receive less of a tax break. According to the National Association of Realtors (NAR), the average monthly payment for a mortgage is just above $1,000 totaling about $12,732 a year. Under the GOP tax plan, the standard deduction will be $12,000 for single filers and $24,000 for married couples. In addition, economic studies suggest that eliminating the MID — which this plan does not do — would lower housing prices, and potentially lead to an expanded first time homebuyer market for the real estate community.  

Myth: Repealing the state and local tax deduction hurts middle class families.

Fact: The state and local tax deduction currently forces federal taxpayers in low-tax states to subsidize taxpayers in high-tax states. The biggest beneficiary of this provision are high-income earners, not middle class families, who live in states with high taxes. In practice, this provision incentivizes state and local governments to raise their tax rates since local voters can write off the high taxes and don’t hold their local politicians accountable. By eliminating this provision, Congress can lower tax rates for all Americans by as much as 16.4 percent and apply pressure on big-government states like New York, Illinois and California to lower rates on their taxpayers. The state and local tax deduction is bad policy and Congress should eliminate it as part of tax reform.

Myth: Repealing the death tax (estate tax) is a giveaway to the wealthy.

Fact: The death tax is an unjust form of double taxation that kills family owned businesses and farms. Most wealthy individuals avoid paying the death tax by putting their wealth in liquid assets, setting up various trusts or partnerships, or by making charitable donations and gifts. The hardest Americans hit by the death tax are family owned businesses and farms whose wealth consists of physical assets such as buildings and land. Repealing the death tax will correct this injustice and boost U.S. economic growth by more than $46 billion over the next 10 years and generate an average of 18,000 private-sector jobs annually. Dying should not be a taxable event.  

Myth: The Alternative Minimum Tax (AMT) is a tax cut for the wealthy.

Fact: The AMT is an unnecessary complexity that is poorly designed. This provision requires certain individuals and businesses calculate their taxes two ways and pay the government the larger of the two amounts. In general, the AMT takes effect when deductions are “too large” relative to income. The AMT does its intended job poorly and inefficiently by burdening taxpayers with additional paperwork and raising little extra tax revenue. The GOP tax plan simplifies the tax code and ends special interest carve outs, making the AMT unnecessary.

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