Reihan Salam discusses the idea.
The problem with Kenny’s proposal, in my view, is that if we are going to set a tariff, $50,000 is almost certainly not the “correct” price. Kenny’s concern is that the price might be too high, yet the findings of Miao Chi and Scott Drewianka suggest otherwise. Moreover, his thought experiment stipulates that a $50,000 tariff would lead to an influx of 1 million, but of course we don’t know what the market-clearing price would be. In the first year of the new system, in light of pent-up demand, the $50,000 tariff might lead to far more than 1 million immigrants, which in turn might lead to a backlash against immigration tariffs.
The way to fix the number slots, Salam argues, is with an auction of immigration slots, rather than a tariff. But I do not see why this is an instance where it is easier to know the number of slots than the correct price. (Not that i have any idea about what the correct price would be.)
When I thought about this issue nine years ago, I wrote
The tax rate for guest workers would provide a means with which to fine tune the competition between domestic and foreign workers. If we believe that foreign workers are driving domestic wages too low, we can raise the tax on foreign workers. On the other hand, if the economy is at full employment and we want continued expansion without inflationary pressure, we could lower the tax on foreign workers.
I was talking about a high payroll tax for guest workers, not about an immigration fee.
Note that the employers of illegal immigrants would much prefer a quota to something like my payroll tax proposal.
Whether high or low, I promise you that some will pay the fee/tax but most will not and sneak in anyway. People want opportunity and a chance to better their lives. People willing to leave their ancestral home and society are far too self-motivated to let such an artificial barrier stop them. Auctioning off a limited number of slots will generate interest, and a far greater number of people who will bypass the system the old fashion way.
The only policy that will ultimately work is one that recognizes a natural right of people to live their lives as they wish, and to find a way to make their entry to the US legal so their earnings can be taxed, and they can live within the legal system. They don’t have to be given citizenship, they can have guest working permits/visas.
This issue reminds me of the drug issue. Illegal for over a century in some cases, but hasn’t changed behavior in the main, just the periphery. It has resulted in a whole host of societal and behavioral issues and certainly has cost us a fortune in enforcement and incarceration. Yet, you can get drugs anywhere, anytime you want. Same thing with immigrants… we maintain a fiction of limiting the number we let in officially, but look at all the people who ignored the law.