Why Immigration reform can’t work!

What must be done to make it possible!

Immigration bill and how it relates to other financial concerns:  

A key question on immigration is: how can our government encourage immigrants to become income tax paying members of our society, when industries hire them as subcontractors rather than as W2 employees?

It is an accepted fact that 47% of American households do not pay any income tax.  It is also acknowledged that a large part of our Latino work force is employed in the residential services industries as subcontractors.  This entire industry avoids the cost of a multitude of social programs, many of which are required by law. The residential services industries include residential remodeling, residential construction, painting, landscaping, lawn services, home cleaning, tree removal services and “in home” daycare and the list continues into many more industries.

The difference between employee and as subcontractor is defined state law.  However this law is ignored because it is difficult to police this difference in the residential services industry. In addition, it is noteworthy that businesses in the U.S. are the collection agent of income taxes from all w2 employees for both state and federal governments.

The primary reason this law is difficult to enforce is that the cost of worker’s compensation insurance for the trades (in the residential services industries) became unreasonably high in cost long ago, (1980’s).

One of the problems of our government (state and federal) is its inability to recognize when a program has failed and to provide a solution that will work.  When will the individual states correct the cost of worker compensation insurance for these industries?

Worker compensation for a carpenter often costs approximately 15% of payroll, ($6,000.00 for each employee that earns $40,000.00). The only way to lower the cost of worker’s compensation insurance for these trades is to increase the waiting period required “to be entitled to the benefit” (this is a sequel to increasing a deductible).  In Maryland we have a 7 day waiting period: should this be increased to 2 weeks or even one month? What size deductible will bring the cost down to where employers are willing to participate?

A second cost-cutting tool is to have employees share in the cost of worker’s compensation insurance, (50% employer and 50% employee).

The third tool needed to make this work is to offer the homeowner a deduction for residential service.  In exchange for the deduction, the homeowner would be required to verify and provide tax info.

Workers compensation is a state-governed program and I question why the individual states fail to address these concerns. However, a pre-requisite to creating an immigration bill must be to remove the road blocks that prevent employers from hiring these workers as (W2) Employees.

To approve an immigration program before we correct the cost of worker compensation insurance for the residential services industries would create a class of workers excused from paying their share.  It would be the government’s way of encouraging members of our society to freeload on the backs of the 53% who pay income tax.