[House Hearing, 109 Congress]
[From the U.S. Government Publishing Office]




 
HEARING ON IMPACTS OF BORDER SECURITY AND IMMIGRATION ON WAYS AND MEANS 
                                PROGRAMS

=======================================================================

                                HEARING

                               before the

                      COMMITTEE ON WAYS AND MEANS
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED NINTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 26, 2006

                               __________

                           Serial No. 109-76

                               __________

         Printed for the use of the Committee on Ways and Means



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                      COMMITTEE ON WAYS AND MEANS

                   BILL THOMAS, California, Chairman

E. CLAY SHAW, JR., Florida           CHARLES B. RANGEL, New York
NANCY L. JOHNSON, Connecticut        FORTNEY PETE STARK, California
WALLY HERGER, California             SANDER M. LEVIN, Michigan
JIM MCCRERY, Louisiana               BENJAMIN L. CARDIN, Maryland
DAVE CAMP, Michigan                  JIM MCDERMOTT, Washington
JIM RAMSTAD, Minnesota               JOHN LEWIS, Georgia
JIM NUSSLE, Iowa                     RICHARD E. NEAL, Massachusetts
SAM JOHNSON, Texas                   MICHAEL R. MCNULTY, New York
PHIL ENGLISH, Pennsylvania           JOHN S. TANNER, Tennessee
J.D. HAYWORTH, Arizona               XAVIER BECERRA, California
JERRY WELLER, Illinois               LLOYD DOGGETT, Texas
KENNY C. HULSHOF, Missouri           EARL POMEROY, North Dakota
RON LEWIS, Kentucky                  STEPHANIE TUBBS JONES, Ohio
MARK FOLEY, Florida                  MIKE THOMPSON, California
KEVIN BRADY, Texas                   JOHN B. LARSON, Connecticut
THOMAS M. REYNOLDS, New York         RAHM EMANUEL, Illinois
PAUL RYAN, Wisconsin
ERIC CANTOR, Virginia
JOHN LINDER, Georgia
BOB BEAUPREZ, Colorado
MELISSA A. HART, Pennsylvania
CHRIS CHOCOLA, Indiana
DEVIN NUNES, California

                    Allison H. Giles, Chief of Staff

                  Janice Mays, Minority Chief Counsel

Pursuant to clause 2(e)(4) of Rule XI of the Rules of the House, public 
hearing records of the Committee on Ways and Means are also published 
in electronic form. The printed hearing record remains the official 
version. Because electronic submissions are used to prepare both 
printed and electronic versions of the hearing record, the process of 
converting between various electronic formats may introduce 
unintentional errors or omissions. Such occurrences are inherent in the 
current publication process and should diminish as the process is 
further refined.


                            C O N T E N T S

                               __________

                                                                   Page

Advisory of July 19, 2006 announcing the hearing.................     2

                               WITNESSES

Horn, Hon. Wade F., U.S. Department of Health and Human Services.     7
Myers, Hon. Julie L., U.S. Department of Homeland Security.......    10
Everson, Hon. Mark W., Internal Revenue Service..................    16
Barnhart, Hon. Jo Anne B., Social Security Administration........    21
Gustafson, Thomas A., U.S. Department of Health and Human 
  Services.......................................................    27

                                 ______

Fix, Michael, Migration Policy Institute.........................    72
Camarota, Steven A., Center for Immigration Studies..............    80

                       SUBMISSIONS FOR THE RECORD

Carter, Hon. John R., a Representative in Congress from the State 
  of Texas, statement............................................    99
U.S. Citizenship and Immigration Services, U.S. Department of 
  Homeland Security, statement...................................   100


                         HEARING ON IMPACTS OF
                   BORDER SECURITY AND IMMIGRATION ON
                        WAYS AND MEANS PROGRAMS

                              ----------                              


                        WEDNESDAY, JULY 26, 2006

                     U.S. House of Representatives,
                               Committee on Ways and Means,
                                                    Washington, DC.

    The Committee met, pursuant to notice, at 2:00 p.m., in 
room 1100, Longworth House Office Building, Hon. Bill Thomas 
(Chairman of the Committee) presiding.
    [The advisory announcing the hearing follows:]

ADVISORY FROM THE COMMITTEE ON WAYS AND MEANS

                                                CONTACT: (202) 225-1721
FOR IMMEDIATE RELEASE
July 19, 2006
FC-25

                      Thomas Announces Hearing on

                     Impacts of Border Security and

                 Immigration on Ways and Means Programs

    Congressman Bill Thomas (R-CA), Chairman of the Committee on Ways 
and Means, today announced that the Committee will hold a hearing to 
review the impact of current and proposed border security and 
immigration policies on programs in the Committee's jurisdiction. The 
hearing will take place on Wednesday, July 26, 2006, in the main 
Committee hearing room, 1100 Longworth House Office Building, beginning 
at 2:00 p.m.
      
    In view of the limited time available to hear witnesses, oral 
testimony at this hearing will be from invited witnesses only. However, 
any individual or organization not scheduled for an oral appearance may 
submit a written statement for consideration by the Committee and for 
inclusion in the printed record of the hearing.
      

BACKGROUND:

      
    Immigrants to the United States are an essential part of the fabric 
of our nation. They contribute to our economy and participate in our 
society in countless ways as they work, pay taxes, raise their 
families, and utilize many of the same public services and benefits 
that are available to all Americans.
      
    However, lax border security and inadequate enforcement of 
immigration laws has contributed to a substantial increase in illegal 
immigration. Since the last major immigration reform legislation was 
enacted twenty years ago--the Immigration Reform and Control Act of 
1986 (P.L. 99-603)--the estimated number of illegal immigrants in the 
United States has nearly quadrupled, from 3.2 million in 1986 to 12 
million in 2006. Illegal immigration and proposals to address it affect 
our Nation's benefit programs, health care costs, and tax system.
      
    Under current law, immigrants living in the United States are 
required to pay taxes; however, illegal immigrants may not obtain 
benefits from many entitlement programs or utilize certain tax 
advantages. For non-citizens living legally in the United States, 
access to many benefits is restricted, based on their immigration 
status. Therefore, legislative proposals that would legalize certain 
illegal immigrants or increase legal immigration would result in 
increased spending for Social Security, Medicare, other benefit 
programs, and for refundable tax credits, including the Earned Income 
Tax Credit. These legislative proposals would also increase revenue 
from taxes paid by new immigrants who start working in the United 
States or newly-legalized immigrants who want to come into compliance 
with the law.
      
    The lure of employment opportunities in the United States has long 
been acknowledged as a significant incentive for immigration. Enforcing 
the law prohibiting employers from knowingly hiring illegal workers is 
essential to securing our borders. Many Federal agencies play a role in 
identifying unauthorized work or penalizing employers who hire illegal 
immigrants, including the Social Security Administration (SSA) and the 
Internal Revenue Service. Some legislative proposals would require 
employers to check the SSA and the U.S. Department of Homeland Security 
databases to verify employees' identifying information and employment 
eligibility, and would expand data sharing between agencies to improve 
enforcement of immigration laws. Although these proposals would assist 
in bolstering workplace enforcement if enacted, they would also place 
administrative burdens on employers and the SSA. In addition, these 
proposals affect the privacy of tax information and could discourage 
voluntary tax law compliance.
      
    In announcing the hearing, Chairman Thomas said, ``Our first 
priority is to secure our borders and enforce our laws. Next, we must 
carefully consider how proposals to modify immigration policy, 
including those that would legalize millions of illegal immigrants, 
would affect Social Security and other benefit programs, our health 
care system and tax revenues. The actions we take today will have a 
profound impact on America's economy and society, and we must take the 
time to do it right. We need a comprehensive, long-term solution that 
recognizes the important role immigrants play in our society and 
economy, while ensuring there is respect for the rule of law.''
      

FOCUS OF THE HEARING:

      
    This hearing will focus on the effect of immigration and border 
security-related proposals on the costs and administration of certain 
entitlement programs within the jurisdiction of the Committee on Ways 
and Means (including Social Security, Supplemental Security Income, 
Medicare, Temporary Assistance for Needy Families), and the effect on 
tax revenues and compliance.
      

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS:

      
    Please Note: Any person(s) and/or organization(s) wishing to submit 
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FORMATTING REQUIREMENTS:

      
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noted above.

                               

    Chairman THOMAS. Good morning. Actually, it tells you where 
I've been and what I've been doing. Good afternoon.
    Time flies when you're having fun. I apologize for starting 
the hearing just a few minutes late, but the subject matter, I 
think, is important because the Committee will examine the 
impact of immigration on programs in this Committee's 
jurisdiction. This hearing is part of a broader effort to enact 
meaningful immigration reform that clearly begins at our 
borders.
    The House and the Senate approved very different 
immigration bills in recent months. Both bills contain an 
important issue in the Committee's jurisdiction, namely, the 
system by which employers would verify the employment 
eligibility of their employees. The Senate bill also includes 
other provisions within the jurisdiction of this Committee.
    Today what we're going to try to do is to begin with a 
broad look at the effect of illegal immigration and its impact 
on our Committee jurisdiction to focus on modifying whatever 
proposals we deal with, to be able to maximize those agencies 
and Departments that are going to need to administer whatever 
it is that the House and the Senate finally agree to do.
    The last time, and some folks weren't here, the last time 
Congress addressed immigration reform was in the eighties, and 
it was clear that, because of what I believed to be fundamental 
flaws in the legislation, ultimately that effort did not stem 
the tide of illegal immigration, and produced, I believe, 
certain adverse effects that, through experience, we don't want 
to repeat.
    Clearly there were unanticipated consequences at time. What 
we're going to try to do through these and other hearings is to 
minimize the chance of that occurring. So, here we are again 
considering how to reform our laws, and how to better enforce 
our borders, and at the same time, insure our economy. This, I 
assume, is a point that people will not argue, that our economy 
has a sufficient workforce to maintain the country's economic 
growth.
    It goes without saying that this country was built by 
immigrants, with enormous contributions from Native Americans. 
Today, still, immigrants are a critical part of our Nation's 
history and our economy, and, frankly, I would say they are an 
important part of our psyche, in terms of a land of 
opportunity.
    Part of the problem, though, is that a Nation State can't 
really be a Nation State if it cannot provide external security 
and internal order. The internal order starts at the border. 
Our inability to enforce the security of our own laws has 
contributed to a significant increase in illegal immigration. 
The amount of that increase is, in large part, in question, and 
it's obvious, overwhelmingly, illegal immigrants come here 
because they want to work.
    Ultimately, in dealing with Mexico, for example, the 
solution is to create an economic environment in Mexico, so 
that the citizens of that country come here to visit because 
they want to, not because they have to. Some of them even pay 
taxes. Some of them are, frankly, exploited. Frankly, some of 
them exploit America's public programs. One of the things we 
want to examine is try to get facts out of an awful lot of myth 
that exists in terms of who uses resources and to what extent.
    All of these are issues that should be examined. We 
obviously have to strike some kind of a balance that 
understands the role of immigrants. It will go so far as to 
examine the current laws in which immigrants are legally 
admitted, as well as dealing with issues trying to address 
illegal immigration.
    Respect for the law is extremely important, but good 
stewardship of public benefit programs is as important, as 
well. This general hearing is hopefully going to produce either 
some additional Subcommittee hearings or more focused hearings 
on the part of the full Committee in the direction of those 
areas of jurisdiction of the Subcommittees that would allow us 
to shed some light.
    With that, I recognize the gentleman from New York, Mr. 
Rangel, for any opening statement he may wish to make.
    Mr. RANGEL. Thank you, Mr. Chairman.
    First of all, when you talked about the contributions of 
immigrants and Native Americans, you excluded the slaves, 
which, in some of our opinions, without that free labor, the 
economy--the country and the economy could not have survived. I 
know----
    Chairman THOMAS. Chairman. Yield?
    Mr. RANGEL. Yes?
    Chairman THOMAS. He's absolutely correct, and the Chair 
appreciates the correction.
    Mr. RANGEL. Thank you. When I heard that we were going to 
join the rest of the House Committees to talk about border 
security, I could not think that you could have been as 
creative as you are now.
    So, with this distinguished panel, may not have much to do 
with the political issue of border security, but it will be 
helpful for us to determine the impact of the various bills 
that are being debated in the House and the Senate. One bill, 
of course, will just build a fence, and the sum concept is just 
to have low-cost labor to come in, in order to help out the 
recreational, and the entertainment, and the agriculture 
Committees, and, I guess, others. Others is a combination of 
both.
    So, I guess we will find out from each of you what would 
the economic impact be on the programs under your jurisdiction. 
Mr. Everson, I am concerned with how we're going to tax 
whichever group of people are allowed to become legal, and also 
concerned as to whether or not immigration policy, as it exists 
today, whether or not is there's any investigation of those 
people that hire illegals on a large scale.
    I have the impression that we are really inviting people to 
come into the United States by giving them jobs. Know where 
they work and what they do, and we know how essential that 
service is. Knowing how sharp the Internal Revenue Service 
(IRS) is in trying to get illegals to pay taxes, I'd be 
interested to know what effort, if any, is ever made to 
determine from employers whether or not the employees are 
illegal, or should they be paying taxes, and then what would 
happen if they did come in under one of the programs, whether 
we could get some taxes from them if they had this quasi-legal 
position.
    So, this is going to be very, very interesting, and I thank 
the Chair for his imagination. I was really prepared to deal 
with terrorists crossing the borders, but this may be more 
substantive, even though it won't have anything to do with 
border security, to find out just where the Administration is 
on all of this, and what the impact is going to be, and, 
perhaps, get some of your recommendations and suggestions as to 
which one of the programs you might think would be best for 
America as you see it. I yield back the balance of my time, 
Chairman Thomas.
    Chairman THOMAS. Thank you, gentleman. I do want to remind 
my colleague from New York that, although these hearings 
shouldn't be used for personal reasons, the Chairman voted 
``No'' on the House bill, and I believe the structure of the 
Senate bill is not implementable the way it's structured. If we 
are honestly going to address the issue, I think we have to 
examine the contents of the House bill and the Senate bill to 
make sure that when we act we act in a way that we can actually 
address the problem, instead of some kind of a political 
response to a very real human and economic problem.
    I just want to put it on that basis, because it was very 
difficult, as you might imagine, for the Chairman of the 
Committee on Ways and Means to vote ``No'' on the House 
proposal. So, I understand, and I don't mean this in a totally 
pejorative sense, a degree of cynicism on the part of folks in 
terms of what we're doing. As far as I'm personally concerned, 
I'm looking for answers, and this hearing is structured, and I 
think other hearings may need to be structured if we can't get 
some answers out of this hearing, to be able to move forward in 
trying to resolve this issue, since so much of the impact of 
the question does hit the jurisdiction of this Committee.
    Gentleman from New York.
    Mr. RANGEL. I think you may have answered it, but I think 
you're joining with me in saying that this panel could help 
clarify, for members that are here, as to which one of the 
pending bills or concepts would be best for the country, after 
we hear their answers.
    Chairman THOMAS. My goal, primarily, would not be to try to 
pick between pieces of legislation, one of which I expressed in 
a vote that I thought was flawed, and, I've just indicated 
verbally to you, the other one probably doesn't work, either.
    I want to hear from the people who are responsible for 
implementing programs about the impact of illegal immigration 
on those programs, what they might have as a response to 
dealing with some of those issues, but also beginning to 
address the more fundamental conflict that we have in this 
system, where we're to a very great degree schizophrenic, as 
the gentleman from New York indicated, in which we say we're 
not supposed to hire illegals, but, frankly, as the President 
said over and over again, especially in certain industries, we 
can't function without illegals, and I think that's 
schizophrenic.
    I think we have to be honest in addressing what options we 
have in front of us that are real, that will assist us in 
moving forward in as humanitarian way as possible in resolving 
the fact that the United States does not have control of its 
borders.
    Mr. RANGEL. Thank you.
    Chairman THOMAS. Thank you. I want to thank the panel for 
being here, and I hope that additional response, if you weren't 
quite clear on what we wanted to do, was to begin a process, 
which, as I said, may require additional hearings, and, in 
large part, relying on what you have to say, may indicate where 
we have to go.
    The first member, and I'll just go from our left to your 
right, Hon. Wade F. Horn, Assistant Secretary for Children and 
Families, U.S. Department of Health and Human Services; Hon. 
Julie Myers, Assistant Secretary for U.S. Immigration and 
Customs Enforcement (ICE), U.S. Department of Homeland Security 
(DHS); Hon. Mark W. Everson, Commissioner, IRS; the Hon. Jo 
Anne Barnhart, Commissioner, Social Security Administration 
(SSA); and my friend Tom Gustafson, Deputy Director, Centers 
for Medicare and Medicaid Services, U.S. Department of Health 
and Human Services.
    We will have a second panel following this panel. Your 
testimony has been submitted and made a part of the record, and 
you may address us in any way you see fit in the time that you 
have. We'll start with you, Mr. Horn, and then we'll just move 
across the panel.

 STATEMENT OF THE HONORABLE WADE F. HORN, ASSISTANT SECRETARY 
FOR CHILDREN AND FAMILIES, U.S. DEPARTMENT OF HEALTH AND HUMAN 
                            SERVICES

    Mr. HORN. Thank you, Mr. Chairman. Mr. Chairman, Mr. 
Rangel, and Members of the Committee, I am very pleased to 
appear before you today to discuss benefits to immigrants under 
the Temporary Assistance for Needy Families (TANF) program.
    The TANF program, as you know, is a $16.5 billion block 
grant program designed to provide temporary assistance to those 
in need and to help move recipients to work.
    Eligibility of immigrants for TANF is restricted by broader 
provisions in the Personal Responsibility and Work Opportunity 
Reconciliation Act (PRWORA) that cover the eligibility of non-
citizens for a public benefit. Under the statute, eligibility 
for Federal TANF welfare benefits is limited to a select group 
of legal immigrants.
    These qualified immigrants consist of lawful, permanent 
residents, asylees, refugees, aliens paroled into the United 
States for at least 1 year, aliens whose deportations are being 
withheld, aliens granted conditional entry, Cuban and Haitian 
entrants, and aliens who, or whose children or parents, have 
been battered or subjected to extreme cruelty in the United 
States by a member of their household. Victims of severe forms 
of trafficking and certain family members also are eligible to 
the same extent as refugees.
    States must verify that the applicant or recipient of a 
Federal TANF welfare benefit has the necessary qualified 
immigration status to ensure eligibility for the benefit. 
Moreover, under PRWORA, most legal immigrants entering the 
country on or after August 22, 1996 are barred for their first 
5 years as a qualified alien from receiving any Federal TANF 
means-tested welfare benefit.
    Legal immigrants who are eligible to receive Federal TANF 
assistance under these statutory provisions comprise a very 
small portion of the TANF population. Our most recent data, for 
fiscal year 2004, show that eligible, qualified immigrants make 
up only about 2.1 percent of the total recipient population of 
4.8 million individuals.
    For lawful, permanent residents who immigrated through a 
family member or through employment with a close relative, the 
sponsor must sign a legally enforceable Affidavit of Support. 
If the sponsored lawful permanent resident applies for a 
Federal TANF welfare benefit after expiration of the five-year 
bar, the State must consider or deem the income and resources 
of the sponsor and sponsor's spouse as available to the lawful 
permanent resident when determining eligibility for the payment 
of the benefit.
    Under most circumstances, this requirement would result in 
a determination of ineligibility for TANF benefits. Moreover, 
in signing the Affidavit, the sponsor agrees to assume 
liability for the non-reimbursed cost of any Federal TANF 
welfare benefit that the sponsor or lawful permanent resident 
actually receives.
    States can assist aliens who are not lawfully present in 
the United States in two very limited ways. First, States may 
use their Federal or State funds to help with the cost of 
providing any non-citizen with an emergency non-cash benefit 
necessary for the protection of life or safety. Second, States 
may use their own State funds to provide a particular welfare 
benefit, but only if the State has enacted a law after August 
22, 1996 that allows for such eligibility. To my knowledge, no 
State has passed such a law.
    However, certain parents of children born in the United 
States, including both legal immigrants who have not satisfied 
their five-year waiting period and undocumented aliens, can and 
do apply for TANF assistance on behalf of their U.S. citizen 
children. In fiscal year 2004, a national total of 426,098 
families were classified as child-only assistance cases for the 
parent in the household, meaning that only the needy child and 
not the parent, received assistance. About 35.6 percent of 
these cases included parents of unknown citizenship or alien 
status. Given that the parent or other caretaker relative is 
neither an applicant nor a recipient, the State is not required 
to verify his or her citizenship or immigration status.
    Of course, States may use their own funds to provide State-
funded TANF assistance to an immigrant family who is subject to 
the five-year bar. So, for example, if a legal immigrant 
subject to this bar gave birth in the United States, then the 
State could provide assistance to the U.S. citizen child using 
Federal TANF funds, and provide the mother's share of 
assistance using State funds.
    I hope my testimony helps to clarify the treatment of 
immigrants and undocumented aliens under the TANF program, and 
I look forward to your questions.

    [The prepared statement of Mr. Horn follows:]

   Statement of The Honorable Wade F. Horn, Assistant Secretary for 
  Children and Families, U.S. Department of Health and Human Services

    Mr. Chairman, Mr. Rangel, and members of the Committee, I am 
pleased to appear before you today to discuss the policy regarding 
provision of benefits to immigrants under the Temporary Assistance for 
Needy Families (TANF) program.
    The TANF program is a $16.5 billion block grant program to provide 
temporary assistance to those in need and to help move recipients to 
work. Since the enactment of the original welfare reform law in 1996, 
welfare rolls for families have declined by 57 percent. The most recent 
caseload numbers show that 1,870,039 families remain on the TANF rolls. 
In fact, there are fewer families on welfare than at any time since 
1969.
    It is worth noting that the immigrant eligibility restrictions are 
not part of the TANF law or unique to the TANF program. Rather, the 
restrictions are free-standing provisions that cover the eligibility of 
non-citizens for a public benefit, and were originally enacted via 
title IV of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA) and subsequent amendments. The 
statutory provisions for the TANF program simply refer to these 
``special rules relating to the treatment of certain aliens.''
    Currently the statute limits eligibility for Federal TANF welfare 
benefits to a select group of legal immigrants. These ``qualified'' 
immigrants consist of: lawful permanent residents, asylees, refugees, 
aliens paroled into the United States for at least one year, aliens 
whose deportations are being withheld, aliens granted conditional 
entry, Cuban/Haitian entrants, and aliens who (or whose children or 
parents) have been battered or subjected to extreme cruelty in the U.S. 
by a member of their household. Victims of severe forms of trafficking 
and certain family members also are eligible to the same extent as 
refugees. Thus, the law does not permit States to provide Federal TANF 
assistance to all non-citizens, even if the non-citizen otherwise meets 
the State's TANF program eligibility requirements. States must verify 
that the applicant or recipient of a Federal TANF welfare benefit has 
the necessary qualified immigration status to ensure eligibility for 
the benefit.
    Under PRWORA, however, most legal immigrants entering the country 
on or after August 22, 1996 are barred for their first five years as a 
``qualified'' alien from receiving any Federal TANF means-tested 
welfare benefit. The following qualified aliens are exempt from the 5-
year bar: refugees, asylees, an alien whose deportation is being 
withheld, Cuban/Haitian entrants, Amerasians, and veterans, members of 
the military on active duty, and their spouses and unmarried dependent 
children.
    Legal immigrants who are eligible to receive Federal TANF 
assistance under these statutory provisions comprise a very small 
portion of the TANF population. Our most recent data, for FY 2004, show 
that eligible ``qualified'' immigrants make up about 2.1 percent 
(100,800) of the total recipient population of approximately 4.8 
million individuals.
    Moreover, for lawful permanent residents who immigrated through a 
family member or through employment with a close relative or for a firm 
in which the relative owns at least 5 percent, the sponsor must sign a 
legally enforceable Affidavit of Support. If the sponsored lawful 
permanent resident applies to receive a Federal means-tested TANF 
welfare benefit after expiration of the 5-year bar, then the State must 
consider, or ``deem'' the income and resources of the sponsor and 
sponsor's spouse available to the lawful permanent resident when 
determining eligibility for and payment of the benefit. This deeming 
requirement lasts until the sponsored immigrant becomes a citizen or 
has 10 years (40 qualifying quarters) of work covered by the Social 
Security Administration. Under most circumstances this requirement 
would result in a determination of ineligibility for TANF benefits.
    In signing the Affidavit, the sponsor agrees to assume liability 
for the non-reimbursed cost of any Federal means-tested TANF welfare 
benefit that the sponsored lawful permanent resident actually receives. 
In some situations, the family may still be eligible to receive a TANF 
benefit. This is because each State may formulate its own methodology, 
including any applicable disregards, for determining the amount of 
income and resources of the sponsor and the sponsor's spouse to deem to 
the sponsored lawful permanent resident. Thus, if the sponsored 
individual receives a Federal means-tested TANF welfare benefit, the 
TANF agency may seek reimbursement from the sponsor by following the 
procedural requirements given in the Department of Homeland Security, 
U.S. Citizenship and Immigration Services' regulations.
    States can assist aliens who are not lawfully present in the U.S. 
(undocumented aliens) in two very limited ways. First, States may use 
their Federal or State funds to help with the cost of providing any 
non-citizen with an emergency non-cash benefit necessary for the 
protection of life or safety. Examples of non-cash benefits include 
soup kitchens, shelters for the homeless and victims of domestic 
violence, child protective services, and crisis counseling. Second, 
States may use their own State funds to provide a particular welfare 
benefit only if the State has enacted a law after August 22, 1996 that 
allows for such eligibility. To my knowledge, no State has passed such 
a law.
    However, certain parents of children born in the U.S., including 
both legal immigrants who have not satisfied their five-year waiting 
period and undocumented aliens, can and do apply for TANF assistance on 
behalf of their U.S. citizen children. Because the child is a U.S. 
citizen, the child may receive Federal TANF benefits to the same extent 
as any other U.S. citizen. In fiscal year 2004, a national total of 
426,098 families were classified as child-only assistance cases with a 
parent in the household, meaning that only the needy child, and not the 
parent, received assistance. About 152,000 or 35.6% of these cases 
included parents of unknown citizenship or alien status. The parents or 
caretakers of these children may be legal but unqualified immigrants, 
qualified immigrants subject to the 5-year bar on receipt of Federal 
TANF assistance, or undocumented aliens. Because the parent or other 
caretaker relative is neither an applicant nor a recipient, the State 
is not required to verify his/her citizenship or immigration status.
    Of course, states may use their own funds to provide State-funded 
TANF assistance to an immigrant family member who is subject to the 5-
year bar. So, for example, if a legal immigrant subject to this bar 
gave birth in the United States, then the State could provide 
assistance for the U.S. citizen child using Federal TANF funds and 
provide the mother's share of assistance using State funds.
    In closing, I appreciate the committee's interest in this topic. I 
hope my testimony clarified the treatment of legal immigrants and 
undocumented aliens under the TANF program. I would be happy to answer 
any questions.

                               

    Mr. MCCRERY. Thank you, Mr. Horn. Ms. Myers.

 STATEMENT OF THE HONORABLE JULIE MYERS, ASSISTANT SECRETARY, 
 U.S. IMMIGRATION AND CUSTOMS ENFORCEMENT, U.S. DEPARTMENT OF 
                       HOMELAND SECURITY

    Ms. MYERS. Thank you. Ranking Member Rangel, Members of the 
Committee, I appreciate the opportunity to discuss with you 
what ICE is doing to enhance worksite enforcement.
    As we're all well aware, the magnet of employment fuels 
illegal immigration. Accordingly, worksite enforcement is a top 
priority for the Department and the Administration. With this 
in mind, the Administration has proposed a comprehensive 
overhaul of the employment verification and employer sanctions 
program in the Immigration and Nationality Act (INA) (P.L. 82-
414) as part of the President's call for comprehensive 
immigration reform.
    Already, as the enforcement arm in this area, we are 
attempting to apply a key lesson learned from the 1986 bill. 
The enactment of the Immigration Reform and Control Act (IRCA) 
(P.L. 99-603) placed the focus of enforcement on administrative 
employer sanctions. As a result, employer audits typically 
resulted in serving businesses with a Notice of Intent to Fine. 
Egregious violators of the law viewed the resulting, low and 
often mitigating fines as simply a cost of doing business, and 
therefore the system did not serve as a true, economic 
inducement for them to change their business model. Today, 
however, ICE has begun to change the culture of illegal 
employment by pursing the most egregious employers of illegal 
workers. We're educating the private sector to institute best 
hiring practices and garnering its support in identifying 
systemic vulnerabilities. Of course, a large part of our effort 
continues to focus on preventing access to critical 
infrastructure sectors to prevent terrorism.
    Just to be clear, we're finding that most employers want to 
do the right thing. Sometimes they just need more assistance or 
more help on how to follow the rules. With this in mind, we 
have stepped up our efforts to educate employers about best 
hiring practices.
    In fact, just this morning, we launched a new, voluntary 
program aimed at strengthening overall hiring practices in the 
workplace. This program is called the ICE Mutual Agreement 
between Government and Employers (IMAGE), and this emphasizes 
enhanced employer compliance through corporate due diligence, 
training, and sharing of best practices.
    This program provides employers ways to prevent immigration 
violations. It also answers the need or the call that we've 
heard for clear standards of good conduct for employers by 
asking them to take certain reasonable steps, including 
reviewing employee documents, using the electronic verification 
system, and retaining all documents relevant to their 
employee's eligibility to work. ICE has also provided 
additional training and tools on its website to help all 
employers avoid violations.
    As I mentioned, part of our approach also includes 
supporting felony charges, and not just the traditional 
misdemeanor worksite violations under section 274(a) of the 
INA. Let me give you some examples of what I mean by that.
    In April 2006, ICE conducted the largest such worksite 
enforcement operation ever undertaken. This case involved IFCO 
Systems. In that case, we executed nine Federal arrest 
warrants, eleven search warrants, and forty-one consent search 
warrants at IFCO worksite locations throughout the United 
States. In addition, ICE agents apprehended over 1,100 
unauthorized workers, and charged nine employees at IFCO with 
conspiracy to transport, and harbor unlawfully, illegal aliens 
for financial gain.
    In another recent worksite case investigation in Baltimore, 
Maryland, owners of three restaurants, who were really abusing 
illegal aliens, treating them poorly and harboring them in an 
apartment above their house, pled guilty to conspiracy to 
commit alien harboring and conspiracy to gain in monetary 
transactions with criminally derived property. At the end of 
the day, they forfeited over a million dollars.
    Now under the old Immigration and Naturalization Service 
ways, they would have been fined approximately $4,000 to 
$30,000, and that's even before the fines were mitigated. We 
believe that charging criminally these most egregious employers 
who hire undocumented aliens will create the kind of deterrence 
that previous enforcement efforts did not generate. We are also 
identifying and seizing the assets that employers derive from 
knowingly employing illegal workers, in order to remove the 
financial incentive to hire unauthorized workers and to pay 
them substandard wages.
    We are also working with the Department of Justice and 
other agencies, including the SSA, to crack down on the 
widespread use and acceptance of fraudulent identification 
documents. To that end, we've launched, throughout the country, 
taskforces, document and benefit fraud taskforces, that really 
target these efforts.
    What more do we need? We need several things. First, we 
need more regulated access to Social Security no-match data; 
second, a new and improved process for issuing civil fines; and 
third, more resources, as requested in the President's 2007 
budget.
    We're working diligently to partner with industry and to 
solve this problem, and I look forward to answering your 
questions on this important issue. Thank you.

    [The prepared statement of Ms. Myers follows:]

  Statement of The Honorable Julie L. Myers, Assistant Secretary, U.S.
    Immigration and Customs Enforcement, U.S. Department of Homeland
                                Security

    CHAIRMAN THOMAS, RANKING MEMBER RANGEL AND MEMBERS OF THIS 
COMMITTEE, it is an honor for me to testify before you today on what 
the Department of Homeland Security and U.S. Immigration and Customs 
Enforcement (ICE) are doing to enhance worksite enforcement of 
immigration laws.

INTRODUCTION
    Worksite enforcement is a top priority for the Department and the 
Administration. In a recent speech before the U.S. Chamber of Commerce, 
the President said, ``A comprehensive reform bill must hold employers 
to account for the workers they hire. It is against the law to hire 
someone who is in the country illegally. Those are the laws of the 
United States of America, and they must be upheld.'' While the border 
attracts substantial attention, we must expand our focus if we are 
going to bring illegal immigration under control. A comprehensive 
solution is necessary because illegal immigrants are living and working 
throughout the nation, in every state and in many different industries. 
With this in mind, the Administration has proposed a comprehensive 
overhaul of the employment verification and employer sanctions program 
in the Immigration and Nationality Act as part of the President's call 
for comprehensive immigration reform. With its extensive authorities 
and experienced investigators, ICE is qualified to carry out this 
comprehensive reform and is already achieving great success in the 
investigation and prosecution of employers engaged in the hiring of 
illegal aliens.
    Among the DHS law enforcement agencies, ICE has the most expansive 
investigative authority and the largest force of investigators. Our 
mission is to protect our Nation and the American people by targeting 
the people, money and materials that support terrorist and criminal 
activities. The men and women of ICE accomplish this by investigating 
and enforcing the nation's immigration and customs laws. Working 
throughout the nation's interior, together with our DHS and other 
federal counterparts and with the assistance of state and local law 
enforcement entities, ICE has begun to change the culture of illegal 
employment across the country by pursuing the most egregious employers 
of illegal workers. ICE is educating the private sector to institute 
best hiring practices and garnering its support in identifying systemic 
vulnerabilities that may be exploited to undermine immigration and 
border controls. A large part of our worksite enforcement efforts 
focuses on preventing access to critical infrastructure sectors and 
sites to prevent terrorism and to apprehend those individuals who aim 
to do us harm.
    In short, our agents and investigators are enforcing the 
immigration laws of this country on a daily basis. However, if we do 
not make greater strides in this area, immigrants will continue to risk 
their lives for the prospect of a well-paying job in this country, 
often by turning to smugglers who exploit and force them to live in the 
shadows once they arrive.

LESSONS FROM THE 1986 IRCA
    ICE knows the shortcomings of the IRCA and I believe it will be 
beneficial to provide a quick historical review of worksite enforcement 
under this Act.
    To varying degrees and during specific time periods, the 
immigration investigators focused on worksite violations by devoting a 
large percentage of its investigative resources to enforce the 
administrative employer sanctions provisions of IRCA. The resulting 
labor-intensive inspections and audits of employment eligibility 
documents only resulted in serving businesses with a Notice of Intent 
to Fine (NIF) or a compliance notice. Issuing monetary fines that were 
routinely mitigated or ignored had little to no deterrent effect. Not 
only were the results far from effective, the process involved endless 
attorney and agent hours in discovery and litigation to adjudicate and 
resolve cases. Egregious violators of the law viewed the fines as just 
a ``cost of doing business'' and therefore the system did not serve as 
a true economic inducement for them to change their business model.
    Moreover, while IRCA required employers to review identity 
documents demonstrating employment eligibility, its compliance standard 
rendered that requirement meaningless and essentially sheltered 
employers who had hired unauthorized aliens. Under the 1986 law, an 
employer could comply with the eligibility verification process so long 
as the document evidencing the employee's authorization to work 
reasonably appeared to be genuine. Employers were not required to 
verify the validity of a document and were not required to maintain a 
copy of the documents that they reviewed. The ability of the employer 
to rely on the facial validity of a single document and the lack of any 
available evidence regarding the document routinely prevented the 
government from proving that the employer knew the employee was not 
authorized to work. Thus, the law should reasonably require the 
employer to review and retain copies of relevant documents and 
information obtained during the verification process, as well as during 
the subsequent employment of a worker. It should also not allow 
unscrupulous employers to be ``willfully blind'' to highly questionable 
documents or other facts indicative of unauthorized status.
    Another detrimental result of the documentation compliance standard 
established under IRCA was an explosive growth in an increasingly 
profitable false document industry catering to undocumented workers 
seeking employment.

A NEW APPROACH TO WORKSITE ENFORCEMENT
    ICE's current worksite enforcement strategy is a comprehensive 
layered approach that focuses on how illegal aliens get to our country, 
the ways in which they obtain identity documents allowing them to 
become employed, and the employers who knowingly hire them.
    The ICE worksite enforcement program is just one component of the 
Department's overall Interior Enforcement Strategy and is a critical 
part of the Secure Border Initiative. A thorough and comprehensive 
worksite enforcement program is paramount to DHS's goal of changing the 
culture of illegal employment in the United States. To that end, the 
Administration has outlined a proposal that would give DHS the tools it 
needs to effectively enforce employment immigration laws.
    Worksite enforcement incorporates a multitude of investigations and 
crimes, as illustrated below. Using this approach, ICE worksite 
investigations now support felony charges and not just the traditional 
misdemeanor worksite violations under Section 274A of the Immigration 
and Nationality Act. Let me give you some examples to explain what I 
mean.
    Of course, a key component of our worksite enforcement efforts 
targets the businesses and industries that deliberately profit from the 
wholesale employment of illegal aliens. In April of 2006, ICE conducted 
the largest such worksite enforcement operation ever undertaken. This 
case involved IFCO Systems, a Houston-based company. ICE agents 
executed 9 federal arrest warrants, 11 search warrants, and 41 consent 
searches at IFCO worksite locations throughout the United States. In 
addition, ICE agents apprehended 1,187 unauthorized workers at IFCO 
worksites. This coordinated enforcement operation also involved 
investigative agents and officers from the Department of Labor, Social 
Security Administration, the Internal Revenue Service, and the New York 
State Police. The criminal defendants have been charged with conspiracy 
to transport and harbor unlawful aliens for financial gain (8 U.S.C. 
Section 1324 and 18 U.S.C. Section 371), as well as fraud and misuse of 
immigration documents (18 U.S.C. 1546).
    In a recent worksite enforcement investigation in Baltimore, 
Maryland, owners of three restaurants pled guilty to conspiracy to 
commit alien harboring and conspiracy to engage in monetary 
transactions with criminally derived property; a fourth owner pleaded 
guilty to employment of illegal aliens. The defendants also agreed to 
forfeit to the United States approximately $1.1 million in assets. 
Historically, agents were tasked with carrying out worksite enforcement 
investigations by utilizing administrative tools. In similar criminal 
investigations, agents typically would have conducted a Form I-9 
inspection to determine whether the employer was in compliance with 
IRCA. If investigators identified unauthorized workers in the course of 
the inspection, an enforcement operation would often follow. Upon 
apprehension, the workers' statements would serve as evidence of 
possible ``knowingly hired'' violations. Under this old way of doing 
business, the fine imposed on the owners of the restaurants would have 
ranged from approximately $4,000 to $33,000 before mitigation.
    Worksite enforcement includes critical infrastructure protection. 
Just last month, an ICE investigation apprehended 55 illegal aliens 
working at a construction site at Dulles International Airport. 
Effective homeland security requires verifying the identity of not just 
the passengers that board the planes, but also the employees that work 
at the airports.
    Worksite enforcement combats alien smuggling. In the last few 
months, we have made arrests at employment agencies that served as 
conduits between the criminal organizations that smuggle illegal aliens 
into this country and the employers that willfully employ them.
    Worksite enforcement also combats human trafficking. As the result 
of worksite enforcement actions, ICE has dismantled forced labor and 
prostitution rings, be it Peruvian aliens in New York or Chinese aliens 
in Maryland. The common threads are the greed of criminal organizations 
and the desire of aliens to come here to work. Human trafficking cases 
represent the most egregious forms of exploitation, as aliens are 
forced to work and live for years in inhumane conditions to pay off the 
debt they incur for being smuggled into the country.
    Worksite enforcement involves financial crimes, commercial fraud, 
export violations, and trafficking in counterfeit goods. ICE 
enforcement efforts use our legacy authorities to fully investigate 
these offenses that involve the employment of illegal aliens to promote 
and further these other crimes. As an example, earlier this month ICE 
agents in Florida arrested two individuals pursuant to an indictment 
charging them with operating an illegal money service business in 
violation of Title 18, United States Code, Section 1960. This 
investigation discovered that local construction companies were 
utilizing an illegal money service business to pay illegal aliens for 
construction work.
    By careful coordination of its detention and removal resources and 
its investigative operations, ICE is able to target the organizations 
unlawfully employing illegal workers, as well as detain and 
expeditiously remove the illegal workers encountered. For example, in a 
recent case in Buffalo, New York, involving a landscape nursery, 34 
illegal workers were apprehended, detained and voluntarily repatriated 
to Mexico within 24 hours.
    This sends a strong message to both the illegal workers here and to 
foreign nationals in their home countries that they will not be able to 
just move from job to job in the United States once ICE shuts down 
their employer. Rather, they will be detained and promptly deported.
    Another recent example of our worksite efforts occurred in May of 
2006, when 85 unauthorized workers employed by Robert Pratt and other 
sub-contractors for Fischer Homes, Inc., were arrested as part of 
another ICE-led joint federal, state and local investigation. In this 
case the targets of the investigation knowingly harbored, transported 
and employed undocumented aliens. Five supervisors were arrested and 
charged with harboring illegal aliens. (8 U.S.C. Section 1324).
    What impact will this have? Criminally charging employers who hire 
undocumented aliens will create the kind of deterrence that previous 
enforcement efforts did not generate. We are also identifying and 
seizing the assets that employers derive from knowingly employing 
illegal workers, in order to remove the financial incentive to hire 
unauthorized workers and to pay them substandard wages.
    To be clear, the magnet of employment is fueling illegal 
immigration, but the vast majority of employers do their best to comply 
with the law. With this in mind, ICE has developed a voluntary 
corporate outreach program aimed at strengthening overall hiring 
practices in the workplace. This outreach program will emphasize 
enhanced employer compliance through corporate due diligence, training 
and sharing of best practices. This program provides employers ways to 
prevent immigration violations in their and work toward changing the 
culture of tolerance for those who employ illegal workers. The program 
will answer the need for clear and reasonable standards of good conduct 
for employers by asking them to take certain reasonable steps, 
including reviewing employee documents, using the electronic 
verification system and retaining all documents relevant to their 
employees' eligibility to work. Employers who are shown to have hired a 
significant number of unlawful aliens in a year, notwithstanding these 
tools to verify employee eligibility, should be presumed to have 
knowingly hired these individuals. We also need to ensure that 
employers cannot use contract arrangements to separate themselves from 
complicity in the illegal hiring of their contractors, which can be 
accomplished through a tightening of the rules. ICE has provided 
additional training and tools on its website to help employers avoid 
violations.
    Just as a chain is only as strong as its weakest link, the 
employment process cannot permit the widespread use and acceptance of 
fraudulent identification documents. Accordingly, in April 2006, Deputy 
Attorney General Paul McNulty and I announced the creation of ICE-led 
Document and Benefit Fraud (DBF) Task Forces in 11 major metropolitan 
areas. These task forces focus on the illegal benefit and fraudulent 
document trade that caters to aliens seeking illegal employment. The 
DBF Task Forces are built on strong partnerships with entities such as 
U.S. Citizenship and Immigration Services, the Social Security 
Administration, the U.S. Postal Inspection Service and the Departments 
of State, Justice and Labor. The Task Forces identify, investigate and 
dismantle organizations that supply identity documents that enable 
illegal aliens, terrorists and other criminals to integrate into our 
society undetected and obtain employment or other immigration benefits.
    The House and Senate have both passed immigration legislation this 
Congress that include provisions authorizing a mandatory electronic 
employment eligibility verification system (EEVS) for all seven million 
U.S. employers. An Employment Verification Program managed by U.S. 
Citizenship and Immigration Services that includes all U.S. employers, 
monitoring and compliance functions, and a fraud referral process, can 
help deter and detect fraud by both employers and employees. As 
currently envisioned, EEVS will include robust systems monitoring and 
compliance functions that will help detect and deter the use of 
fraudulent documents, imposter fraud, and incorrect usage of the system 
by employers (intentionally and unintentionally). EEVS also will 
promote compliance with correct program procedures. USCIS will forward 
enforcement leads to ICE, and the monitoring unit will scrutinize 
individual employers' use of the system. It also will conduct trend 
analysis to detect potential fraud. Findings that are not likely to 
lead to enforcement action (e.g., the user has not completed training) 
will be referred to compliance officers for follow-up. Findings 
concerning potential fraud (e.g., Social Security numbers being run 
multiple times and employers not indicating what action they took after 
receiving a final non-confirmation) will be referred to ICE worksite 
enforcement investigators. It is essential that DHS have the authority 
to use information arising from the Employment Verification Program to 
enforce our Nation's laws, including deterring and prosecuting fraud, 
and identifying and removing criminal aliens and other threats to 
public safety or national security.

NEW TOOLS
    ICE has made substantial improvements in the way we investigate and 
enforce worksites.
    DHS supports several of the additional tools contained in pending 
legislation, and we look forward to working with Congress as it 
considers comprehensive immigration reform, including proposals to 
enhance worksite enforcement.

NO-MATCH
    The Administration has sought the authority to have additional 
access to Social Security Administration no-match data to improve 
immigration enforcement. Greater access to no-match data would provide 
important direction to ICE investigators to target their enforcement 
actions toward those employers who have a disproportionate number of 
these no-matches, who have reported earnings for multiple employees on 
the same number and who are therefore more likely to be engaging in 
unlawful behavior.
    Additionally, provisions in current legislative proposals regarding 
document retention by employers, including evidence of actions taken by 
employers to resolve employment eligibility issues (e.g., SSA no-match 
letters), are crucial to worksite enforcement criminal prosecutions. 
Asking employers to retain documents for at least as long as the 
statute of limitations for these crimes is simply common sense.

PROPOSED MODEL OF FINES AND PENALTIES
    Although criminal prosecution of egregious violators is our primary 
objective in worksite cases, a need exists for a new and improved 
process of issuing fines and penalties that carry a significant 
deterrent effect and that are not regarded as a mere cost of doing 
business. Only with a strong compliance program, combined with issuance 
of meaningful penalties, will the United States have an effective 
worksite enforcement program.
    The Administration has proposed a streamlined administrative fines 
and penalties process that gives the DHS Secretary the authority to 
administer and adjudicate fines and penalties. We would further purpose 
a penalty scheme that is based on clear rules for issuance, mitigation, 
and collection of penalties.
    As I have outlined in my testimony, ICE has made great strides in 
its worksite enforcement program and its efforts are part of a 
comprehensive strategy that focuses on several different layers of the 
problem simultaneously, including smuggling, document and benefit 
fraud, and illegal employment.
    ICE agents are working tirelessly to attack the egregious unlawful 
employment of undocumented aliens that subverts the rule of law. We are 
working more intelligently and more efficiently to ensure the integrity 
of our immigration system.
    Our responsibility at ICE is to do everything we can to enforce our 
laws, but enforcement alone will not solve the problem. Accordingly, 
the President has called on Congress to pass comprehensive immigration 
reform that accomplishes three objectives: strengthening border 
security, ensuring a comprehensive interior enforcement strategy that 
includes worksite enforcement, and establishing a temporary worker 
program. Achieving these objectives will dramatically improve the 
security of our infrastructure and reduce the employment magnet that 
draws illegal workers across the border, while eliminating the problems 
created by the 1986 law.
    ICE is dedicated and committed to this mission. We look forward to 
working with this Committee in our efforts to secure our national 
interests. I hope my remarks today have been helpful and informative. I 
thank you for inviting me and I will be glad to answer any questions 
you may have at this time.

                               

    Mr. MCCRERY. Thank you, Ms. Myers. Mr. Everson.

   STATEMENT OF THE HONORABLE MARK W. EVERSON, COMMISSIONER, 
                    INTERNAL REVENUE SERVICE

    Mr. EVERSON. Chairman McCrery, Ranking Member Rangel, and 
Members of the Committee, I appreciate the opportunity to 
appear before you today to discuss the impact of immigration 
issues on tax administration.
    Let me first say that comprehensive immigration reform is a 
national priority. I say that as a former deputy commissioner 
of the Immigration and Naturalization Service. I understand 
firsthand the importance of a system of immigration that 
functions effectively. In fact, I oversaw the implantation of 
the Immigration Reform and Control Act. This included both the 
amnesty and the enforcement elements of that law.
    As commissioner of Internal Revenue, I am also sensitive to 
the interaction between the immigration system and the tax 
system. At the IRS, our job is to make sure that everyone who 
earns income within our borders pays the proper amount of 
taxes, whether that income is legally obtained, and whether the 
individual is working here legally. If someone is working 
without authorization in this country, he or she is not 
absolved of tax liability.
    The Subcommittees on Oversight and Social Security have 
held two hearings over the past 3 years on issues associated 
with Individual Tax Identification Numbers (ITINs) and the 
mismatch of SSNs and W-2 information. At those hearings, I 
testified about our Individual Taxpayer Identification Number 
(ITIN) program.
    Last year, over 2.5 million tax returns were filed that 
included an ITIN for at least one person listed on the return. 
To date, in calendar year 2006, we have received 1.6 million 
new applications for ITINs. That's up 25 percent from this time 
a year ago. The IRS estimates that for tax periods 1996 to 2003 
that the income tax liability for ITIN filers totaled 
approximately $50 billion.
    Of the 231,000,000 W-2s filed in Tax Year 2004 file, 
approximately 223,000,000 had matching names and SSNs. After 
analysis, there were about 7.9 million W-2s with no valid name 
and SSN match.
    There are two interesting aspects to the data mismatches. 
The first is geographical. Over 50 percent of the mismatches 
are found in four States: California, Texas, Florida, and 
Illinois. California has by far the greatest number of 
mismatches, totaling 2.3 million or approximately 29 percent of 
the mismatch total. The second is economic. Based on IRS' own 
analysis, about 75 percent of all mismatched W-2s report wages 
of less than $10,000.
    Concerning employers, the SSA had no enforcement power and 
cannot impose penalties on employers for failure to correct SSN 
mismatches. The IRS, however, does have enforcement power, and 
can assess penalties. Under Section 6721, we may impose a $50 
penalty on an employer for each W-2 or Form 1099 that omits or 
includes an inaccurate SSN, unless the filer shows reasonable 
cause for the omission or inaccuracy.
    From a tax compliance perspective, violations of these 
provisions are generally identified as part of an overall 
employment tax examination. We would not ordinarily institute 
an examination against an employer solely on the basis that he 
or she had reported a high number of mismatches. This is a 
function of both resources and the fact that the employer can 
easily demonstrate that he or she has performed the due 
diligence required under the law.
    Turning to the pending immigration legislation, we are well 
aware that both the Senate and House have adopted bills that 
take different approaches to addressing this issue. It is 
neither my role, nor my desire, to express a preference for 
either version. I merely wish to offer some observations 
concerning tax administration.
    The one common approach in both the House and Senate 
immigration bills is the requirement that employers verify the 
work eligibility of potential employees with DHS from 
information provided by the SSA. The Senate bill amends section 
6103 of the Internal Revenue Code, relating to the privacy of 
taxpayer information, and requires SSA to send to DHS the 
identities of employers who, among other things, have a 
significant number of SSN mismatches.
    The Senate bill also allows aliens unlawfully present in 
the United States to adjust their status to legal, permanent 
resident status, if they meet certain criteria. These include 
demonstrating payment of any liability for Federal taxes owed 
during the required pre- and post-enactment periods of 
employment. The IRS is mandated to cooperate with aliens by 
providing documentation to establish the payment of all Federal 
taxes required.
    We are continuing to study the provisions of the Senate 
bill but, based on what we have examined so far, we do have 
some concerns. However, I am confident that as we progress 
toward the goal of comprehensive immigration reform, we can 
iron out these potential issues. Thank you.

    [The prepared statement of Mr. Everson follows:]
  Statement of The Honorable Mark W. Everson, Commissioner, Internal 
                            Revenue Service

Introduction
    Chairman Thomas, Ranking Member Rangel, and Members of the 
Committee, I appreciate the opportunity to appear before you this 
afternoon to discuss the impact of immigration issues on tax 
administration.
    I would like to do three things this afternoon. First, I wish to 
try to frame the issues, at least from an IRS perspective. Second, I 
want to discuss in more detail how the IRS handles the mismatching of 
Social Security Numbers (SSN). And, third, I want to offer some 
comments on the pending legislation from the perspective of tax 
administration.

Framing the Issues
    Perhaps the most difficult part of these issues is framing them 
properly and understanding fully the different, yet sometimes 
complementary, roles performed by the Social Security Administration 
(SSA), the U.S. Department of Homeland Security (DHS), and the Internal 
Revenue Service (IRS).
    We at the IRS support and appreciate the jobs being done at SSA in 
maintaining and protecting the Social Security Trust Funds and at DHS 
in enforcing our immigration laws, but our function is tax 
administration. Our job is to make sure that everyone who earns income 
within our borders pays the proper amount of taxes, whether that income 
is legally obtained and whether the individual is working here legally 
If someone is working without authorization in this country, he/she is 
not absolved of tax liability. Instead of an SSN to file a tax return, 
that person frequently uses an Individual Taxpayer Identification 
Number (ITIN).
    An ITIN is a tax processing number issued by the IRS. It is a nine-
digit number that always begins with the number 9 and has a 7 or 8 in 
the fourth digit, e.g. 9XX-7X-XXXX.
    IRS issues ITINs to foreign individuals who are required to have a 
U.S. taxpayer identification number but who do not have, and are not 
eligible for an SSN. ITINs are issued regardless of immigration status 
because non-citizens may have U.S. tax return and payment 
responsibilities under the Internal Revenue Code.
    The Oversight and Social Security Subcommittees have held two 
hearings over the past three years on issues associated with ITINs and 
the mismatch of SSNs on W-2s. At those hearings, I talked about our 
ITIN program. It is important to understand that the ITIN program is 
bringing taxpayers into the system. Last year over 2.5 million tax 
returns were filed that included an ITIN for at least one person listed 
on the return. In calendar year 2006, so far we have received 1.6 
million new applications for ITINs, up 25 percent from this time last 
year. Since 2004, to obtain an ITIN most applicants must attach a tax 
return to establish a return filing requirement.
    We estimate that for tax periods 1996 to 2003 that the income tax 
liability for ITIN filers totaled almost $50 billion.
    Comprehensive immigration reform--including border security, 
interior enforcement, and a temporary worker program--is a top 
Administration priority. The Administration believes that worksite 
enforcement is critical to the success of immigration reform. Further, 
as immigration laws are enforced, the Administration believes that 
comprehensive immigration reform also requires us to improve those laws 
by creating a temporary worker program that rejects amnesty, relieves 
pressure on the border, and provides a legal means to match willing 
foreign workers with willing American employers to fill jobs Americans 
are not doing.
    As the Commissioner of the IRS, it is not my role to advocate 
public policy changes. However, as a former Deputy Commissioner at 
Immigration and Naturalization Service, I am sensitive to the need for 
a system of immigration that functions effectively and I am 
particularly sensitive to the interaction between the immigration 
system and the tax system. I recognize that comprehensive immigration 
reform can have positive impacts on tax administration. For example, 
the creation of a temporary worker program will likely result in 
additional taxpayers entering the system.

IRS's Role in the Mismatch Program
    Each year, employers send their W-2s and W-3s to the SSA by 
February 28 (or March 31 if filed electronically). SSA processes the 
forms and then attempts to reconcile any mismatches. They then send the 
information to the IRS on a weekly basis. IRS culls out any unusable 
records as well as any W-2s that are not related to the current tax 
year. For Tax Year (TY) 2004, the resulting IRS file contained more 
than 231 million W-2s from the SSA.
    This represents a decline of approximately 6.5 percent from the 
corresponding file for TY 2000. We are considering this and other 
employment-related trends as part of our ongoing study of the standards 
used to distinguish between employees and independent contractors. The 
decline in the number of W-2s has been accompanied by a corresponding 
decline in the number of mismatches that could not be reconciled.
    Of the 231 million W-2s in IRS's TY 2004 file, approximately 223 
million had matching names and SSNs. Some of these matches resulted 
from SSA's successful use of techniques for resolving mismatches. For 
the balance of approximately 8 million TY 2004 W-2s for which there was 
no valid match, IRS used several additional methods to match the 
numbers. We were able to match approximately 60,000 more names with 
SSNs, leaving about 7.9 million W-2s where there is no valid name and 
SSN match.
    To help correct SSN mismatches, the SSA sends letters to employers, 
employees and self-employed individuals asking that they take steps to 
match the names with the SSNs. These letters go only to certain 
employers. First, letters are sent to employers who submit a wage 
report containing more than 10 Forms W-2 that SSA cannot process. In 
addition, employers who file more than 2200 W-2's, more than one-half 
of one percent (1/2 percent) of which represents mismatched forms, also 
receive the letters. In TY 03, the SSA sent over 121,000 such letters 
to employers, inquiring about 7.2 million invalid W-2s. There is no 
letter sent to the employers for the other 0.7 million mismatches
    There are two interesting aspects to the data on mismatches. The 
first is geographical. Over 50 percent of the mismatches are found in 
four states, California, Texas, Florida and Illinois. California has by 
far the greatest number of mismatches totaling nearly 2.3 million, or 
approximately 29 percent of the mismatch total.
    The second is economic. Based on IRS' own analysis, about 75 
percent of all mismatched W-2s report wages of less than $10,000. If we 
focus only on those mismatched W-2s with no withholding, the percentage 
increases to 90 percent. Only about 2 percent of all W-2s with invalid 
SSNs report wages greater than $30,000. In fact, the average wage for 
all mismatches is only about $7,000 annually. Bear in mind, that many 
employees receive more than one W-2 in a tax year, so these numbers may 
not reflect an individual's gross income.
    From a tax administration perspective, we know that for TY 2004 
there were approximately $53 billion in wages reported on W-2s with 
invalid SSNs, with about a quarter of that amount, or $13.3 billion, on 
W-2s with no withholding. About 56 percent of the $53 billion came from 
W-2s reporting wages between $10,000 and $30,000.
    On the high end, only about 1 percent of the wages ($0.5B) were 
reported on mismatched W-2s showing wages in excess of $100,000. Thus, 
this analysis shows that the worker population causing W-2 mismatches 
represents the lowest wage earners who likely have little or no tax 
liability.

Legal Requirements for Employers
    It is important to point out that SSA has no enforcement power and 
cannot impose penalties on employers for failure to correct SSN 
mismatches. IRS, however, does have enforcement power and can assess 
penalties. Therefore, it might be helpful if I walk you through our 
current legal authority.
    Under section 6041 and 6011 of the Internal Revenue Code (IRC) 
employers and other payors must include correct SSNs or Taxpayer 
Identification Numbers (TINs) on form W-2 reporting wages or salaries 
paid to employees.
    Under section 6721, we may impose a $50 penalty on an employer for 
each W-2 or 1099 that omits or includes an inaccurate SSN/TIN unless 
the filer (employer, other payor, etc.) shows reasonable cause for the 
omission or inaccuracy. The maximum penalty for any employer or payor 
in a calendar year is $250,000. If the violation is deemed to be 
willful, the fine is the greater of $100 or 10 percent of the 
unreported amount per violation, with no maximum.
    From a tax compliance perspective, violations of these provisions 
are generally identified as part of an overall employment tax 
examination. We would not ordinarily initiate an examination against an 
employer solely on the basis that he/she had reported a high number of 
mismatches. This is a function of both resources, and the fact that the 
employer can easily demonstrate that he/she has performed the due 
diligence required under the law.
    Specifically, Section 6109 places the burden on the employee or the 
payee to provide the employer or payor with an accurate SSN or TIN. 
This is an important distinction because the employer can have any 
penalty imposed for failing to include an accurate SSN or TIN on the 
return abated, if the employer made an initial and, if necessary, 
annual request that the payee provide an accurate SSN/TIN. He can also 
have the penalty abated if he establishes that due diligence was 
otherwise used, such as by obtaining a statement from the employee 
under penalties of perjury that the SSN or TIN is accurate.
    As you can see, what is important here is that the employer or 
payor makes a request, or repeats a request, for an accurate SSN or 
TIN. If the employer does, he/she has performed due diligence and has 
reasonable cause to believe the SSN or TIN is correct. Because the 
reasonable cause and due diligence standard in section 6724 is 
relatively easy for employers to meet, it has been virtually impossible 
to sustain a penalty assessed against an employer under section 6721.
    When I testified last February before your Oversight and Social 
Security Subcommittees, there were some questions as to whether we were 
utilizing our enforcement authority. I indicated then that we had 
surveyed nearly 300 companies with high mismatch rates. I also 
indicated that we intended to look more carefully at 48 of those 
companies that failed to respond to that survey.
    We have now begun those investigations and I can tell you that what 
we have found thus far is consistent with what we found from our 
survey. The companies tend to be from three industries: Agriculture, 
janitorial and temporary workers. The employees are low wage earners, 
and we have found no other employment tax violations in 90 percent of 
the companies we have examined. From a tax administration standpoint, 
these companies do not constitute a target rich environment.

Pending Legislation
    We are well aware that both the Senate and House have adopted bills 
that take different approaches to addressing the immigration issue. It 
is neither my role nor my desire to express a preference for either 
version. I merely wish to offer some observations and concerns about 
how each of the bills would affect tax administration.
    Having a strong immigration policy that includes border security, 
interior enforcement, and a temporary worker program is critical to our 
future.
    As I indicated earlier, many illegal aliens, utilizing ITINs, have 
been reporting tax liability to the tune of almost $50 billion from 
1996 to 2003. In TY 2004, we had 2.5 million ITINs filed with nearly $5 
billion in tax liability. That is why comprehensive reform is so 
necessary. It will allow these taxpayers as well as others who are not 
currently filing to become a more active part of our economic system. 
Failure to enact comprehensive reform could have negative consequences 
for tax administration if procedures are imposed on employers and 
employees that have the effect of driving certain economic activities 
``underground.''
    The one common approach in both the House and Senate immigration 
bills is the requirement that employers verify the work eligibility of 
potential employees with DHS from information provided by the Social 
Security Administration. The Senate version of the bill does this by 
requiring DHS to create a verification system with the cooperation of 
SSA. The House bill essentially takes the discretionary process that is 
already in place under the Basic Pilot Program, which is administered 
by DHS with the help of SSA, and makes it mandatory.
    The Senate bill goes much further. It amends Section 6103 of the 
Internal Revenue Code relating to the privacy of taxpayer information 
and requires SSA to send to DHS the identities of employers who, among 
other things, have a significant number of employee/SSN mismatches. The 
bill restricts disclosure only for the purposes of establishing and 
enforcing participation in the system and complying with various laws.
    The Senate bill, under what it calls the ``Earned Adjustment'' 
program, also allows aliens unlawfully present in the U.S. to adjust 
their status to legal permanent resident status if they meet certain 
criteria, including continuous residence in the U.S. during the 
previous 5 years, employment in 3 of those 5 years, and employment for 
at least the next 6 years. It appears that, the Earned Adjustment 
applicants would not be allowed to adjust status until they had 
demonstrated ``the payment'' of any liability for Federal taxes owed 
during the required pre- and post-enactment periods of employment. The 
IRS is mandated to cooperate with aliens by providing documentation 
``to establish the payment of all [Federal] taxes required''.
    We are continuing to study the provisions of the Senate bill, but 
based on what we see thus far, we do have some concerns. For example, 
to the extent that applicants for earned adjustment will make requests 
for prior tax payments from IRS, that will require IRS to divert 
resources from current functions.
    In addition, is important to consider that while we can, upon 
request, currently provide any taxpayer, including those who have filed 
using ITINs, a transcript of their tax return records, we do not verify 
the accuracy of their tax returns or the information the taxpayer has 
submitted. Accordingly, we are not now equipped to provide any 
taxpayer, including aliens, with documentation to establish payment of 
all Federal taxes.
    In addition, if the alien has filed using multiple SSNs that were 
not assigned to him and later with an ITIN, it is possible that a 
single alien could request multiple transcripts. From a disclosure 
perspective, we would be reluctant to provide a single taxpayer with 
multiple taxpayer records upon request.
    We have other administrative concerns with provisions of the Senate 
bill, but we are confident that as we progress toward the goal of 
comprehensive reform that we can iron those out.

Conclusions
    We appreciate Mr. Chairman, the tough policy choices that you and 
other Members of Congress must make on the tough issue of immigration, 
and we realize that tax administration may be a small factor in those 
policy considerations.
    As the agency responsible for collecting and administering the more 
than $2 trillion that we use to fund the government, we will play 
whatever role Congress deems appropriate.
    We urge, however, that any change in the current tax system 
encourage the type of behavior that we desire from both employees and 
employers. We are collecting some taxes in these areas and with 
comprehensive reform we hope we can collect even more.
    Similarly, imposing requirements that the IRS verify the accuracy 
of tax payments by aliens would challenge our ability to maintain our 
current level of service and enforcement.
    Thank you for inviting me to testify this morning. I will be happy 
to take any questions you may have.

                               

    Mr. MCCRERY. Thank you, Commissioner Everson.
    Commissioner Barnhart. If you could, turn your microphone 
on.

 STATEMENT OF THE HONORABLE JO ANNE B. BARNHART, COMMISSIONER, 
                 SOCIAL SECURITY ADMINISTRATION

    Ms. BARNHART. Mr. Chairman and Members of the Committee, 
the President has proposed a comprehensive approach to 
immigration reform that addresses the need to secure our 
borders, enforce worksite employment practices, and address the 
economic issues of immigration. This approach calls for the 
creation of a true, temporary-worker program that allows 
individuals to achieve legal status by paying their taxes, 
learning English, and gaining employment in our society.
    Within this context, I appreciate your invitation to appear 
before you to discuss how and when we assign SSNs and issue 
Social Security cards to non-citizens, as well as issues 
relating to benefit eligibility for non-citizens. My written 
testimony describes in some detail our current responsibilities 
and activities to safeguard the integrity of the Social 
Security system, including the work we perform with the DHS and 
the IRS.
    Currently, as required by the Illegal Immigration Reform 
and Immigrant Responsibility Act of 1996, we provide DHS 
extensive information about every non-work SSN where earnings 
were reported. Non-work SSNs are issued to individuals who are 
not authorized to work in the United States but who have a 
valid reason for obtaining a SSN. These cards include the 
legend, ``Not Valid for Employment.''
    Social Security is also an integral part of the DHS Basic 
Pilot program, which allows employers to verify both the SSNs 
and work-authorization status of persons they hire. Of course, 
we continue to provide SSN verification services to employers, 
including our web-based SSN Verification System (SSNVS).
    Currently we have the authority to use information from W-
2s only for the purposes of determining eligibility for and the 
amount of Social Security benefits. The Administration supports 
allowing disclosure of this data in the interests of national 
security and for law-enforcement purposes.
    At SSA, we have a proven performance record, and can and 
will do what we are called upon to do. This year alone, we will 
process over 6.7 million claims for benefits, process almost 
245,000 Medicare Part D subsidy applications, make decisions on 
over 575,000 hearings, issue 18,000,000 new and replacement 
cards, process 265,000,000 earnings records for workers' 
earnings, handle approximately 59,000,000 transactions through 
our 800 number, serve 42,000,000 visitors at our field offices, 
and process millions of actions to keep beneficiary and 
recipient records current and accurate, as well as conducting 
1.6 million continuing disability reviews, and over 1,000,000 
non-disability Supplemental Security Income re-determinations.
    I have worked closely with the Social Security and 
Subcommittee on Human Resources in our efforts to improve 
service, most notably through the Disability Service 
Improvement initiative, and related improvements to the 
disability process. I know that the Committee is well aware of 
the challenges we face at SSA.
    The President's budget for FY 2007 proposed an increase in 
SSA's administrative budget of 4.2 percent over the enacted 
level for this year. House and Senate appropriators have 
proposed reductions of $200,000,000 to $400,000,000 in the 
President's budget request for SSA administrative costs. From 
my perspective as Commissioner, I am concerned that these 
reductions will jeopardize our ability to improve service and 
eliminate backlogs, even without new responsibilities.
    Before I close, let me say, again, SSA is ready, willing, 
and able to do its part to provide support for DHS and its 
immigration enforcement activities. The men and women of Social 
Security are dedicated, hard-working, and productive public 
servants who will do everything they can to carry out SSA's 
responsibilities, whatever they may be.
    I want to publicly thank this Committee for your support 
for SSA and its programs over the years. I look forward to 
continuing to work with you as we serve the American people.

    [The prepared statement of Ms. Barnhart follows:]

 Statement of The Honorable Jo Anne B. Barnhart, Commissioner, Social 
                        Security Administration

    Mr. Chairman and Members of the Committee:
    The President has proposed a comprehensive approach to immigration 
reform that addresses the need to secure our borders, enforce worksite 
employment practices, and address the economic issues of immigration. 
This approach calls for the creation of a true temporary worker program 
that allows individuals to achieve legal status by paying their taxes, 
learning English and gaining employment in our society.
    Within this context I appreciate your invitation to appear before 
you to discuss how and when we assign Social Security numbers and issue 
Social Security cards to non-citizens, as well as issues relating to 
benefit eligibility for non-citizens. In my testimony today, I will 
describe SSA's current responsibilities and activities to safeguard the 
integrity of the Social Security system, including our work with 
Department of Homeland Security (DHS) and the Internal Revenue Service 
(IRS).
    Currently, as required by the Illegal Immigration Reform and 
Immigrant Responsibility Act of 1996, we provide DHS extensive 
information about every ``nonwork SSN'' where earnings were reported. 
``Nonwork SSNs'' are issued to individuals who are not authorized to 
work in the U.S. but have a valid reason for obtaining an SSN. These 
cards include the legend, ``Not Valid for Employment''.
    SSA is also an integral part of the DHS Basic Pilot program which 
allows employers to verify both the Social Security numbers and work 
authorization status of persons they hire. Of course, SSA continues to 
provide SSN verification services to employers, including our web-based 
Social Security Number Verification System (SSNVS)
    SSA currently has the authority to use information from Forms W-2 
only for the purpose of determining eligibility for and the amount of 
Social Security benefits. The Administration supports allowing 
disclosure of this data in the interests of national security and for 
law enforcement purposes.
    At SSA, we have a proven performance record and can and will do 
what we are called upon to do. But I would be remiss if I did not 
mention that, as this Committee well knows, every new responsibility we 
are given, without adequate funding, will affect our ability to provide 
our core mission service to the American public.
    This year alone, we will process over 6.7 million claims for 
benefits; process almost 245,000 Medicare Part D low income subsidy 
applications; make decisions on over 575,000 hearings; issue 18 million 
new and replacement Social Security cards; process 265 million earnings 
items for workers' earnings records; handle approximately 59 million 
transactions through SSA's 800-number; serve 42 million visitors to our 
field offices; process millions of actions to keep beneficiary and 
recipient records current and accurate; and conduct 1.6 million 
continuing disability reviews (CDR's) and over 1 million non-disability 
Supplemental Security Income (SSI) re-determinations.
    I have worked closely with the Social Security and Human Resources 
subcommittees in our efforts to improve service, most notably through 
the Disability Service Improvement initiative and related improvements 
to the disability process. I know that this Committee is well aware of 
the challenges we face.
    From my perspective as Commissioner of Social Security, I am 
concerned that reductions of $200-$400 million in the President's 
budget request for SSA administrative costs that have been proposed by 
the House and Senate appropriators would jeopardize our ability to 
improve service and eliminate backlogs, even without new 
responsibilities. I might note that the President's budget for FY 2007, 
and for the past few years, included modest increases in SSA's 
administrative budget.

ENUMERATION AND BENEFITS FOR NON-CITIZENS
Enumeration of Non-Citizens
    Under current law, Social Security numbers can be issued to non-
citizens when they are lawfully admitted to the United States for 
permanent residence, if they are otherwise authorized to work in the 
United States, or, under limited circumstances, where an individual is 
not authorized to work, but has a valid need for an SSN.
    The vast majority of original Social Security cards are issued to 
United States citizens, or to permanent resident non-citizens. Since 
these individuals are authorized to work without restriction in the 
United States, these cards show only the name and SSN of the individual 
and can be used as evidence of authorization to work in the U.S.
    However, cards issued to non-citizens who are not authorized to 
work (at the time of application for a Social Security number) or who 
are only temporarily authorized to work bear one of two legends 
describing work authorization status at the time the card was issued: 
``Not Valid for Employment'' or ``Valid for Work only with DHS 
Authorization''.

``Not Valid for Employment''
    Initially, SSA issued the same type of Social Security card to 
everyone, whether or not the individuals were authorized to work. In 
1974, SSA began assigning SSNs for non-work purposes, but the cards 
were not specifically annotated. Beginning in May 1982, SSA started 
issuing cards printed with the legend ``Not Valid for Employment,'' 
often referred to as nonwork SSNs,'' to non-citizens not authorized to 
work. This was due to the increasing need for individuals to have SSNs 
for nonwork purposes (e.g., to receive payment of a government benefit, 
to open a bank account, or to get a drivers license) and concerns that 
such individuals might use the SSN for unauthorized work. With this 
restrictive legend appearing on a card, employers were able for the 
first time, to determine whether the individual to whom the card was 
issued was authorized to work. Of course then as now, an employer could 
not rely on the Social Security card alone to establish that the person 
presenting the card was the person to whom the SSN was assigned. The 
Social Security card is not, and never has been, an identity document, 
which is why it must be presented in conjunction with an identity 
document to prove work authorization under immigration law.
    In October 2003, I significantly tightened the rules for issuing 
nonwork SSNs. No longer do we issue SSNs to non-citizens just so they 
can obtain a driver's license. Instead, SSA only issues such an SSN 
when 1)a Federal statute or regulation requires an SSN to receive a 
particular benefit or service to which an alien has otherwise 
established entitlement; or 2) a State or local law requires an SSN to 
get public assistance benefits to which the legal alien without work 
authorization has otherwise established entitlement and for which all 
other requirements have been met. This action reduced the number of 
``nonwork SSNs'' we issue each year from 72,000 to 15,000.
``Valid for Work Only with DHS Authorization''
    Beginning in September 1992, SSA began issuing cards with the 
legend ``Valid for Work Only with INS Authorization'' to non-citizens 
lawfully in the United States with temporary authorization to work. 
This legend has been changed to ``Valid for Work Only with DHS 
Authorization'' to reflect the change from ``INS'' (the Immigration and 
Naturalization Service) to ``DHS.'' In these cases, employers must 
examine other acceptable documentation for the employment eligibility 
verification process (Form I-9), normally the non-citizen's DHS 
documentation.
    In Fiscal Year (FY) 2005, SSA issued approximately 5.4 million 
original cards. Of these, 4.3 million were issued to U. S. citizens. 
Approximately 1.1 million cards were issued to non-citizens with 
temporary or permanent work authorization and fewer than 15,000 cards 
were issued to aliens not allowed to work.

Social Security Benefits for Non-Citizens
    As you know, current law explicitly prohibits the payment of 
benefits to individuals in the United States who are not lawfully 
present here. A non-citizen who is outside the United States can be 
paid benefits only if he or she meets the applicable statutory 
requirements.

Impact of the Social Security Protection Act of 2004 (SSPA)
    Under SSPA, Social Security benefits are not payable on the record 
of a non-citizen worker unless the worker was authorized to work in the 
United States when the worker was issued a Social Security number, or 
any time thereafter. (This change became effective with regard to 
workers who were issued an SSN on or after January 1, 2004.) 
Consequently, a non-citizen worker must meet this requirement to become 
eligible for benefits, or for the worker's family members to become 
eligible for benefits as dependents or survivors of the worker.

Nonpayment Provisions
    The alien nonpayment provision (section 202(t) of the Act) provides 
for nonpayment of benefits to aliens who are absent from the United 
States for more than 6 consecutive calendar months, unless they meet 
one of several exceptions in the law that permit payment to continue. 
The primary exception is that the alien beneficiary is a citizen of a 
country which has a social insurance system of general application and 
which pays benefits to eligible United States citizens while they are 
outside that country.
    Benefits that have been stopped because the beneficiary is outside 
the United States will resume when the beneficiary has returned to the 
United States and has remained here in lawful presence status for one 
full calendar month and will continue until the beneficiary is absent 
from the United States for longer than six consecutive calendar months.
    In addition, in many cases, aliens entitled to dependents' or 
survivors' benefits must also meet a U.S. residence requirement to be 
paid outside the United States. The dependent or survivor beneficiary 
must have resided in the United States for five years, during which 
time the family relationship on which benefits are based must have 
existed. This five year residence requirement can be removed for 
dependents or survivors who are citizens or residents of a country with 
whom the United States has a totalization agreement.

Other Events That Result in Nonpayment of Benefits to Non-citizens
    The Social Security Act prohibits the payment of Social Security 
benefits to alien workers (and their dependents or survivors, in 
certain cases) who are removed from the United States under specific 
provisions of the Immigration and Nationality Act.

Crediting Unauthorized Work Towards Social Security Benefits
    There have been a number of proposals to eliminate Social Security 
credit for earnings that are posted to a noncitizen's record during 
periods when the person is not authorized to work. You may recall that 
when the SSPA was enacted, consideration was given to a similar 
proposal, which ultimately was not included in the law.
    We understand the rationale behind this proposal. However, to 
administer such a change, we would have to know exactly which periods 
in the past a person was authorized to work and not authorized to work. 
We defer to DHS on the specifics of availability of data, but we 
understand that DHS does not have the data readily available at this 
time to reconcile earnings and work status.

``HARDENING'' THE SOCIAL SECURITY CARD
    As you are aware, the expertise of counterfeiters and the wide 
availability of state-of-the-art technology make it increasingly 
difficult to develop and maintain a Social Security card that cannot be 
counterfeited, despite best efforts to guard against such incidents. 
Therefore, SSA will continue to evaluate new technology as it becomes 
available to determine if additional features should be included.
    As provided in the IRTPA, we, in consultation with the Secretary of 
Homeland Security formed an interagency task force to establish 
requirements for improving the security of Social Security cards and 
numbers. Because current law requires the card to be printed on 
banknote paper, the taskforce was limited to consideration of 
improvements to this type of card. In addition to representatives from 
SSA and DHS, the task force included representation from the Federal 
Bureau of Investigation, the Department of State and the Government 
Printing Office. I share Congress' concern about the security of the 
Social Security card and am committed to doing what I can to make 
improvements in this regard. The taskforce has completed its work and I 
provided this Committee with a report a few days ago on how its 
recommendations can be implemented. We have decided to delay moving 
forward with the production of the improved Social Security card 
pending resolution of the immigration reform debate because the final 
law may include provisions that affect the Social Security card.
    Although not proposed by the Administration, creating a different 
kind of Social Security card has been suggested by some members of 
Congress. The immigration and welfare reform legislation passed in 1996 
required us both to conduct a study and to develop a report on 
different methods for improving the Social Security card process, 
including prototypes of several kinds of new cards. This report, 
``Options for Enhancing the Social Security Card,'' was issued in 1997.
    We know from the 1997 effort that should SSA be required by 
Congress to replace all SSN cards the main costs associated with 
replacing the current SSN card are those associated with reinterviewing 
individuals and reverifying documents, while the additional costs of 
the card itself--even with additional security features--are minimal. 
Thus, the feasibility of a ``hard'' card depends on who would receive 
it over what period of time.
    The most important factor affecting the total cost is the 
requirement to verify the identity of the person applying for the card 
and, in the case of non-citizens, determining the immigration status 
and work authorization. Other factors must be taken into account as 
well. For example, the cost of equipment that might be needed in SSA 
field offices to work with the new cards and the cost to SSA to notify 
number holders who might need to obtain a new SSN card would have an 
impact on total outlays.
    Currently, most original SSNs (and cards) for United States born 
individuals are issued through the Enumeration at Birth (EAB) process 
in which parents apply for their child's SSN at the hospital as part of 
the birth registration. The vast majority of replacement SSN cards, and 
a relatively small number of original SSN cards for U.S. born 
individuals, are issued by SSA field offices where evidence is reviewed 
and verified. The majority of original SSN cards issued through SSA 
field offices are for individuals who recently arrived in the United 
States and whose immigration status permits assignment of an SSN.
    Last year, we estimated that a card with enhanced security features 
would cost approximately $25.00 per card, not including the start-up 
investments associated with the purchase of equipment needed to produce 
and issue this type of card. According to estimates made last year, 
reissuance of all new cards for the 240 million cardholders over age 14 
would cost approximately $9.5 billion. We know that, since we made that 
estimate, the cost of issuing SSN cards has increased by approximately 
$3.00 per card due to new requirements for additional verification of 
evidence, so we anticipate an increase in the total cost estimate when 
we update our figures to reflect current dollar costs. I hasten to add 
that the Administration is not seeking to replace all cards. The number 
of workers who would have to obtain a new card varies from proposal to 
proposal.
    Currently, each year staff of the agency devotes approximately 
3,300 work years of effort to the SSN card issuance process. Because of 
the need to interview everyone receiving a new card, and examine 
original documents, last year's estimate indicates that we would need 
an additional 67,000 work years to issue everyone a new card. This 
would require hiring approximately 34,000 new employees if we were 
required to complete the work within two years and 14,000 new employees 
to complete the work in five years. As noted, this estimate assumes 
replacing cards for 240 million individuals, which the Administration 
has not proposed. An approach that would mandate new tamper resistant 
cards to be issued only during the normal course of initial issuance 
and reissuance would involve significantly less additional costs. For a 
phased approach that limited new cards to only the approximately 30 
million people who change jobs at least once during a year and the 
additional five million young people reaching age 14, the cost would be 
approximately $1.5 billion per year, using last years cost numbers.

SSA HELPS IDENTIFY UNAUTHORIZED WORKERS
SSN Verification Services
    Over the years, we have worked to offer employers alternative 
methods to verify SSNs. One of those methods is the Employee 
Verification Service (EVS). EVS is a free, convenient way for employers 
to verify employee SSNs. It provides employers with several options 
depending on the number of SSNs to be verified. For up to five SSNs, 
employers can call SSA's toll-free number for employers (1-800-772-
6270) weekdays from 7:00 a.m. to 7:00 p.m. Eastern Standard Time. 
Employers may also use this number to get answers to any questions they 
may have about EVS or to request assistance. In FY 2005, SSA responded 
to nearly 1.5 million calls.
    Employers also have the option to submit a paper listing to the 
local Social Security office to verify up to 50 names and SSNs. In 
addition, employers may use a simple registration process to verify 
requests of more than 50 names and SSNs or for any number of requests 
submitted on magnetic media. Currently, almost 17,000 employers are 
registered for this verification service.
    To further increase the ease and convenience of verifying employee 
SSNs, we developed the Social Security Number Verification Service 
(SSNVS). After obtaining a PIN and password in a simple registration 
process, employers can use the internet to get immediate verification 
of the accuracy of employees' names and SSNs. This service was expanded 
to all employers in June 2005.
    I announced the nationwide rollout last year at the SSA sponsored 
National Payroll Reporting Forum, and we continue to promote SSNVS. For 
example, an article on SSNVS appeared in the SSA/IRS Reporter that is 
sent to over 6.6 million employers. It was also featured in the SSA 
wage reporting email newsletter, W2News. We have also highlighted SSNVS 
in our many speaking engagements before the employer community. There 
is a special section on SSA's website for employers that highlights and 
explains the use of SSNVS. This site recently ranked third in the 
American Customer Satisfaction Index survey, which asks users to rate 
the content, usefulness and functionality of applications on both 
public and private sector sites. Through SSNVS, we processed over 17 
million verifications for 21,000 employers in the first six months of 
2006.

Basic Pilot
    As I mentioned earlier, employers in all 50 states may participate 
in the Basic Pilot program, an ongoing voluntary program in which SSA 
supports the Department of Homeland Security (DHS) in assisting 
employers confirming employment eligibility for newly hired employees. 
Participating employers register with DHS to use the DHS' automated 
system to verify an employee's SSN and work authorization status. The 
information the employer submits to DHS is sent to SSA to verify that 
the Social Security number, name, and date of birth submitted match 
information in SSA records. SSA will also confirm U.S. citizenship, 
thereby confirming work authorization; DHS confirms current work 
authorization for non-citizens. DHS will notify the employer of the 
employee's current work authorization status. In December 2004, the 
Basic Pilot was expanded to all 50 states. As of July 17, 2006, DHS and 
SSA had signed agreements with over 10,000 employers, representing 
about 36,000 employer sites. For FY 2005, SSA received approximately 
100,000 Basic Pilot queries each month. So far, for FY 2006, SSA is 
receiving an average of 150,000 Basic Pilot requests a month. In June 
2006, we received over 182,000 queries.
    In 2005, through the EVS, SSNVS, and Basic Pilot programs, we 
estimate we provided a total of 67 million employer verifications, up 
from 62 million in 2004.

Earnings Suspense File (ESF)
    The Earning Suspense File is an electronic holding file for W-2s 
(wage items) that cannot be matched to the earnings records of 
individual workers. It does not represent nonpayment of Social Security 
payroll taxes, nor is it a repository for actual wages.
    There are approximately 255 million wage items in the ESF through 
Tax Year (TY) 2003, the last year for which data is available. This 
represents about $519.6 billion in wages. That sounds like a large 
number, but during that period, we have successfully recorded $73.8 
trillion in wages, or more than 99 percent of the total.
    SSA does not have data on the number of wage items in the ESF that 
are attributable to unauthorized work by non-citizens. SSA's source of 
information about earnings is the Form W-2, and there is no citizenship 
or immigration status information on that document. While some 
percentage of name and SSN mismatches are attributable to fraud by 
unauthorized workers, such mismatches also can occur for a variety of 
other reasons, including typographical errors, unreported name changes 
and incomplete or blank SSNs.

No-Match Letters
    As you know, SSA processes wages reported by employers on Forms W-
2. We pass this information on to the Internal Revenue Service for 
income tax purposes, and we record the earnings to each worker's 
account so that they are considered in determining eligibility for 
benefits and the level of benefits to be paid.
    We send ``no match'' letters to employers who submit more than 10 
wage items when more than 0.5 percent of the items in a wage report 
consist of an SSN and name combination that does not match our records. 
The employer `no match' letters include a list of up to 500 SSNs 
submitted by the employer in wage items that SSA could not post to a 
worker's record. In 2005, we sent approximately 127,000 employer `no 
match' letters, which covered 7.3 million mismatched records. For 
privacy reasons, the letter lists only the SSNs, not the name/SSN 
combination.
    The only source of information that SSA receives about a taxpayer's 
employer and earnings is tax return information on the Form W-2. We 
receive and process this information as an agent for the Internal 
Revenue Service. Use of and disclosure of tax return information is 
governed by section 6103 of the Internal Revenue Code. SSA currently 
has the authority to use this information only for the purpose of 
determining eligibility for and the amount of social security benefits. 
The Administration supports allowing disclosure of this data in the 
interest of national security and law enforcement purposes.

CONCLUSION
    Before I close, let me say again, that SSA strongly supports the 
President's comprehensive immigration reform approach and is ready, 
willing, and able to do its part to provide support for DHS in its 
immigration enforcement activities. The men and women of Social 
Security are dedicated, hardworking, and productive public servants who 
will do everything they can to carry out SSA's responsibilities, 
whatever they may be.
    I want to publicly thank this Committee for your support for SSA 
and its programs over the years. I look forward to continuing to work 
with you as we serve the American people.
    Thank you again for the opportunity to appear before you today. I 
look forward to working with you, and will be happy to answer any 
questions you may have.

                               

    Mr. MCCRERY. Thank you, Commissioner. Dr. Gustafson.

   STATEMENT OF THOMAS A. GUSTAFSON, PH.D., DEPUTY DIRECTOR, 
CENTERS FOR MEDICARE AND MEDICAID SERVICES, U.S. DEPARTMENT OF 
                   HEALTH AND HUMAN SERVICES

    Mr. GUSTAFSON. Chairman McCrery, Representative Rangel, 
thank you for inviting me to speak with you about the Centers 
for Medicare and Medicaid Services' effort to assist hospitals 
and other providers that provide healthcare to the uninsured, 
particularly to undocumented immigrants. I am going to 
concentrate on two provisions that are of particular interest 
in this area.
    The first is the Emergency Medical Treatment and Labor Act 
(EMTALA) (P.L. 99-272), which requires hospitals to address any 
person seeking emergency care, regardless of the payment method 
or citizenship status of the individual. The Second is Section 
1011 of the Medicare Modernization Act (MMA) (P.L 108-173), 
which provides a million dollars over 4 years to help hospitals 
and other providers with the burden for caring for undocumented 
immigrants.
    EMTALA was designed to insure that people who request 
treatment for emergency medical conditions will receive 
appropriate screening and emergency treatment, regardless of 
their ability to pay. The law creates obligations for hospitals 
in connection with individuals making these requests. These 
obligations do not vary by whether the individual is a citizen.
    CMS's regulations implementing EMTALA require that 
hospitals with dedicated emergency departments provide an 
appropriate medical screening examination to any person who 
comes to the hospital emergency department and requests 
treatment or examination of a medical condition. The same 
requirement relates to any person who presents on hospital 
property, even in areas other than the emergency room, 
requesting evaluation or treatment of an emergency medical 
condition. If the examination reveals an emergency medical 
condition, the hospital must also provide either necessary 
stabilizing treatment or arrange for an appropriate transfer to 
another medical facility.
    EMTALA applies to all Medicare participating hospitals with 
dedicated emergency departments, and applies to all individuals 
who present requesting examination or treatment of a medical 
condition, not just those who receive Medicare benefits. 
Hospitals with specialized capabilities also have a 
responsibility under EMTALA to accept appropriate transfers, 
regardless of whether the hospital has a dedicated emergency 
department.
    A hospital that violates EMTALA may have its ability to 
participate in Medicare terminated and may be subject to civil 
money penalties of up to $50,000 per violation. The law also 
provides a private right of action against a hospital that 
violates EMTALA.
    Hospitals are also required to maintain lists of physicians 
who are on-call for duty after the initial examination to 
provide necessary stabilizing treatment. Hospitals have 
discretion to develop their on-call lists in a way that best 
meets the needs of their patients requiring services required 
by EMTALA. Under CMS's regulations, EMTALA does not apply after 
an individual has been admitted for in-patient hospital 
services.
    In order to provide a detailed review of how EMTALA is 
implemented, the MMA required us to establish a technical 
advisory group (TAG), which has already met four times, and 
which has a very active set of Subcommittees, is taking a 
detailed look at EMTALA policies and procedures, including both 
CMS's regulations and the interpretive guidance outlining 
hospitals' responsibilities.
    This TAG includes hospital, physician, and patient 
representatives, and I sit on it as the CMS's senior 
representative. Its report is expected in October of 2008.
    Turning now to Section 1011, this provision--under this 
provision, Congress provided a total of $1 billion, 
$250,000,000 a year, over 4 years, to help hospitals and 
certain other providers cover their otherwise unreimbursed 
costs of providing emergency services for undocumented 
immigrants, which could include some of the costs resulting 
from the EMTALA provisions I just spoke of.
    Payments are made directly to eligible providers, which 
include hospitals, qualifying physicians, and ambulance 
providers. The Centers for Medicare and Medicaid Services (CMS) 
established guidelines for determining who is eligible for 
these benefits, and providers are responsible for making these 
determinations.
    Section 1011 provides funds for 2005 through 2008. Each 
year, two-thirds of the $250,000,000 allocated, or $167,000,000 
is allocated across the States, based on their relative 
percentages of undocumented immigrants. All 50 States and the 
District of Columbia are eligible for this pot of money.
    The remaining $83,000,000 is allocated to those six States 
that have the highest number of undocumented apprehensions in 
each fiscal year. The payments are made to the extent that the 
care was not otherwise paid for. Thus, if an individual has 
Medicaid, for instance, the payments would be taken into 
account in making the Section 1011 payments. In fiscal year 
2005, CMS made payments in excess of $58,000,000 to providers 
under this section. Since approximately $192,000,000 allocated 
in FY 2005 was not paid, CMS rolled these excess funds over to 
be used into FY 2006.
    This concludes my remarks, and I'll be happy to answer any 
questions that you may have.

    [The prepared statement of Mr. Gustafson follows:]

 Statement of Thomas A. Gustafson, Ph.D., Deputy Director, Centers for 
  Medicare and Medicaid Services, U.S. Department of Health and Human 
                                Services

    Chairman Thomas, Rep. Rangel, thank you for inviting me to speak 
with you about the Centers for Medicare & Medicaid Services' (CMS) 
efforts to assist hospitals that provide health care to the uninsured, 
particularly undocumented immigrants. Use of medical services by 
undocumented immigrants has been a long-standing issue for hospitals, 
especially those located along the U.S.-Mexican border. Federal law 
requires hospitals to medically screen and provide stabilizing 
treatment or an appropriate transfer to any person seeking emergency 
care, regardless of payment method or citizenship status. This 
obligation has added to the level of uncompensated care provided by 
hospitals, prompting Congress to include a provision in the Medicare 
Prescription Drug, Improvement, and Modernization Act of 2003 (MMA) to 
help certain hospitals recover some of their costs for providing this 
care to undocumented immigrants. In addition to providing the funding 
appropriated by the MMA, CMS recently issued guidance to the States as 
part of the implementation of the Deficit Reduction Act of 2005 (DRA), 
which requires Medicaid applicants who declare they are citizens to 
document their citizenship.

Federal Reimbursement of Emergency Health Services Furnished to 
        Undocumented Immigrants
    Under Section 1011 of the MMA, Congress appropriated a total of $1 
billion to help hospitals and certain other providers cover their 
otherwise un-reimbursed costs of providing emergency services required 
under the 1986 Emergency Medical Treatment and Labor Act (EMTALA) to 
undocumented immigrants. Generally, under EMTALA, hospitals with 
emergency departments that participate in Medicare must medically 
screen all individuals who present to the hospital's dedicated 
emergency department seeking treatment, and must provide stabilizing 
treatment or an appropriate transfer to any individual requiring 
emergency care. Section 1011 provides for direct payments to eligible 
providers for EMTALA-related care to undocumented immigrants that was 
not otherwise reimbursed. Eligible providers include hospitals, 
qualifying physicians, and ambulance providers, and may also include 
Medicare critical access hospitals (CAHs) and Indian Health Service 
facilities (whether operated by the Indian Health Service or by an 
Indian tribe or tribal organization). For purposes of the section 1011 
program, physician and ambulance providers need not be enrolled in the 
Medicare Program. Providers may also qualify for payment under this 
program for emergency care furnished to immigrants who have been 
paroled into the United States for the purpose of receiving health care 
services and to Mexican citizens who have temporary permission to enter 
the United States. For purposes of section 1011, CMS does not require 
hospital staff to ask patients directly about their citizenship or 
immigration status. Instead, CMS developed a Provider Payment 
Determination information collection form that instructs providers to 
ask or research some basic questions (e.g., whether the patient is 
enrolled in Medicaid) and request some documentation (e.g., a border 
crossing card, foreign passport). It is the provider's responsibility 
to make a reasonable determination of patient eligibility based on that 
information.
    Section 1011 provides funds for FY 2005 through FY 2008, with $250 
million appropriated per fiscal year. Each year, two-thirds of this 
$250 million, or $167 million, is allocated to the States based on 
their relative percentages of undocumented immigrants. The remaining 
$83 million is allotted to the six States with the highest number of 
undocumented immigrant apprehensions for each fiscal year. In FY 2005 
and FY 2006, Arizona, Texas, California, New Mexico, Florida, and New 
York were the six states determined to have the highest number of 
undocumented immigrant apprehensions.
    Although funds under section 1011 are allocated on a State level, 
CMS makes payments directly to providers. These payments are made from 
each State's allocation and these payments to providers are subject to 
a proportional reduction if the total amount allocated is insufficient 
to provide full reimbursement to each provider based on the law's 
payment formula. This pro-rata reduction ensures that some amount is 
paid for every provider that makes a qualifying payment request 
(claim). Payments under section 1011 may only be made to the extent 
that care was not otherwise paid for (through insurance or another 
source). Funds are State-specific, and any unused portion allocated in 
one year may be rolled over to the State's allocation for the following 
year for use by that State.
    For FY 2005, CMS made payments in excess of $58 million to 
providers under section 1011. Since approximately $192 million 
allocated for FY 2005 was not paid to providers, those excess funds 
were rolled over to be used in FY 2006.
    To help hospitals and other providers utilize the funding available 
under section 1011, CMS contracted with TrailBlazer Health Enterprises 
in July 2005 to administer the program. CMS and TrailBlazer have worked 
together to develop systems for provider enrollment, claims processing, 
and payment. TrailBlazer, which processes these claims on a quarterly 
basis, also conducts outreach and training sessions and maintains a Web 
site, listserv, and customer service telephone line to update providers 
on any developments regarding the section 1011 program.

EMTALA
    As previously mentioned, under EMTALA hospitals have obligations to 
any individual, regardless of citizenship, who requests treatment for a 
medical condition. EMTALA was designed to ensure that people will 
receive appropriate screening and emergency treatment, regardless of 
their ability to pay.
    CMS' regulations implementing EMTALA require that hospitals with 
dedicated emergency departments provide an appropriate medical 
screening examination to any person who comes to the hospital emergency 
department and requests treatment or examination of a medical 
condition. They also require that these hospitals provide an 
appropriate medical screening examination to any person who presents on 
hospital property requesting evaluation or treatment of an emergency 
medical condition. In both cases, a request may be made by another 
individual on behalf of the person for whom examination or treatment is 
sought or a request can be considered to have been made if a prudent 
layperson believes that based on the behavior of the individual an 
emergency medical condition exists. If the examination reveals an 
emergency medical condition, the hospital must also provide either 
necessary stabilizing treatment or arrange for an appropriate transfer 
to another medical facility.
    EMTALA applies to all Medicare-participating hospitals with 
dedicated emergency departments and applies to all individuals who 
present requesting examination or treatment of a medical condition, not 
just those who receive Medicare benefits. Hospitals with specialized 
capabilities have a responsibility under EMTALA to accept appropriate 
transfers regardless of whether the hospital has a dedicated emergency 
department. A hospital that violates EMTALA may have its ability to 
participate in Medicare terminated and may be subject to civil 
penalties of up to $50,000 per violation. An individual who has 
suffered personal harm and any hospital to which a patient has been 
improperly transferred and that has suffered a financial loss as a 
result of the transfer are also provided a private right of action 
against a hospital that violates EMTALA.
    Hospitals also are required to maintain lists of physicians who are 
on call for duty after the initial examination to provide necessary 
stabilizing treatment. Hospitals have discretion to develop their on-
call lists in a way that best meets the needs of their patients 
requiring services required by EMTALA.
    Under CMS' regulations, EMTALA does not apply after an individual 
has been admitted for inpatient hospital services, as long as the 
admission is made in good faith and not in an attempt to avoid the 
EMTALA requirements.
    Section 945 of the MMA required the Secretary of Health and Human 
Services to establish a technical advisory group (TAG) to review EMTALA 
policy, including the regulations and interpretive guidance outlining 
hospitals' responsibilities under EMTALA. This TAG, which includes 
hospital, physician and patient representatives, has already met 4 
times. The TAG will complete its deliberations and submit a report of 
its findings and recommendations to the Secretary by October 2008.
Conclusion
    Thank you again for this opportunity to discuss CMS' efforts to 
assist hospitals that provide health care to undocumented immigrants. I 
would be happy to answer any questions you might have.

                               

    Mr. MCCRERY. Thank you, Dr. Gustafson.
    Ms. Myers, I talk to employers occasionally about this 
issue of verification of eligibility to work, and they often 
express frustration with the current law that governs their 
ability to determine whether a prospective employee is, in 
fact, eligible for employment in the United States. The DHS and 
SSA kind of jointly operate the Basic Pilot program, which, as 
I understand it, is designed to help employers verify 
eligibility to work. Can you describe for us the current law 
with respect to what tools are available to employers to verify 
eligibility for work, and how, if at all, the Basic Pilot 
program alters that for those employers who volunteer for the 
program?
    Ms. MYERS. Thank you, Chairman McCrery. The Basic Pilot 
program is a voluntary program that's administered jointly by 
SSA and the United States Citizenship and Immigration Services 
at the DHS, not ICE. The Basic Pilot, we believe, helps provide 
employers with some tools for verifying that employees, when 
they bring in documents, can know whether or not the employee 
is legally entitled to work here. What it doesn't do is, if 
someone is using my name and SSN and provides those documents, 
that can't tell you that, so it's not a perfect system, but it 
is one step.
    One of the reasons that we launched the IMAGE program today 
is that we believe there are other things that employers can do 
to try to protect themselves from being tricked by individuals 
who might want to come in and provide them with false 
documents. Those are some of the best practices, which we've 
placed on our website. Those include such things as making sure 
that the individuals who are reviewing I-9's actually have 
training, that you conduct an internal audit twice a year to 
make sure that the individuals who are reviewing I-9s know what 
they're doing. You also can work with ICE in other ways to make 
sure that you are complying with the law.
    We realize the Basic Pilot is not the entire solution, and 
that's why we're working with other law enforcement agencies in 
cracking down on the problem of document fraud. We've 
established these taskforces throughout the country to go after 
franchises like the Castorena franchise that had locations in 
many cities, really document mills, that were providing false 
documents to employers. So, those are some of the tools that 
we're using to help guide employers who want to follow the law.
    Mr. MCCRERY. So, it's my understanding that the 
Administration believes that a mandatory program like the Basic 
Pilot program ought to be in place eventually for employee 
verification; is that correct?
    Ms. MYERS. Yes. Yes, Chairman.
    Mr. MCCRERY. I suppose that means that you all have reached 
the conclusion that the Basic Pilot program works and that it 
actually facilitates identification of potential employees who 
are, indeed, eligible for employment in the United States, and 
also the converse, would help identify those people who are not 
eligible for employment in the United States, who are seeking 
employment. Is that right?
    Ms. MYERS. We do believe it had--the Basic Pilot program 
and a mandatory electronic employer-verification system has 
some value. Now it's not a panacea. It can't be looked at as 
the only thing, as the only tool for employers or as the only 
way that we're going to weed out illegal immigration, but we 
have seen it has value. For example, in some employers, we hear 
examples that if they advertise that they're using Basic Pilot, 
illegal aliens don't come in to apply because they know that 
the employer is using Basic Pilot, that their documents are 
going to be checked. So, there are some things like that that 
are helpful, but certainly, Basic Pilot is not a perfect tool. 
I would defer to Commissioner Barnhart as well, if she has 
anything to add on the Basic Pilot program.
    Mr. MCCRERY. Well, I think the key question here is, 
because I know Commissioner Barnhart, she and I have talked 
about this before, and there are added costs to the SSA for 
administering their end of the Basic Pilot program. So, I guess 
the question we need to broach here is, is the added advantage 
that we're getting from the Basic Pilot program worth the added 
expense that we're paying through administrative costs at the 
DHS and the SSA. Commissioner Barnhart, do you have any----
    Ms. BARNHART. As you know, Mr. Chairman, what the Basic 
Pilot does is it verifies the name, SSN, and the date of birth. 
We also provide a death indicator, and then the citizenship 
status as we know it. If they're not American citizens, it goes 
back to DHS to verify the current work authorization status of 
the individual.
    The bulk of the work that is done through Basic Pilot, in 
terms of verifications, I think 92.5 percent were handled by 
SSA last year, and only 7.5 percent, I believe, had to be 
deferred to DHS for their follow-up. So, I do think it's a 
tool, if you look at the way that the number of employers using 
Basic Pilot has increased. We have over 10,000 employers who 
are using it now. That's an increase over the past. We have 
approximately 36,000 employer sites around the country using 
it. So, I think employers are looking for any tool that could 
be available and helpful to them, and they do like it.
    They're also using our SSN Verification System, which, as 
you know, matches name and SSN, and doesn't go as far as 
citizenship, but does at least give a preliminary indicator of 
whether the individual is presenting appropriate and accurate 
information for purposes of the W-4 that they complete.
    Mr. MCCRERY. Thank you, Commissioner. Mr. Rangel.
    Mr. RANGEL. Thank you so much, Mr. Chairman. I don't know 
what this has to do with pending immigration legislation, but I 
have to admit it is very informative, and I'll take my 
questions wherever the testimony leads me.
    I want to thank IRS for the great job that you do over the 
years, for the thankless work that you do. There was some 
implication from Secretary Myers, and you, Commissioner, that 
this enforcement of existing law as it relates to undocumented 
workers--I don't--you said something about----
    Mr. EVERSON. Yes, sir. I think what you are probably 
responding to is the enforcement penalties in this area. What 
Secretary Myers was referring to, are the----
    Mr. RANGEL. No, no, no. I don't want to talk about what 
she's talking about. I want to talk about you saying that 
illegal workers are liable for taxes.
    Mr. EVERSON. Yes.
    Mr. RANGEL. There was some vague implication that you're 
going after the worker and the employer. Someone gave me this 
saying that we got between 11,000,000 and 12,000,000 illegals, 
unauthorized population, that two-thirds of them have been in 
the country for 10 years or less, that 30 percent of them--
where is it now?
    The industries that they work in: the hotel industry, the 
agricultural industry--oh, here it is, here. Seven million of 
the workers out of the labor force of one-hundred forty-eight 
legal, and one-third of the unauthorized workers are in service 
occupations. Nineteen of the illegals employed in construction 
and extractutive (sic); fifteen in production, installation, 
and repair; four percent in farming. That's not very--then we 
have percentages in cleaning and all the service industries: 
butcher, food, landscaping.
    The President has implied that if we got rid of all the 
illegals, it would have an outstanding negative economic impact 
on these industries, and that's why we have to do something to 
legalize them. That means that we know where they are, where 
they're working, the industries, and what the political 
position is. We not only cannot want to deport them, but we 
can't afford to deport them. We can't do and we can't afford to 
do it.
    Now how does the IRS fit into this? You know where they 
are. You know where they're working. You know the industries. 
Are you suggesting that you're enforcing the tax laws, as 
relates to illegal workers in the United States of America?
    Mr. EVERSON. Sire, what I have said, and perhaps I wasn't 
as clear as I should have been, is that the tax laws do not 
distinguish between status as a citizen, a legal resident, or 
as an illegal undocumented worker.
    Mr. RANGEL. No, I know the law. I want to talk about--ask 
you, are you----
    Mr. EVERSON. We try to get the taxes----
    Mr. RANGEL. Are you attempting to enforce the law as it 
relates to illegal workers in the United States of America?
    Mr. EVERSON. No, we are trying to enforce law as it relates 
to the tax obligations of illegal workers in this country.
    Mr. RANGEL. Let's try it again. Are you going after illegal 
workers who don't pay taxes in the United States of America?
    Mr. EVERSON. Yes, we do, sir. We have, in this country, an 
absolute obligation to pay your taxes.
    Mr. RANGEL. I know the obligation, but----
    Mr. EVERSON. That doesn't matter whether you're here 
legally or illegally.
    Mr. RANGEL. Are you going after employers who hire illegal 
workers, who don't take taxes away from these illegals?
    Mr. EVERSON. They are subject to the same scrutiny that 
other employers are subject to.
    Mr. RANGEL. Commissioner, I know they're subject to, but do 
you have any statistical data--can you give me any idea of the 
number of cases that you've gone after. All of this statistics 
and the President of the United States--no one challenges you 
can go to any restaurant, chain of restaurants, chain of 
hotels, agriculture, landscaping, we know where the illegals 
are. Could you tell me what percentage of the estimate of 
illegals that you've prosecuted for none-payment of tax?
    Mr. EVERSON. I can give you one statistic that I think will 
answer your question and, perhaps, rebut the inference that 
we're singling this population out. When you look at our----
    Mr. RANGEL. I don't want you to rebut it. If you know 
they're illegal, why rebut it, if they have a legal----
    Mr. EVERSON. Let me give you one statistic.
    Mr. RANGEL. Sure.
    Mr. EVERSON. The audit rate for all individuals is a little 
less than one percent. If you look at the audit rate for non 
Earned Income Tax Credit (EITC) claimants with an income under 
$25,000, that is point-one-two (.12) percent. In other words, 
we are doing very little in that area in contrast to a 5 
percent audit rate for people who have a million dollars of 
income or more. These people are not being singled out. That's 
because at the level that we're talking about, and if you look 
at the mismatched W-2s, as I indicated, three-fourths of them 
are for amounts of $10,000 or less. The ramification of all 
that is, we tread very lightly in this area because it does not 
generate a lot of money.
    Mr. RANGEL. Okay, but I will you could send me something as 
soon as you can. If we know that--do you really believe that 
illegal aliens generally are paying tax, Federal taxes?
    Mr. EVERSON. Well, it's a very difficult thing to estimate, 
but, as I indicated, this year, so far, we've received 2.6 
million returns that have an ITIN on a return. Now that can be 
an ITIN for a dependent or for a spouse, but probably there are 
2 to 3 million illegals who are paying taxes out of the general 
consensus, of about 7 million you mentioned in the workforce. 
So, clearly, there is a very significant contribution of tax by 
that population, sir.
    Mr. RANGEL. Thank you for your leniency, Mr. Chairman.
    Mr. MCCRERY. You're quite welcome, Mr. Rangel. Mr. Shaw.
    Mr. SHAW. Thank you, Mr. Chairman. I'd like to start with 
Dr. Horn. I have an interesting question, I think. In your 
testimony, you provide, correctly so, that the TANF payments 
are paid on behalf of the child, if the child is an American, 
regardless of whether the parents are illegal or not, they'd be 
entitled to some TANF payments.
    Also, under the Welfare Reform Law, certain work is 
required in time-limited welfare reform. How do you work this 
out where somebody is an illegal and is required--having work 
requirements with regard to a condition of receiving TANF 
payments?
    Mr. HORN. If the adult is an undocumented immigrant, then 
they are not eligible for an adult assistance payment under any 
circumstance, and they are not covered under the work 
requirement. So, in cases where an illegal immigrant has a 
U.S.-born, citizen child, that benefit is paid on behalf of the 
child, but the adult is not eligible for Federal payment.
    Mr. SHAW. Oh, the child is not eligible for Federal----
    Mr. HORN. The Child is, but not the parent, if the child is 
a U.S. citizen.
    Mr. SHAW. Where do you pay the TANF funds?
    Mr. HORN. Payment goes to the family.
    Mr. SHAW. To the illegals?
    Mr. HORN. The check, since children generally don't have 
bank accounts, goes to the parent.
    Mr. SHAW. That's interesting. Mr. Everson, I--listening to 
the exchange that you had with Mr. Rangel calls to mind a bill 
that, I think, Mr. English has filed, and that is a question--
and which I think I'm a cosponsor, and that is a question of 
matching SSNs with employees with regard to the W-2 forms that 
are filed for these employees. The question is what effect 
would it be to tell the employer that unless they can come up 
with a legitimate SSN, that they would not be able to deduct 
from their income tax the cost of the labor payments made to 
illegals.
    Mr. EVERSON. I think that this could be enforced, 
Congressman, but we need to consider that carefully. I would 
suggest that the real trick here is to get comprehensive reform 
so that we dry up the demand and the flow of illegals into the 
country.
    If that's not done, a provision like that could have a real 
impact where businesses decline to organize in the legal 
sector. Businesses would then go into the underground economy 
where they don't pay taxes at all. They're then not paying the 
employment taxes; they're not paying the income taxes. So, I'd 
be very careful before we did something like that, sir.
    Mr. SHAW. That's interesting, and the--I would assume, 
though, that most of the illegals don't really reach the point 
where they have any income tax liability.
    Mr. EVERSON. I think that's probably, by and large, true, I 
talked about the billions that do come in, but if you look at 
all those mismatches that I mentioned before, the preponderance 
of them is for amounts below $10,000. Right now it takes about 
$8,000 as a single filer before you have any tax obligation, 
and $16,000 if you're filing jointly, so you're right. A lot of 
folks are under that limit.
    Mr. SHAW. Commissioner Barnhart, I, for some time--and I 
think we've talked about this, maybe, over the years. It's been 
a very great concern of mine that somebody can be amassing 
Social Security payments under, really, a false number that 
they have made up, and actually, in many cases, is part of 
identity theft, and then they can come back, if they were 
legalized and had a legal SSN, they could come back then and 
claim the moneys that they they've paid in under an assumed 
name or quite--due to fraud and identity theft of another. Do 
you think we ought to reevaluate that position, and, exactly 
what--it seems basically wrong to me to allow somebody to enjoy 
our Social Security system who has actually defrauded the 
system for so many years, and then going back and claim the 
benefits of the fraud that they have perpetrated on the system, 
as well as, in some cases, the employer.
    What would be the effect of changing this policy? How much 
money is out there that's estimated that would be forfeited in 
the event we were to change this policy?
    I think the situation over at the Senate was pretty much 
tracking a lot of the law that's already on the books in their 
immigration bill.
    Ms. BARNHART. Yes. Mr. Shaw, as you know, there have been 
several changes made relative to the issue of who can collect 
Social Security benefits. In the 1996 legislation, it was 
required that you had to be legally present in the United 
States to collect benefits.
    The Social Security Protection Act (SSPA) (P.L. 108-203) 
that went through this Committee required that anyone who was 
issued a SSN after on or after January 1, 2004, had to have 
been work authorized at some point or the earnings that they 
had accrued would not count toward Social Security benefits.
    The difficulty that we run into in looking back and trying 
to discern whether the person was work authorized or not work 
authorized is that, to the best of my knowledge, there is no 
electronic database or file where it chronicles a person's 
status for specific periods of time. For example, a person 
could come into the country legally and be working, and then 
become not authorized to work, and therefore be in an 
unauthorized status, and then come back into being in an 
authorized status again.
    It's my understanding, and I would defer to Ms. Myers, but 
my understanding is that the DHS does not, in an automated 
fashion, track that data longitudinally, and so it's not 
readily available for us to go back and make determinations at 
Social Security about which portion of earnings were earned 
during a work-authorized period and which portion of earnings 
were earned under an unauthorized period.
    In the case of just strict identity theft--and I described 
that instance that I did because I believe that's what you were 
talking--I believe that was the----
    Mr. SHAW. Yes, ma'am.
    Ms. BARNHART. --but I just want to point out that in the 
case of strict identity theft, misuse of a SSN is a felony, and 
we would refer that to our Inspector General for investigation 
and prosecution.
    Mr. SHAW. Would the Senate bill have changed that?
    Ms. BARNHART. The Senate bill----
    Mr. SHAW. Senate Immigration bill.
    Ms. BARNHART. My understanding is that the Senate 
Immigration bill does not change the requirements currently on 
the books related to who is eligible to receive Social Security 
and not eligible to receive Social Security. Rather, what it 
does is, it gets into making more people potentially eligible.
    Mr. SHAW. Thank you.
    Mr. MCCRERY. Mr. Stark.
    Mr. STARK. Thank you, Mr. Chairman. Secretary Myers, in 
your enforcement of these immigration and customs laws, do you 
use informants?
    Ms. MYERS. Yes, we do.
    Mr. STARK. My opponent has suggested a program of offering 
bounty payments to citizens for turning in undocumented workers 
or illegal residents. Would you--would the Administration 
support that? Would you support that idea?
    Ms. MYERS. Well, Congressman, we certainly are looking at, 
kind of, all creative ideas at this point, in order to insure--
--
    Mr. STARK. Have you considered bounty payments?
    Ms. MYERS. We have not specifically considered so-called 
bounty payments. There are certain occasions----
    Mr. STARK. Mr. Everson, you use rewards in collecting----
    Mr. EVERSON. We do, sir. We have a whistleblower program. 
You're right.
    Mr. STARK. I doubt if you get many people in the five and 
10 percent bracket getting turned in, but you may. With your 
experience, would offering bounties to the average citizen help 
you or be useful in this kind of enforcement?
    Mr. EVERSON. I don't want to get into that if I can avoid 
it. Chairman Grassley is a very strong advocate of expanding 
the whistleblower program, and we're working to do that. 
Perhaps where you apply that is toward the top end, sir.
    Mr. STARK. That's what I thought, too. One other idea that 
my opponent has that I, as far as I know of any--I guess I 
could ask Dr. Horn. He suggested that we revoke the citizenship 
of all the children who were born here of illegally resident 
parents, and I'm not a lawyer, but I'm not sure that, short of 
a Constitutional amendment, that would be possible. Is anybody 
here a lawyer? Who's a lawyer?
    Are you a lawyer, Mr. Everson? I don't think that's 
Constitutional, do you?
    Mr. HORN. I'm a psychologist, not a lawyer.
    Mr. EVERSON. I believe that would require a Constitutional 
amendment, sir.
    Mr. STARK. Thank you very much. Now, Secretary Myers, 
you're familiar with both the Senate and the House bill?
    Ms. MYERS. Yes, sir.
    Mr. STARK. Which do you prefer, and which would be more 
helpful in your work?
    Ms. MYERS. We enforce the law, and whatever law is passed, 
that's the law----
    Mr. STARK. I'm asking, you're a professional law-
enforcement person. We have two bills we're discussing, we may 
compromise between them. I'd like to know which of the bills 
would be more useful to you in fulfilling your duties.
    Ms. MYERS. Well, there's certain core things that we need 
in order to be more effective in enforcing, particularly, the 
Worksite Enforcement Law. One, we believe, would be more 
regularized access to the Social Security no-match data.
    Mr. STARK. Which bill does that better? I'm----
    Ms. MYERS. Well, sir--the Administration, I think, has 
worked very closely. We would be happy to continue to work on 
that, because----
    Mr. STARK. Let me try--is anybody else, Commissioner 
Everson? Between the bills--Secretary Barnhart, in Social 
Security, which bill would make your job easier? I'm not--I 
don't think we'll get either one in as it stands, but I'm 
curious which one would help you more.
    Ms. BARNHART. From my perspective, Mr. Chairman, Social 
Security doesn't get involved, as Mr. Everson said earlier in 
his opening remarks, Social Security doesn't get involved in 
strict enforcement of immigration law. So, from my perspective, 
both bills address the issue of Basic Pilot in terms of 
expanding the current Basic Pilot to make it mandatory to all 
employers. In addition, the Senate bill would include more 
elements.
    What I'm mainly concerned about is making sure that wages 
that are reported to Social Security are credited accurately to 
the appropriate SSN. This goes back to the question that I was 
asked----
    Mr. STARK. Dr. Gustafson, one of the concerns in the bill, 
the House bill, that the Senate bill doesn't have is that 
there's a--that the emergency-room workers who help illegal 
residents or aliens might be arrested for providing care that, 
under EMTALA, they're required to provide. Have you looked into 
that part of the House bill? Would you have any comment on 
that?
    Mr. GUSTAFSON. Not in any depth, sir.
    Mr. STARK. Pardon?
    Mr. GUSTAFSON. We have not looked at that provision in any 
depth.
    Mr. STARK. You're familiar with it?
    Mr. GUSTAFSON. It has been called to our attention 
recently, sir.
    Mr. STARK. Do you think it would help?
    Mr. GUSTAFSON. I think we would have to voice concern about 
a provision which interfered with the public health role of 
America's hospitals, sir.
    Mr. STARK. Thank you, Mr. Chairman.
    Mr. MCCRERY. Mr. Herger.
    Mr. HERGER. Thank you. Commissioner Barnhart, just 
following up on some questioning that Congressman Shaw asked 
earlier, do you have any estimates of the number of children 
receiving Supplemental Security Income (SSI) benefits whose 
parents are in the United States illegally?
    Ms. BARNHART. No, sir. I do not. I can tell you that 
approximately 1,000,000 children receive SSI disability 
benefits. Unfortunately, for purposes of answering your 
question, we don't capture whether or not the children are 
American citizens because they were born here but their parents 
are here illegally. We don't capture that kind of data.
    Mr. HERGER. Secretary Horn, your testimony notes that in 
2004, about 152,000 TANF child only included parents of unknown 
citizenships. That is an alarming figure. Is this group a 
rising share of the welfare caseload? If so, what, if anything, 
can we do through future TANF policy reforms to address this 
issue?
    Mr. HORN. If you look at the number and the percentage of 
cases in which a child is receiving a benefit and residing with 
a parent who is not receiving a benefit, and where the parent 
is either of unknown citizenship or alien status, back in 1996, 
there were about 160,000 such cases, and in 2004, there were 
152,000. So, in terms of absolute number, compared to the last 
year of Aid to Families with Dependent Children (AFDC), the 
number has gone down, although, if you compare it to 2000, the 
number was about 91,000 in 2000, and currently it's 152,000. 
So, it depends on what your comparison year is.
    If you look at the percentage of those cases, in 1996, 
under the last year of AFDC, it was 16 percent of all child-
only cases, and in 2004, it was 18 percent. If you compare to 
2000 instead, it was 12 percent in 2000 and 18 percent in 2004. 
So, if your comparison is to the last year of AFDC, the number 
has gone down, certainly, but if you compare to 2000, the 
number and the percentage has gone up.
    Mr. HERGER. Is that considering the fact that our caseload 
has gone down by 60 percent since 1996?
    Mr. HORN. If you look at the overall number of child-only 
cases on the caseload, the number has stayed relatively 
constant since the enactment of TANF, but the percentage has 
grown pretty dramatically for the entire category of child-only 
cases. In 1997, there were about 900,000 child-only cases, and 
in 2004, there were 864,000. As a percentage of the total 
caseload, however, the percentage of child-only cases has grown 
from 21 percent to 44 percent. Now not all of those child-only 
cases are in the category that we're discussing. A lot of them 
are residing with a parent who is on SSI, and some of them are 
residing with parents who are in sanction status, so it depends 
on which category of child-only cases you're thinking about.
    Mr. HERGER. Does welfare--again, Dr. Horn, does the welfare 
system now expect illegal alien parents to work for these 
benefits or otherwise place a time limit on them?
    Mr. HORN. Illegal aliens are not eligible to receive a cash 
assistance payment.
    Mr. HERGER. Again, referring to the children who are 
receiving them, who have been born in the United States, even 
though their parents are illegal, they are legal, and if those 
children are receiving, are the parents working?
    Mr. HORN. Child-only cases, regardless of the status of the 
adult, at least until recently, the adult was not subject to 
the work requirement. That has changed for some categories of 
child-only cases with the publication, in late June, of our 
interim final TANF regulation, but we still did not include, as 
being subject to the work requirement, parents of child-only 
cases who are either immigrants under their five-year bar for 
receipt of benefits, or illegal immigrant parents.
    Mr. HERGER. Thank you.
    Mr. MCCRERY. Mr. Johnson.
    Mr. JOHNSON OF TEXAS. Thank you, Mr. Chairman. Ms. 
Barnhart, following up on the Chairman's earlier question, do 
you have the ability to have instantaneous confirmation of 
someone with a SSN.
    Ms. BARNHART. Mr. Johnson----
    Mr. JOHNSON OF TEXAS. Turn on your mic, please.
    Ms. BARNHART. Thank you. Mr. Johnson, what we have is the 
ability for an employer, through our SSN Verification System, 
to get a pin and password to be able to sit down on a web-based 
system, plug in Jo Anne Barnhart and my SSN and instantaneously 
it comes back that either it's a match or it's a no-match.
    Now that does not say, going back to a point Ms. Myers made 
earlier, that I'm actually Jo Anne Barnhart. It can't do that, 
but it can say that the name and the number match, but not 
necessarily that the individual who provided that name and 
number to the employer in this instance is actually----
    Mr. JOHNSON OF TEXAS. Yes, it could be a false number, but 
it matches whatever the name is?
    Ms. BARNHART. Correct. It does.
    Mr. JOHNSON OF TEXAS. Okay. You coordinate with them on 
that, with ICE?
    Ms. BARNHART. Yes, we do. That is part of what we do. In 
addition to the SSNVS program that is available to all 
employers on a voluntary basis, we also work through the Basic 
Pilot with the DHS.
    Mr. JOHNSON OF TEXAS. Okay. You got a non-work alien file, 
I think, that tracks earnings. Is that true?
    Ms. BARNHART. We do have a non-work alien file.
    Mr. JOHNSON OF TEXAS. With a non-work SSN. If the Congress 
were to pass a new law stating, ``only earnings from citizens 
or those with a green card were to be credited to Social 
Security,'' is there any way to go back to previous years and 
make sure that no wages paid to illegals would ever be credited 
with Social Security benefits?
    Ms. BARNHART. That would be extremely difficult, Mr. 
Johnson. As I was discussing with Mr. Shaw earlier, the issue 
for us is that there is no longitudinal database that tracks a 
person's work authorization status at specific points in time. 
So, for example, let's say that I was here illegally in this 
country working, and then I went through whatever channels are 
necessary to go through, got sponsored, and I became a work 
authorized individual. It is my understanding that the database 
at DHS actually overwrites and then says, ``As of today, July 
26, I am now work authorized and in this country legally.'' So, 
the data that would be necessary to go back and say, ``that 
work authorization just started that day, and anything prior to 
was unauthorized,'' to the best of my knowledge does not exist. 
I would invite Ms. Myers to talk about it.
    Mr. JOHNSON OF TEXAS. Okay. You do know that they're 
earning wages and you apply them to Social Security?
    Ms. BARNHART. We do know that they're earning wages, and if 
the name and SSN match our files, we apply it to Social 
Security.
    Mr. JOHNSON OF TEXAS. Okay. Do you coordinate with IRS on 
those wages?
    Ms. BARNHART. The coordination that takes place with IRS is 
actually done through our no-match. Every year, when we receive 
wage reports, which are the W-2s that are submitted with a 
summary W-3, we record those. The IRS, and Mr. Everson can 
obviously describe what they do better than I can, but we 
actually provide IRS with the information on the W-2s, and if 
we end up with a name and SSN that doesn't match our records, 
we let them know, and if they can determine the correct SSN 
from their tax return file, then they contact us.
    Mr. JOHNSON OF TEXAS. Well, what happens if you don't get a 
match?
    Ms. BARNHART. If we don't get a match it goes into the 
earnings suspense file, something that's been in existence 
since 1937.
    Mr. JOHNSON OF TEXAS. Yes.
    Ms. BARNHART. There are approximately 255,000,000 items in 
the earnings suspense file. Not dollars, but wage items that 
could not be attributed to a correct earnings record.
    Mr. JOHNSON OF TEXAS. Do you now coordinate with ICE on 
those kind of items?
    Ms. BARNHART. We send to the DHS information on the non-
work SSNs where wages were earned in the non-work alien file.
    Mr. JOHNSON OF TEXAS. Okay, let me ask----
    Mr. EVERSON. If I could add something to that. This gets to 
the nub of the issue on section 6103. Those 8,000,000 
mismatches or so, are taxpayer information. It's generated off 
a W-2. A W-2 is taxpayer information, so this is what the 
Administration is proposing would be addressed through the 
mandatory verification system, a change to 6103 that would 
allow what you're talking about to happen, sir.
    Mr. JOHNSON OF TEXAS. Thank you. One quick question for Dr. 
Gustafson, does CMS have an understanding as why there was 
money left over in 2005 for section 1011 funding; and was it a 
lack of education on the providers' part or were hospitals 
reluctant to verify status of citizenship; and what were the 
main barriers?
    Mr. GUSTAFSON. Not all of the money was expended in 2005. 
As you indicated, that rolls over to be available in 2006. We 
believe that the principle thing to point to here is that this 
was a new program, so that we were getting up and running, 
providers were enrolling in it, everybody was getting used to 
the new business. We have no evidence I could provide you 
indicating any reluctance on the part of providers to 
participate.
    Mr. JOHNSON OF TEXAS. Thank you, sir. Thank you, all of 
you. Thank you, Mr. Chairman.
    Mr. MCCRERY. Thank you, Mr. Johnson. Mr. Levin.
    Mr. LEVIN. Thank you. Welcome. Welcome to all of you. Ms. 
Barnhart, I think there was a Social Security Actuary estimate 
on the Senate bill. Are you familiar with that?
    Ms. BARNHART. Yes, sir. I've read that estimate. It was 
done by our independent actuary. Yes, sir.
    Mr. LEVIN. So, why don't you briefly tell us what it said 
about the impact in terms of the solvency of the fund.
    Ms. BARNHART. The actuary's memo that was provided to 
Chairman Grassley explained that, due to significantly 
increased revenue, because of the temporary worker program 
provided for in the S. 2611, the exhaustion date would actually 
be moved out two years, from 2040 to 2042.
    Mr. LEVIN. Thank you. Also, we were talking about the 
child-only cases, and you mentioned the availability of SSI. I 
think the record should be clear. If the child is illegal, 
there's no benefit, right? There has to be legality of 
somebody, is that correct?
    Mr. HORN. Yes. It's complicated. There are different 
categories of child-only cases. One category is that the parent 
is a legal immigrant, a qualified immigrant, who is under the 
five-year bar from receiving assistance, and the child is a 
U.S. citizen and getting assistance. Another category would be 
a U.S. citizen-born child, whose parents are here illegally, 
and therefore ineligible for a cash benefit. There are other 
categories. One of them is that the parent is on SSI and the 
child is receiving a benefit.
    My assumption is to get SSI, you have to be a U.S. citizen 
yourself, as an adult. Is that correct?
    Ms. BARNHART. Actually, the limitations on SSI to non-
citizens became extremely strict after the 1996 legislation. 
Absolutely, Wade. The fact of the matter is that unless you are 
a legal citizen, you really don't get SSI, except in very, very 
limited circumstances, for example, in the cases of certain 
refugees or asylees.
    Mr. LEVIN. I just though the record should be totally clear 
on that. Let me ask you another question about the Senate bill. 
Would guest workers be entitled to any benefits under the 
Senate bill. Does anybody know that?
    Ms. BARNHART. What I can tell you is that depending how the 
Congress decides to deal with that, workers who earn credits 
and who pay into Social Security would be entitled to benefits 
under Social Security, unless the legislation decided to change 
that.
    Right now, generally if you earn money working in this 
country, your employment is covered under Social Security, and 
you pay taxes into Social Security, then you are covered by 
Social Security.
    Mr. LEVIN. Have you looked, though, at the guest worker 
provision in the Senate bill?
    Ms. BARNHART. Not specifically to that degree, Mr. Levin, 
but I'd be happy to do that and provide a response for the 
record.

    [The response of Ms. Barnhart follows:]

    The effect on Social Security benefits of a temporary worker 
program would depend on the details of the ultimate provision. The SSPA 
provided that, in determining whether a noncitizen qualifies for 
benefits, the noncitizen must be authorized to work when his or her SSN 
was issued or anytime thereafter. The requirement applies to SSNs 
issued after December 2003.
    Thus, if Congress establishes a temporary worker program and 
provides for the issuance of work-authorized SSNs to temporary workers, 
any earnings that they have in covered employment would be used in 
determining their eligibility for, and the amount of, their Social 
Security benefits. Of course, to qualify for Social Security benefits, 
the worker would need enough in credited earnings to be insured.

                               

    Mr. LEVIN. Good. Dr. Horn, you're the psychologist, so I 
won't ask you a legal question.
    Just so we're clear again, the child-only cases, so what 
percentage of the overall beneficiaries relates to child-only 
cases? Just give us a--because you talked about the increase, 
but in terms of the total workload, what proportion is involved 
with child-only cases?
    Mr. HORN. The total category of child-only cases, as a 
percentage of the total TANF caseload in 2004, is 44 percent. 
That is not the same thing as the percentage of child-only 
cases where the adult is an illegal or a qualified immigrant 
under the five-year bar. That's a much smaller percent.
    Mr. LEVIN. So, it's clear, what's the number of cases, now, 
of people on TANF?
    Mr. HORN. The number of families on TANF, in 2004, was 1.98 
million. Of that, 864,000 are child-only cases. If you subtract 
out families with non-parent care givers and those who are in 
sanction status, that number drops from 864,000 to 426,000, 
and, within the 426,000, 152,000 have either a parent who is a 
qualified alien who is ineligible--usually that means they're 
under the five-year bar for assistance--or they could be an 
illegal alien.
    Mr. LEVIN. So, it's out of a total of how many it's how 
many?
    Mr. HORN. So, out of 1.98 million, the number of cases in 
which the child is receiving a benefit while residing with a 
parent who is either of unknown citizenship or alien status is 
152,000. So, out of 1.98 million, that category is 152,000.
    Mr. LEVIN. Thank you.
    Mr. MCCRERY. Just to clarify, Commissioner Barnhart, on Mr. 
Levin's question about non-citizens receiving Social Security 
benefits. They have to be here legally in order to claim Social 
Security benefits and to collect Social Security benefits, 
isn't that correct?
    Ms. BARNHART. Absolutely, sir, I interpreted Mr. Levin's 
question as speaking specifically to people who would be 
authorized as temporary workers under the Senate bill.
    Mr. MCCRERY. Yes, I think he was. I just wanted to make it 
clear that people who are not here legally, even though they 
may have paid Social Security taxes, cannot collect Social 
Security benefits unless they subsequently become legal workers 
or citizens here.
    Ms. BARNHART. That is absolutely true as passed in the 
Social Security Protection Act a few years ago.
    Mr. MCCRERY. Thank you. Mr. Lewis.
    Mr. LEWIS OF KENTUCKY. Thank you, Mr. Chairman. Ms. 
Barnhart, as we have been discussing, most illegal aliens work 
but many granted amnesty under the Senate bill may be disabled 
or otherwise unable to support themselves in this country, and 
many may seek benefits under programs under our jurisdiction, 
like the SSI and Social Security disability, welfare checks. 
How would the amnesty program affect the eligibility of 
formerly illegal aliens for SSI and Social Security programs?
    Ms. BARNHART. Thank you, Mr. Lewis. Obviously, it would 
depend ultimately on the specifics. Just to generally try to 
answer your question, even if you had an increase in the number 
of lawfully present aliens, it wouldn't necessarily have a big 
effect on the SSI Program or Social Security because people 
still have to qualify under the existing rules of the program. 
For example, in Social Security, in order to receive retirement 
benefits you have to have 40 quarters of work or the equivalent 
of 10 years. So, simply looking at automatically legitimizing 
the person's presence in the United States does not guarantee 
that. Further, there is the additional provision that the 
Chairman just referenced from the Social Security Protection 
Act, which requires that person to have a legal SSN or a SSN 
issued prior to 2004in order to be able to collect benefits.
    Mr. LEWIS OF KENTUCKY. Okay, thank you. I yield back my 
time. Thanks.
    Mr. MCCRERY. Mr. Foley.
    Mr. FOLEY. Thank you very much. A couple of questions, 
either to Internal Revenue or Social Security, I have inquired 
to some employees, who appear to be obviously working in our 
area, however I don't believe they are using an accurate 
number. When I asked the question because I was curious how 
they cashed paychecks, how they were paid by their employers, 
and one of them said, ``Well, we all use one number, five or 
seven of us use one number in order to facilitate to our 
payments. So, we use a SSN belonging to another individual.'' 
How is it the Service cannot determine if there are many 
entries into a person's payroll record, five different jobs, it 
would seem physically or humanly impossible to have five 
simultaneous jobs but that is apparently how they are working 
the system in order to receive a paycheck.
    Ms. BARNHART. Well, I would defer to Mr. Everson to give 
details about how W-2 information is reported but from my 
knowledge W-2's do not express the time period in which the 
earnings were accrued other than the year. So, it is possible. 
We do have individuals who have multiple W-2's for perfectly 
legitimate reasons. They may work for a contractor. They may 
work all over the place. There are a number of circumstances 
under which it is perfectly plausible that the individual does 
have multiple W-2's. Individuals change jobs more and more. The 
current generation changes jobs way more than say the Boomers 
did or our parents before us.
    Mr. FOLEY. Let me understand, so you are saying that the W-
2 would reflect the aggregate payments over the course of the 
year, not individual payments?
    Ms. BARNHART. Well, what it doesn't say is that Jo Anne 
Barnhart earned these from January to March of 2006. What it 
says is these were the earnings that were paid to her by this 
employer for tax year 2006. So, we cannot discern from the 
information reported to us that they were concurrent earnings 
to get to what I believe your initial question was.
    Mr. FOLEY. Well, and I am trying to figure out on a weekly 
basis as they report their Social Security payments, the 
payments on a quarterly basis, the employer, whoever that 
happens to be. There is no cross system that shows inputs from 
employers collected from employees that then verify where those 
two?
    Mr. EVERSON. If maybe I could get in here, sir. There are 
approximately 230-plus million W-2s that are issued each year 
for about 150 million employees. That indicates that the 
typical employee gets more than one W-2. That is the first 
point I would make. As I have indicated, there are about eight 
million mismatches a year, largely associated with this 
population of folks working illegally. Within that, it is very 
likely that there is a higher multiple people working in more 
than one job. Part of the problem you have here is that all 
that information flows into us after the work takes place 
because we don't get the W-2s from SSA until several months 
after the end of the calendar year. In many instances this 
population is--if you look at these employers, their total 
employee turnover is more than 100 percent of employees during 
the course of the year. So, trying to get the currency on this, 
which is what the Administration is really suggesting, with the 
up-front verification is much more effective than trying to 
track it down afterward because of the nature of this 
population.
    Mr. FOLEY. I guess ultimately if five people are using the 
same number, then one person is going to have a more plentiful 
Social Security check at the end of their working?
    Mr. EVERSON. Let me make a comment as to the tax then defer 
to my colleague. This is a problem where there is identity 
theft. We estimate that approximately 30,000 returns a year 
come in from identity theft. That is where my name and SSN is 
being used by somebody else. So, to us it appears that there 
are multiple wages coming in on my account. If there is just a 
mismatch, our systems screen that out so that if someone is 
using my SSN but not my name, I am not going to be dinged by 
the Service.
    Ms. MYERS. If I could just add there, we have found on some 
case by case occasions that W-2's are useful. In the IFCO case, 
which is the case I cited in my opening example, it actually 
came to our attention because the illegal aliens were ripping 
up their W-2's. Another employee said, ``Why are you doing 
that?'' They said, ``We don't need those. We are not paying 
taxes.'' So, five to seven individuals posting against one 
number may not be the big thing. In cases where we have 
hundreds, two hundred, those are the kinds of things that often 
come to our attention through other means and are very useful 
in building a case.
    Ms. BARNHART. I would just add from Social Security's 
perspective, if there are seven people who somehow happen to 
come up with a name/number combination that is a legitimate 
number issued to a person who is authorized to work, when that 
person receives their statement from us, which we provide to 
all workers over age 25 every year, approximately 2 months 
before their birthday, it shows the earnings for each of the 
preceding years. We urge people obviously to read the 
statement, pay attention to it, and we find that people 
actually do from the surveys we do. So, I obviously know how 
much I earned in a particular year, and I could look and if I 
all of a sudden saw enormous amounts of earnings because these 
seven people had my name and number, then I would know that 
individuals were using my number, and I would be able to 
contact SSA and we would sort through that.
    Mr. EVERSON. It might help you get a loan though.
    Mr. FOLEY. That was the irony of it all is who is going to 
end up reporting the excess income if they don't have a tax 
penalty, they will simply have a more aggregate of a Social 
Security check at the end of their working years. So, it just 
seems a system fraught with problems.
    Ms. BARNHART. What we do at the end of--say this situation 
would continue throughout a person's work year, odds are when 
they come to apply for benefits, going back to the Chairman's 
point, they would not be eligible because they are probably 
still residing illegally in this country, which would make them 
de facto ineligible for benefits. If, in fact, they did have a 
work authorized SSN, we would go through and actually do what 
we call unscramble the earnings, and we do this with some 
degree of regularity. Sometimes it is for purely legitimate 
reasons, a woman gets married and changes her name but forgets 
to tell Social Security and her employer reports earnings under 
her married name. There are all kinds of reasons why earnings 
end up being scrambled. We would actually make the individual 
provide information from the employer, wage stubs proving that 
they had earned those earnings. It is quite a process that some 
people must go through in order to show that past earnings that 
were recorded on a number used by many were actually theirs for 
purposes of determining the benefit.
    Mr. MCCRERY. Dr. McDermott.
    Mr. MCDERMOTT. Thank you, Mr. Chairman. Article 14 of the 
Constitution says that, ``All persons born in the United States 
are citizens and no law shall make or enforce any law which 
will abridge the privileges of immunities.'' Now, you have 
heard questions asked here about how do the children of 
illegals get TANF benefits as though there is something wrong 
with that, as though there was something wrong. Well, I would 
like to expand this a little bit. Let me give you a specific 
example. Tommy Clark came over from Ireland for a visit to his 
brother in Boston, stayed on, got a job, laid bricks. The first 
year he paid his income tax on his ITIN. The next year he paid 
his ITIN, paid his ITIN for 10 years. Then, well, he married 
Mary Quinn along the way and they had two little boys, Sean and 
Locklin. Then Tommy was killed on the job. Would his children 
be eligible for survivor benefits under Social Security?
    Ms. BARNHART. I would have to have a little more 
information about whether or not----
    Mr. MCDERMOTT. Whatever you want to know I can make it up.
    Ms. BARNHART. Was he legally working in this country at the 
time that he was making payments?
    Mr. MCDERMOTT. No, he was an illegal.
    Ms. BARNHART. He never had a work authorized SSN?
    Mr. MCDERMOTT. He never had a SSN. He used an ITIN the 
whole time.
    Ms. BARNHART. He used an ITIN the whole time. For purposes 
of the children, were they born in this country?
    Mr. MCDERMOTT. The children were both born here, one in 
Boston, Mass General.
    Ms. BARNHART. I think the difficulty would be in the fact 
that the individual based on the Social Security Protection Act 
provisions, would not have had a legally authorized to work 
SSN. I would have to check on that, Mr. McDermott, just to be 
sure before giving you a definitive answer.
    Mr. MCDERMOTT. Are you saying, Mr. Everson, that you keep a 
record? He pays taxes on his wages, he pays the payroll taxes, 
doesn't he? He pays Social Security and pays Medicare, right?
    Mr. EVERSON. What you are getting to is the divergence 
under the law between treatment for Social Security benefits 
and your income tax obligations, sir.
    Mr. MCDERMOTT. You just left me hanging out in the middle 
of a divergence, what does that mean?
    Mr. EVERSON. It means while the information is collected 
and shared between the two agencies, that just because you paid 
your income taxes, that doesn't entitle you to Social Security 
benefits.
    Mr. MCDERMOTT. If you put money into an account, you have 
done your 40 quarters of work. I worked him for 10 years.
    Mr. EVERSON. Sure.
    Mr. MCDERMOTT. So, he has his 40 quarters done. It is all 
recorded by you and she has got the data, right? You sent it 
over to her.
    Ms. BARNHART. I would have the data based on the W-2s that 
are reported, the employer wage reports that were posted 
against that individual's number. You indicated that in this 
case that the individual you are presenting here wouldn't have 
a work authorized SSN.
    Mr. EVERSON. There would be a mismatch here, sir. This is 
what we are getting to--because Mr. Clark wouldn't have used 
his ITIN at his employer. He would have used a false SSN in 
order to have been hired.
    Ms. BARNHART. So, his wages would go into our earnings 
suspense file, Mr. McDermott.
    Mr. MCDERMOTT. Why didn't you give that information to the 
Homeland Security people and get him thrown out of the country? 
How could an Irish immigrant last 10 years in this country and 
you not give his name to her and boot him? If he is using a 
false SSN, isn't somebody going to pick that up?
    Mr. EVERSON. Well, again, the basic presumption is the 
protection, the absolute privacy of the tax return information. 
Right now it is not shared with DHS in order for them to go 
find this person and to use your word ``boot'' him. That is 
what is the nub of the issue. That needs to be considered 
because there will be a tax administration impact on changing 
section 6103, albeit with the goal of having better protection 
and better workforce enforcement.
    Ms. MYERS. If I could just add, sir, something I believe is 
interesting in this situation as well. This whole notion of 
reporting when someone is not work authorized and so forth, 
based on our reviews that we do, at any given point in time 
about 36 percent of the people who are not work authorized at 
the time that the no match is initially discovered, meaning 
when the wage report is filed, either in February or March of 
each year, about 36 percent eventually become work authorized 
and are work authorized within that year. So, the situation 
changes quite a bit, and I think that also elaborates on some 
of the complexities that you are speaking about, Mark.
    Mr. MCDERMOTT. Doesn't the employer have to fill out an I-9 
as well and you are supposed to go collect them. Do you go and 
collect all the I-9's from all the employers?
    Ms. MYERS. No, the employer keeps those on file so we do 
not go--we audit them and do investigations.
    Mr. MCDERMOTT. How often do you audit? This guy is working 
for 10 years for a construction company and you haven't audited 
his company in 10 years?
    Ms. MYERS. Well, certainly we have a number of challenges, 
we only have about 5,700 agents in the entire country who not 
only do work site but also do criminal aliens, who do custom 
violations, who do kind of a number of things. We are really 
increasing our work site efforts, and we are targeting the most 
egregious employers.
    Mr. MCDERMOTT. How do you increase them? You don't have any 
more people.
    Ms. MYERS. We have increased them by trying to do it 
smarter because we used to just focus on the I-9 audits, and we 
found at the end of the day that sometimes people would have 
their paperwork clean but it wasn't good paperwork. So, we 
focus on using confidential informants, using other sources, 
working with other leads to develop cases.
    Mr. MCDERMOTT. What does it mean to have your paperwork 
clean but it isn't clean? That sounds political to me a little.
    Ms. MYERS. Certainly, Congressman, if you owned a 
construction company and you had six employees and you had all 
their documentation listed on the I-9's, it was actually us and 
in fact you knew that. That would be the kind of problem that 
we would see where sometimes the I-9 paperwork is fine but in 
fact we have reason to know that the employer actually knows 
that they are not hiring me, they are hiring the individual 
that you named.
    Mr. MCDERMOTT. Does the I-9 have my SSN or something on it 
so I know that--I am the employer, how do I know that this 
person is illegal?
    Ms. MYERS. Well, certainly there are challenges for the 
employers and so that is why we are providing them with best 
practices. So, for if I came into you and I said I was Wade 
Horn. I said I was Wade Horn, and I claimed to be a Caucasian 
man with a moustache but I looked just like me, and I gave you 
my documents, you filled it out. If you didn't look askew at 
that, that is a problem. Now if I came in and said I was Julia 
Smith, you might not have any reason to know based on the 
documents, based on a fake document I presented to you and so 
that is why we use things in addition to just looking at I-9's, 
which can be very helpful to bring cases. What we do is we work 
with employees who act as whistle blowers. We got a good case 
the other day from a congressman in Pennsylvania who had heard 
that down in one of the grocery stores in North Carolina there 
were a lot of illegal aliens employed there. We actually 
conducted an investigation and made some arrests there. So, we 
use kind of a wide variety of sources and then we are bringing 
criminal cases. We are just not focusing on small fines. It 
used to be we would fine people $150 and today that is not 
enough to keep employers from going out and hiring other 
illegal aliens. What is enough is if you bring a criminal 
charge against them where they could be subject to spending 
years in prison or forfeiting ill-gotten assets.
    Mr. MCDERMOTT. One second to say what is puzzling to me is 
I look at your work site enforcement data from 1999 to 2003 and 
you went from 192 cases--182 cases down to four this year. It 
sounds like you are doing less to me. I yield back the balance 
of my time.
    Mr. MCCRERY. I will give Ms. Myers a chance to respond to 
that.
    Ms. MYERS. I appreciate that. That is actually the notice 
of intent to fine, the civil fine structure, which we found to 
be not effective. We actually would like to have a more robust 
civil fine structure that is in the Senate bill, it is 
something we think would be helpful. This year we are actually 
up over 445 criminal arrests, and we have apprehended over 
2,700 illegal aliens. So, we think we have made great progress 
in the area since ICE was formed.
    Mr. MCCRERY. Mr. Brady.
    Mr. BRADY. Well, first I hope Mr. McDermott will accept our 
condolences to the family, the widow and the son of the 
imaginary couple that you have.
    Mr. MCDERMOTT. They got good benefits.
    Mr. BRADY. There are a lot of emotional issues tied to the 
discussion about the temporary worker program. If I could ask 
Commissioner Barnhart first, trying to get a little handle on 
the Social Security impact. If I understand it right, under 
current law those who work here illegally, once they are 
legalized can claim benefits for work done illegally as long as 
they can prove through documents that they worked, is that 
correct?
    Ms. BARNHART. They actually have to have an authorization 
to work, a Social Security card that indicates authorization to 
work. We provide Social Security cards with no legend, just 
your name. We provide a legend that says, ``Valid for Work with 
DHS Authorization,'' or ``Not Valid for Employment.'' The not 
valid for employment category, we only provide less than 15,000 
of those a year and they are largely so people can take 
advantage of programs like those that Dr. Horn operates because 
they are State or Federal programs that require a SSN and card 
in order to be eligible for the programs.
    Mr. BRADY. So, under current law they cannot go back and 
claim benefits if they are here illegally working, have filed 
under multiple cards, for example, and then later are 
legalized? I am just trying to understand it.
    Ms. BARNHART. Well, if they are later legalized, and they 
have a SSN that was issued with authorization to work, then, 
yes, they can. They absolutely can because the fact of the 
matter is that we credit the wages to their SSN and use those 
wages in the calculation of their Social Security benefit since 
the law does not distinguish in that sense. What SSPA says is 
you have a work authorized SSN issued on or after January 1, 
2004 in order to receive benefits.
    Mr. BRADY. Under the Senate bill, and they have sort of a 
three-tiered path to citizenship, but for those who end up 
working here legally, do they then have a claim for past Social 
Security benefits earned under--if they have a Social Security 
card, whether it is a legal document or a multiple fraudulent 
document? I am just trying to understand if they have the 
claim----
    Ms. BARNHART. Again, that would fall into that unscrambling 
of earnings. If in fact they had earnings while they were 
working illegally, odds are they were posted to a false SSN or 
an incorrect SSN. Those would fall into the mismatch category 
that Mr. Everson and I have been describing, and if that were 
the case, it would require unscrambling those earnings. We 
would not simply accept their personal attestation that, gee, I 
was working there and these are my earnings. I dare say that 
happens in very few cases because most individuals don't keep 
wage stubs and W-2's, particularly if they are working 
illegally. As you pointed out, oftentimes people try to destroy 
W-2's now who are here illegally because it is not to their 
advantage to have them.
    Mr. BRADY. If the Senate bill were eventually to become 
law, there are different estimates in how many would end up 
being legalized. I don't know if it is five million or eight 
million or 12 million. Does SSA have any range of estimated 
costs to Social Security of what those past benefits may add up 
to? I know there are a whole bunch--it depends on what the 
final product would be obviously, but have you looked at or do 
you have experience and in past cases, what do those past 
claims tend to be?
    Ms. BARNHART. I don't believe we have but I would be happy 
to check for you, Mr. Brady. What we have looked at in terms of 
that legislation is the workload that would be required 
assuming the majority of those individuals do not have 
legitimate SSNs. So, for example, if they were legalized and 
they all of a sudden needed to get a SSN, would we likely be 
having to issue 6,000,000 new numbers, 9,000,000 new numbers, 
12,000,000 numbers. We have looked at that in the context of 
the fact that we now issue approximately 17,000,000 a year--
usually 12,000,000 replacement numbers and 5,000,000 original 
numbers. So, obviously it would add fairly dramatically on a 
short-term basis to our, what we call, enumeration workload if 
in fact all those individuals needed Social Security cards.

    [Ms. Barnhart's response follows:]

    Attached is a memorandum from the Social Security Administration's 
Chief Actuary that provides information on the cost effects of the 
Senate-passed immigration reform bill (S. 2611). The estimates reflect 
the total cost of both the additional benefits that would be paid and 
the additional revenue to the trust funds (due to an increase in net 
immigration). As indicated in the memorandum, the net effect would be 
to reduce the long range deficit from the estimated level of 2.02 
percent of taxable payroll under current law to roughly 1.88 percent of 
payroll.
    I would like to point out that this memorandum also includes 
information on the cost effect of a possible amendment to the Senate 
bill (amendment Number 3985 by Senator Ensign) that would stipulate 
that a worker assigned a valid SSN after enactment would not be 
credited with earnings for Social Security benefit purposes for years 
prior to being assigned the SSN. The Chief Actuary indicates that the 
effect of this amendment is estimated to be a relatively small 
reduction in total benefits, possibly negligible.

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    Mr. BRADY. Okay. May I ask how big is the suspension file 
for the no match dollar wise?
    Ms. BARNHART. The suspense file is 255,000,000 separate 
items, in other words wage reported items, and it totals $519.6 
billion. What is important is to make the point that is wages 
and that taxes have been paid. So, in other words for those 
255,000,000 instances of individuals where the wages did not 
match--their name and SSN did not match, those wages when you 
add them up total $519.6 billion.
    Mr. BRADY. Is that cumulative?
    Ms. BARNHART. Absolutely, from 1937--I believe that is 
through tax year 2003.
    Mr. BRADY. Any idea how much each year that is running?
    Ms. BARNHART. I didn't bring that information with me, but 
I could certainly--in terms of the dollar value, I could 
certainly get you that. I think it is around 1.3 percent of all 
earnings each yearend up in the earnings suspend file.

    [The information follows:]

    Wage item entries added to the Earnings Suspense File for TY 2003
totaled $57.8 billion.

                               

    Mr. BRADY. All right, thanks, Commissioner. Sorry, I ran 
over time, Mr. Chairman.
    Mr. MCCRERY. Mr. Lewis.
    Mr. LEWIS OF GEORGIA. Thank you very much, Mr. Chairman. 
Mr. Chairman, I apologize that I had to be out of the room for 
a moment, a little more than a moment. I heard each member of 
the panel's testimony. Commissioner Everson, it is good to see 
you here, and I know that my colleague, I believe Mr. Johnson 
touched on this issue while I was out of the room, but I want 
to be sure I follow-up on some discussion that we had when you 
testified earlier this year.
    Mr. EVERSON. Yes.
    Mr. LEWIS OF GEORGIA. I think back in February.
    Mr. EVERSON. Yes, sir.
    Mr. LEWIS OF GEORGIA. You testified before the Subcommittee 
on Oversight. I think that was a joint Committee, Social 
Security and Oversight. During that hearing, the DHS was 
seeking broader access to taxpayers' return information, which 
would require an amendment to Tax Code section 6103. You 
testified then, and I think you made it plain and somewhat 
clear, that giving this information, turning this information 
over to the DHS in your words would have a chilling effect on 
participation in the tax system and that everyone should have 
their eyes wide open before agreeing to such a proposal. Do you 
care today to discuss your concern about giving DHS access to 
tax return information?
    Mr. EVERSON. Certainly, sir, and thank you for your 
welcoming words. I believe you have correctly quoted me but you 
have left out a part.
    Mr. LEWIS OF GEORGIA. Oh, what did I leave out?
    Mr. EVERSON. I advocated this sharing, but I said that 
there are times when concerns over tax administration can give 
way to a national imperative. My point then, and my point now 
is that we, and particularly this Committee, which has 
jurisdiction over the tax laws, needs to have its eyes wide 
open that we are changing this very important element of 
privacy as to return information.
    Let me just read you what the President said just 2 days 
ago. He said, ``Congress is now considering legislation on 
immigration reform. That legislation must be comprehensive. All 
elements of the problem must be addressed together or none of 
them will be solved at all.'' I believe what I said in 
February, and what I believe today, is that we need to solve 
all the elements of this problem. My concern would be if we 
have a cherry picking of solutions, some legalization efforts 
and not enough enforcement, or we don't ultimately get to the 
right balance here, then you will be left with immigrant groups 
and others counseling aliens not to participate in the tax 
system. That remains a concern of mine. That is why I think it 
is so important to do what the President says and get all the 
elements that need to be included in this legislation handled. 
I support what the President is doing very vigorously, but I do 
think it needs to be done in a balanced way and understanding 
that there will, sir, be this ramification on tax 
administration.
    Mr. LEWIS OF GEORGIA. I appreciate that very much, Mr. 
Commissioner. With your history and your background and your 
previous role in the Government, do you believe that the DHS 
has done all it can to enforce immigration laws and use the 
laws already under its authority?
    Mr. EVERSON. Well, I am reluctant to criticize sister 
agencies, especially when someone is sitting right next to me. 
So, if you will bear with me, I won't go down that road. What I 
will say is that the flaw in the 86 Act is one that we have 
been dancing around all afternoon. That is the fact that 
employers were able to just review the documents and the 
documents of the employee could be false. That is what has 
gutted the effect of the IRCA, the 86 Act, the fact that you as 
an employer could look at me and say, gee, those documents look 
good and then you were off the hook. That is what gave rise to 
the decline in this interior enforcement I would suggest, and 
that is what the Administration is trying to address here, sir.
    Mr. LEWIS OF GEORGIA. Thank you very much.
    Ms. MYERS. If I could just add?
    Mr. LEWIS OF GEORGIA. Yes.
    Ms. MYERS. I think as a Department we are and have been 
striving to do better. The Secretary's Secure Border Initiative 
developed the kind of a comprehensive strategy for looking anew 
at interior enforcement and using the tools that we have. I 
believe that we had not adequately used all the tools that were 
existing and that is why we are trying to enforce the law in 
new and better ways but there is much more work to be done.
    Mr. LEWIS OF GEORGIA. Thank you very much. Thank you, Mr. 
Chairman. I yield back.
    Mr. MCCRERY. Thank you, Mr. Lewis. Mr. Beauprez.
    Mr. BEAUPREZ. Thank you, Mr. Chairman. Mr. Horn, are you 
aware of any cases where someone who thought probably did 
qualify for benefits, welfare benefits of one type or another, 
when they applied, they found out, were told, ``Wait a minute, 
you have got a whole bunch more income than you are reporting 
here'' or that they were on benefits and later were bumped off 
because of at least an assumed reporting of too much income?
    Mr. HORN. Are you saying am I aware, sir----
    Mr. BEAUPREZ. Somebody applies for a benefit. They meet the 
poverty guidelines. Somebody does the check and says, ``Wait a 
minute, we checked your SSN and your reporting $200,000 of 
income,'' what is up?
    Mr. HORN. Sure, I know that happens. In fact, we encourage 
the TANF agencies to match against the National Directory of 
New Hires.
    Mr. BEAUPREZ. Good, I am glad you do that check. I am also 
familiar with, and I am going to share with all of you, some 
background information that I got recently from my State 
Department of Labor in Colorado. In the first quarter of 2006 
alone, just inside one quarter, 304 different SSNs were 
reported by 2,819 different employers. This was a check for 
only numbers that were reported at least six or more times. It 
is certainly possible that somebody had six employers within a 
90 day period, I grant that, but that seems like quite a few, 
especially for that many. They further found out that one 
number was reported by 57 different employers, one by 36, one 
by 24, 23, 22, 19, you get the picture. Some employers actually 
reported SSNs, interestingly enough, with all nine digits the 
same digit, 111-11-1111, same for two and three and four and 
nine, and I am sure you are familiar with this. Some of those 
employers were extremely familiar employers to me and I am sure 
to you. The point being something must be wrong. Some of that 
is probably legitimate, people change jobs several times, but 
it staggers the imagination. I don't know how much of this 
really goes to our illegal question or not because we don't 
know. There is a problem here. I think it was Ms. Barnhart, if 
I remember right, who pointed out what I already knew, misuse 
of a SSN is a felony. Are we pursuing this kind of a problem or 
are we not?
    Ms. BARNHART. I can say that generally these kinds of 
issues do not rise to the level of demanding aggressive pursuit 
by U.S. attorneys.
    Mr. BEAUPREZ. Okay, let me tell you what I think is part of 
the problem, and this is the complexity I think of illegal 
immigration and identity theft and law enforcement that we are 
dealing with, there is at least some degree of identity theft 
going on here. I saw one case of a lady who had 529, I believe 
I have got the number right, I am working from memory, over a 
half a million dollars of income reported to her SSN in a year. 
She was a widow lady and was legitimately trying to get 
benefits. Now she has got to go hire an attorney and you know 
the rest of the story and wait a protracted period of time and 
literally live hand to mouth and be begging from relatives 
instead of getting her justifiable benefits. That is part of 
the problem we have got here. I guess what I would ask, I have 
got a photo ID that is encrypted to get into my YMCA. Would it 
make sense, Ms. Barnhart, if our Social Security 
identification, which is the backbone of our ID in this whole 
country for citizenship and everything else, would it make 
sense that it got into something close to the 21st century 
technologically as opposed to more line the 19th century?
    Ms. BARNHART. There has been a lot of interest expressed in 
what you are talking about, a tamper proof or allegedly tamper 
proof hard card, whether it has biometrics in it or a 
photograph. We have looked at that and explored what that would 
mean for us in terms of workload particularly. I know that was 
one of the subjects for this hearing and one of the questions 
posed us specifically by the Chairman.
    Mr. BEAUPREZ. Yes, that is why I am asking it.
    Ms. BARNHART. Yes, the cost of the card itself is not the 
issue. The cost of the card is very inexpensive. The questions 
that have been asked to me by Congressman and Senators ``Jo 
Anne, explain to me why can't you just issue a card like 
American Express does? It costs them nine cents a card.'' My 
response to that is the reason is because we spend about 30 
minutes--31 minutes to be precise--per person checking the 
evidentiary documents that are provided to us. When someone 
loses a Social Security card and comes in for a replacement, we 
don't just accept the fact that the person ways he is Mark 
Everson, although in your case we might, Mark, but we actually 
say show us a U.S. passport, show us a U.S. driver's license.
    Mr. BEAUPREZ. Sure.
    Ms. BARNHART. You have to have two forms of documentation. 
So, it is that time--the times spent verifying the evidence 
documents that drives the cost. Also, the estimate, whether you 
use a photograph or biometrics, if we were to look at re-
issuing cards, for just the working people, that would be 
300,000,000 minus 60,000,000 of the under 14, so a total of 
240,000,000 people. Trying to do that would cost about $9.5 
billion and require 67,000 work years. To put that in 
perspective, I currently have a budget of $9.4 billion and less 
than 65,000 employees at the agency. So, it is really a matter 
of checking the evidence that stands behind those cards.
    Mr. BEAUPREZ. I accept that. I see I am out of time but 
only a follow-up comment. I would suggest for at least this 
Committee and this Congress that the system we have is broken 
and unsustainable. At some point when you have got this kind of 
problem out there, when the SSN clearly doesn't mean anything 
anymore, we have got a problem and somehow have to address it. 
I think technology somehow has to be your friend and ours and 
that of the legitimate legal citizen out there and the person 
who is perhaps a victim of identity theft, which I know is an 
enormously growing problem in this country. With that, I will 
just yield back, Mr. Chairman.
    Mr. MCCRERY. Thank you, Mr. Beauprez. Mr. Neal, you just 
returned, but it is your turn to inquire if you like, or I can 
go to Mr. Becerra.
    Mr. NEAL. Go ahead.
    Mr. MCCRERY. Be happy to. Mr. Becerra.
    Mr. BECERRA. Mr. Chairman, thank you very much. To all the 
witnesses, thank you very much for your patience and for your 
testimony. Let me make sure in all this conversation that I 
have this correct in terms of where we are so far on these 
immigration matters. First, if I hear correctly, any worker--
any immigrant who does not have the authority to be in this 
country is barred under law, Federal law, from receiving any 
kind of Federal benefit. The only exception that I heard was 
emergency medical care. Any disagreement with that. Okay, 
secondly, legal immigrants, individuals who have the right to 
be in this country and are on their way to becoming U.S. 
citizens and have gone through all the process to have their 
documents certified, those with what we call the green card, 
they too are restricted from a lot of these Federal benefit 
programs. In many cases, even if they are entitled or eligible 
for some, they are means tested so they may not qualify based 
on their income. Any disagreement with that? Okay. Social 
Security and Medicare are programs that are earnings based. If 
you work and pay into these programs, then you have earned the 
right to receive those benefits. If you don't work, you don't 
get to receive Social Security or Medicare payments, is that 
correct?
    Ms. BARNHART. Yes, it is.
    Mr. BECERRA. So, for any immigrant here in this country to 
qualify, first that immigrant would have to be here legally, 
correct?
    Ms. BARNHART. Correct.
    Mr. BECERRA. Secondly, the person would have to have worked 
and paid into the system for Social Security and Medicare to 
have any access to those programs, correct?
    Ms. BARNHART. For Social Security purposes, absolutely.
    Mr. BECERRA. My understanding, Commissioner Barnhart, is 
that the actuaries for the SSA have estimated that the Senate 
bill on immigration reform, the comprehensive immigration 
reform, would actually if it passed extend the solvency of the 
Social Security Trust Fund, as you pointed out earlier, and 
that it would reduce, because it would increase revenues, it 
would reduce the long range deficit of the Social Security 
system by about 6 percent?
    Ms. BARNHART. That is correct, it would reduce it to 1.88 
percent of taxable payroll.
    Mr. BECERRA. So, I am assuming that what the actuaries are 
saying in these estimates is that if the Senate comprehensive 
immigration reform bill would pass, that you would incorporate 
more of these immigrants, who are probably right now in our 
underground economy or our shadow economy and maybe some paying 
taxes, maybe others not, but it would incorporate them more so 
that we would all get them within the legal system for paying 
their contributions into Social Security and Medicare and 
therefore the trust fund for Social Security would have an 
increase in revenues?
    Ms. BARNHART. I have read the actuaries' memo and that is 
what it says to me, Mr. Becerra.
    Mr. BECERRA. Okay, now we have all these folks that are the 
subject of this discussion about immigration reform because 
many are in this country without documents, and I think 
everyone in this panel, on this Committee would agree that no 
one has the right to be in this country without first having 
received the permission of this sovereign Nation to be here. 
The fact remains that we have some, estimates are some 
10,000,000 to 12,000,000 people who are in this country working 
without those documents. The nut here that we haven't been able 
to crack is what do you do with so many folks? I know that some 
folks are saying we just deport them all and others are saying 
let's be more rational and try to figure out how we figure out 
who has earned a chance to stay here, who will pay some fines, 
and so forth so they have an opportunity to stay here long term 
and continue to contribute to this country.
    The Social Security system, as you just mentioned, I think 
the questions asked by the gentleman from Texas, my friend from 
Texas, Mr. Brady, has an earnings suspense file. That is a file 
or an account of money where you cannot connect the 
contribution that you found from the W-2 form that was 
submitted to you with a name for someone who has a SSN. So, 
that contribution that came in from that work, documented 
through that W-2 form, is now money in the Social Security 
system but you cannot trace to whom it really belongs because 
it did not match the names you have on file?
    Ms. BARNHART. That is correct.
    Mr. BECERRA. That totals $520 billion or so to date?
    Ms. BARNHART. Yes.
    Mr. BECERRA. We do not know the source of all these 
discrepancies. We know in some cases it could be just a simple 
clerical error or a mistyped name but in many cases it is 
probably due to the fact that there are many workers in this 
country who do not have documented status, are paying into the 
Social Security system, but you cannot trace it to them because 
they do not have a legal or a legitimate SSN?
    Ms. BARNHART. That is right and if they do not get that and 
come back and unscramble the earnings, they will never be able 
to collect.
    Mr. BECERRA. So, I guess my point here is not really a 
question. As we try to move forward in this debate, and I found 
this hearing to be somewhat constructive and helpful in this 
discussion, is that what we find is that for the most part we 
are talking about a population of folks who do not have the 
right to be in this country but continue to work, in many cases 
I think, as Commissioner Everson also mentioned, they are also 
paying taxes even though most of them will not get to file for 
a tax refund for any taxes they may have paid, they are paying 
into Social Security in many cases, yet they cannot collect it 
because they cannot legally apply for the system. So, we are 
trying to figure out what to do with folks who for the most 
part are working very hard, don't deserve to be here if they do 
not have the documents, but we have to figure out a way to 
resolve this for some 10,000,000 to 12,000,000 people, the size 
of the State of Ohio, to get this immigration nut cracked. I 
hope that with your testimony you will help us come to a 
rational way, a comprehensive way of dealing with immigration 
reform [continuing]. So, I thank you for having taken so much 
time here to be with us. I yield back.
    Mr. MCCRERY. Just a quick correction to an exchange that 
Mr. Becerra had with Commissioner Barnhart. In fact, in the 
case of spousal benefits and survivor benefits, there are often 
people who do not have a work history who do receive Social 
Security benefits.
    Ms. BARNHART. I apologize. Yes, that is correct. I was 
looking at it specifically within the universe he was 
discussing. Absolutely, Mr. Chairman, you are right.
    Mr. BECERRA. Mr. Chairman, can I clarify? You are saying a 
spouse or a child who may not have worked but it is due to the 
fact that there was a person who did work and paid into the 
system?
    No one is receiving a benefit that he or she or a working 
relative did not pay into the system for?
    Mr. MCCRERY. That is correct.
    Mr. BECERRA. Thank you.
    Mr. MCCRERY. Mr. Hayworth?
    Mr. HAYWORTH. Thank you, Mr. Chairman. Thank you to the 
witnesses.
    It is almost like an exam question. Compare and contrast 
the observations of my friend from Colorado with the 
observations of my friend from California. It goes to the crux 
of the matter.
    What my friend from California failed to describe when he 
talked about hard working people using false SSNs, my friend 
from Colorado did address.
    It is committing a felony. Now, we go back to the crux of 
the matter. Are we a nation of laws or not? I guess that is the 
essence of the public policy debate.
    I marvel at my friend from Washington State, a psychiatrist 
by training, who had a generous amount of time applied to a 
complete hypothetical about an illegal Irish immigrant and the 
game of what if. It is called counter factual now in the study 
of history.
    In other words, it was fictitious. Yet, we had almost 15 
minutes of serious sober policy analysis of a tragic fable. It 
makes for great political theater, but it sheds very little 
light.
    Dr. Gustafson, thank you for coming in. You talked about 
EMTALA. You also talked about Section 1011. This is Section 
1011. It says here, I have highlighted, ``A provider should not 
ask a patient if he or she is an undocumented alien.''
    According to a 2004 GAO study, over 95 percent of hospitals 
use lack of a SSN as a method of identifying unauthorized 
aliens.
    You go on down Application 1011, it says the SSA cannot 
validate SSNs for Section 1011 purposes, but rather providers 
should determine if the SSN is valid or not.
    Dr. Gustafson, why can't hospitals ask outright a person's 
immigration status?
    Mr. GUSTAFSON. The 1011 program is intended to be a program 
providing support for hospitals serving illegal aliens and 
other folks for which they have an obligation as I described 
under EMTALA.
    The intent of Congress as we implemented it was to ensure 
that payments went to hospitals, to try to prevent inhibiting 
effects on potential applicants for medical care, for patients 
coming through emergency rooms, because they would be concerned 
about enforcement information being turned over to the DHS or 
other authorities, so we set up the system in such a way that 
although we can audit whether the individuals are in fact 
appropriately identified, but we concluded that it would be 
counter productive for the purposes of this statute to require 
information about whether the person was in fact illegally 
here.
    I guess, Mr. Chairman, I could claim the right that my 
friend from Washington State utilized, to offer a hypothetical. 
Since Arizona is ground zero for illegal immigration, since we 
have had confirmation from both the DHS of at least hundreds of 
people, persons of a national security interest, crossing our 
border illegally, submitted for your disapproval, the story of 
one Osama Hussein, where in reconciling testimony to an 
appropriations Subcommittee, the Director of the FBI, tells us 
that we now have people from Nation States exporting Islamic 
fascism, adopting Hispanic surnames, in this case, Osama 
Hussein has changed his name to Juan Valdez.
    He is involved in transporting across our southern border 
components of a nuclear device when he is thrown from a pick up 
truck, his neck is broken, and he is taken to the Copper Queen 
Emergency Room in Bisbee, Arizona.
    What we understand now is that it would be counter 
productive to inquire as to Mr. Hussein, now with the alias, 
Valdez, status, and really, it is not the role of the hospital 
to first ascertain who this person is, to offer that 
compassionate care, but basically not to go any further.
    That is basically the conundrum we find now. As I said in 
the oversight hearing to my friend from the IRS, and as we have 
heard in a variety of different answers today, and again, I'm 
not like my friend from Washington State, licensed to practice 
psychiatry, but I would tell you, ladies and gentlemen, we are 
engaged in public policy schizophrenia.
    Unless and until we understand the first and most basic 
responsibility of Government is protection of the citizenry, 
and offer true compassion to the American people and to those 
really in need of compassionate care, and deal with the 
security and legal questions as they stand, and unless and 
until we do, we will remain a Nation at risk, and we are 
whistling past the grave yard.
    I yield back.
    Mr. MCCRERY. Thank you, Mr. Hayworth. Mr. Neal?
    Mr. NEAL. Thank you very much, Mr. Chairman.
    I was at a meeting with the National Transportation Safety 
Board discussing the Big Dig. I apologize for coming back late.
    I was hoping the gentleman from Arizona might have stated, 
as the grandson of immigrants, which probably qualifies half of 
Massachusetts, we remind people that all those immigrants, they 
raised two sons who gladly and proudly fought for America 
during World War II, and raised families quite successfully, 
and nobody loved America more than those grandparents did.
    Nobody ever thought there was going to be a chance that 
would come close in any other Nation, the chance that was 
presented to them by coming to America.
    Mr. Everson, just a couple of questions, and a note of 
congratulations to you on many of the reforms you have 
embraced. I think not only is it healthy, but I think the 
public interpretation of them is being balanced and fair, and 
it is really an achievement that you ought to take some 
satisfaction from.
    Mr. EVERSON. Thank you, sir.
    Mr. NEAL. You spoke a couple of days ago before the House 
Government Reform Committee about the negative impact on tax 
administration if procedures are imposed on employers and 
employees that have the effect of driving economic activities 
underground.
    What you are referring to there is the underground economy, 
I assume.
    Mr. EVERSON. Yes, sir. What we were just discussing with 
your colleague, Mr. Lewis, is that I am a strong advocate for 
what the President is trying to achieve, which is a 
comprehensive program of immigration reform.
    If you get this right and you have an eligible legal 
workforce and you do not have the reason to go underground, 
then the system will be helped.
    The problem that we potentially have, if we do not have a 
balanced solution, is that if we open up 6103 and make another 
exception, and I would emphasize there are already 50 
exceptions, so it is not as if this has never been done before, 
but if we agree to share this information but then there is not 
the benefit of solving our illegal immigration problem, I do 
worry there will be a price on tax administration that we all 
should understand as we go through this process.
    Mr. NEAL. What would be a couple of examples that might 
encourage non-compliance?
    Mr. EVERSON. You have a lot of businesses that may have 
competition that is not legal. They are not organized formally 
as a corporation. They are hiring illegal employees, and they 
are not paying their taxes.
    The problem is if they know there is a check by DHS, then 
they may just say it is not worth organizing legally. If you 
really have not stopped that flow of illegals into the country, 
and that ready illegal workforce continues to be there, there 
will be some who will say ``I will just go underground and not 
participate in the system at all.''
    That situation would not be in the interest of tax 
administration. You really have to solve this and stop that 
flow with enforcement at the border and strong interior 
enforcement as well as an appropriate legal workforce, which I 
think the President is trying to work toward.
    Mr. NEAL. The Senate bill disallows workers attempting to 
obtain legal status, the ability to file for a refund on over 
withheld taxes. Who would receive that excess tax revenue?
    Mr. EVERSON. I think that would stay in the Treasury. I 
have not commented on this, but there are two points here. One 
is the denial of the participation with certain credits, like 
EITC. That is, as your colleague, Mr. Becerra, was saying, that 
is consistent with the denial of other benefits to illegals.
    I am somewhat troubled with the specific provision you 
mention, if our goal is to have people get current with their 
taxes, if they do that, I'm not quite sure I understand the 
basis for saying you are current, you happen to be over 
withheld, and you cannot have that back. Once you have evened 
out, you have fulfilled the tax obligation.
    I think the intent of what the Senate is trying to do is to 
say everybody should have fulfilled that tax obligation. I 
think we ought to think about that one provision.
    Mr. NEAL. Are there any other groups of workers who are 
barred from filing for refunds of over withheld income taxes?
    Mr. EVERSON. I would have to consider that more carefully. 
I think the Joint Committee staff paper makes it clear that 
this is an aberration.
    Mr. NEAL. Thank you, Mr. Chairman.
    Mr. MCCRERY. Ms. Hart?
    Ms. HART. Thank you, Mr. Chairman. I want to thank the 
panel for coming before the Committee. Your testimony actually 
demonstrates for us part of what the problem is, and obviously, 
each of you are not in complete sync with the other in ways 
that we can all get together and help enforce our immigration 
laws.
    That is not criticism of you. It is obviously something 
that we need to focus on to help you do better. We fully intend 
to do that.
    This sharing of information, I want to address right up 
front. Taxpayer information sharing, obviously between the DHS 
and the IRS. I am interested in your comments about the Senate 
proposal, because it permits the sharing of taxpayer 
information with the DHS.
    I want to know first of all, does the IRS have any concerns 
with that sharing on a limited basis with DHS?
    Mr. EVERSON. As I have indicated in several of the 
conversations, we do have concerns, but there are 50 exceptions 
to section 6103.
    The Congress very clearly takes a look at that broad 
prohibition, and then acts from time to time to allow that 
information sharing. It will have to be done properly, and 
again, I believe it should only be done if we can achieve a 
real reform, a comprehensive reform of our immigration laws.
    If that is not the case and we have not fixed our 
immigration system, but we have tinkered with the tax 
administration system, you could have problems.
    I am not saying do not do this. I support what we are 
trying to do here.
    Ms. HART. In a comprehensive way.
    Mr. EVERSON. In a comprehensive way, and with all the 
safeguards. There are standing protections now that are very 
important when the IRS shares taxpayer information, we 
regularly audit the other agencies that have the information, 
be that a State tax system or another Federal agency, that 
needs to be done.
    Ms. HART. That is fair. I have very little time and I want 
to jump to Ms. Myers. Does the DHS have ideas or a mechanism 
now that they are using that kind of information that is 
accessible on a limited basis?
    Ms. MYERS. Right now, Congresswoman, we have access to the 
information on a case by case basis. Sometimes we will be 
working on an investigation for over a year, and then Social 
Security Office of Inspector General joins in and then they are 
able to share that information with us.
    It is very frustrating to us. We waste a lot of time where 
we could really target things up front, if we had this 
information in a more regularized fashion.
    Ms. HART. Does the Senate proposal actually satisfy what 
you believe would be a good model for that sharing?
    Ms. MYERS. The Senate proposal, we think goes a long way 
and takes us much further than where we are now.
    Ms. HART. There is something good in the Senate proposal.
    Ms. MYERS. We would be perfectly happy to work with that 
and continue to work with the SSA.
    Ms. HART. I will yield 30 seconds to my colleague, Bob 
Beauprez, and then I am coming right back.
    Mr. BEAUPREZ. I thank the gentle lady and my good friend 
and colleague for yielding.
    I assume Ms. Barnhart is the right one to answer this 
question. I am confused about Basic Pilot and the Social 
Security Administration's number verification program.
    As I read them, for employers who want to verify especially 
new employees, Basic Pilot is the appropriate program. The NV 
program looks to me like it has all kinds of signals on it that 
you should not use it because of privacy violation concerns.
    Can you clarify for me? My State is one of the States who 
is looking at trying to give employers very clear direction as 
to how to live better within the law.
    Ms. BARNHART. Actually, thank you for that question. We are 
constantly promoting Social Security's online number 
verification system as a matter of fact. We are trying to urge 
as many employers as possible to use it, and the usage has 
grown fairly dramatically in the last couple of years. It has 
only been around for about two and a half years and open to all 
employers since June 2005.
    The caution is that we are not allowed under the law to 
verify name and SSN for an employer until the person is hired. 
I believe that is the privacy violation concern you are talking 
about. That is the issue.
    Mr. BEAUPREZ. That is exactly right. I yield back to the 
gentle lady from Pennsylvania.
    Ms. HART. Thanks. I have a quick question actually, and it 
is more or less to the panel in general.
    There have been a lot of discussions about what we need to 
do to help fix the immigration system among my colleagues 
informally, formally, proposals, you name it.
    One of the things that has been talked about there, and I 
do not necessarily endorse it, is that we end birth right 
citizenship in the United States.
    I am interested in any feedback, especially from the two 
gentlemen on the end, if you believe your agencies are burdened 
because we have birth right citizenship, as a result of--I see 
my time is limited. Can I have another second for them to 
answer?
    Mr. MCCRERY. Yes.
    Ms. HART. Thank you. I appreciate that. Gentlemen, if you 
could, quickly.
    Mr. HORN. First of all, whether caseloads go up or down, 
States get the same amount of money in a block grant 
environment. Of the 1.9 million families on TANF, a relatively 
small percentage of them are child only cases, where a U.S. 
citizen born child resides with a parent who is an illegal 
immigrant.
    We do not know the precise percentage, because if the adult 
is not applying for assistance the adult is not required to 
provide proof of immigrant status. Therefore, they are not part 
of the assistance unit because they are legal permanent 
residents but under the 5-year bar, or they are illegal 
immigrants.
    Ms. HART. Thank you. Dr. Gustafson, are you familiar with 
any cases?
    Mr. GUSTAFSON. No. I do not really have anything to add.
    Ms. HART. You do have under your agency and under your 
jurisdiction benefits that actually are applied for by parents 
for children directly?
    Mr. GUSTAFSON. It comes as part of the Medicaid program, 
and basically the benefits flow as a by-product of the welfare 
programs.
    Ms. HART. It is pretty hard to measure.
    Mr. GUSTAFSON. I would believe so; yes.
    Ms. HART. On the State programs, the parents can apply for 
all kinds of assistance where they do not get any but it is for 
the child.
    Mr. MCCRERY. Mr. Everson, if you would like to submit a 
response in writing.
    Ms. HART. If any of you have further responses, we would 
love it in writing. I thank the Chairman for his indulgence.
    Mr. MCCRERY. We have two more members who would like to 
inquire. I would like to get that in before we leave. Mr. 
Doggett?
    Mr. DOGGETT. Thank you, Mr. Chairman. I would offer my 
sincere thanks for your comments. I know the Committee asked 
you to appear. You have been kind enough to appear. We will 
benefit from your insight.
    My comments do not go to your role as individuals but to 
other failings of this Administration and this Congress. Of the 
many bizarre hearings I have been at in this room, I think this 
one ranks fairly near the top.
    This Committee played absolutely no role in the passage of 
the immigration bill that passed through the House. It was not 
referred to this Committee. I think there have been some 
occasional hearings about the impact on Social Security, not 
directly related to this bill.
    The bill that passed the House was a narrow, impractical 
bill that will not address this problem, and it would not have 
passed the House without the vote of almost every Republican on 
this Committee.
    The Senate passed a bill that dealt with this problem, and 
while it is an imperfect bill, it appears to be a more 
comprehensive way of approaching the problem. I am pleased that 
the President has belatedly endorsed, it though his 
Administration also seemed to have kind words to say about the 
initial House bill.
    I think any high school civics class member in Austin, 
Texas would know that when the House passes a bill and the 
Senate passes a bill, there is a way to resolve the differences 
if the Administration and the Congress has the slightest 
interest in addressing this problem, and if it has any degree 
of the urgency that your testimony suggests that it does.
    That is to convene a conference Committee to address the 
differences between the House and the Senate, one of the first 
things you learn in understanding the legislative branch in 
high school civics.
    The House has chosen not to do that. The Bush 
Administration is in year six of dealing with this problem or 
in fact, not dealing with this problem.
    Today's hearing, while insightful and interesting and of 
some academic importance, has very little relevance to whether 
or not we will see an immigration bill passed in this Congress, 
and apparently, it is not the intent of the House leadership, 
which took such a narrow backward and impractical approach to 
immigration, to do anything except use this for political 
purposes.
    That would be consistent with the way the House has handled 
this issue in the last couple of years. As we have heard in 
earlier questions, instead of having more border patrol 
officers, we are going to turn our emergency room nurses into 
border patrol officers. Instead of having more border patrol 
officers, we will turn our bank tellers into border patrol 
officers.
    Instead of having more border patrol officers, we will turn 
our local police who need the confidence of everyone in their 
community to be able to prosecute garden variety murders, rapes 
and robberies, we will turn them into border patrol officers.
    The problem is that this Congress back in 2004 approved 
2,000 additional border patrol officers, and this 
Administration said no, we do not need 2,000, 210 will be 
enough.
    The problem became so serious in Texas that my Republican 
colleagues in the Texas delegation, including two in this 
Committee, wrote to the Administration last September and said 
there was an emergency, a crisis in Texas, because the 
administration had taken our border patrol officers and 
transferred them out to Arizona.
    This Administration has come on board about this problem 
too little with none of the so-called political capital that 
the President claimed he had applied in a consistent manner to 
try to work out a solution.
    I appreciate your comments, given the phony solutions and 
the whole phony situation that has been set up about 
immigration reform. I am not sure they are going to advance us 
much closer to an answer that will make any difference in the 
lives of the people throughout America.
    I represent the largest border section, along the Rio 
Grande River, in Texas, of any Member of Congress save one. I 
can tell you there is a broad consensus along that border, 
whether you are talking about a Republican banker, a Democratic 
farm worker, or an independent small businessperson, that there 
is a total lack of understanding of the realities of the 
border.
    Many phony solutions that are being advanced, like the ones 
I mentioned, as well as more formal policies, like the western 
hemispheric travel initiative, WHTI, they are counter 
productive to our local economy, that they will undermine our 
local economy and prevent legitimate business transactions and 
customers coming from Mexico to share, invest and contribute as 
they have in a very significant way.
    As to the real comprehensive solutions, I will ask you if 
all of you agree that if the Senate bill with imperfections 
that it has were passed in its current form, if you agree it is 
actually a revenue raiser, not a revenue cost, according to the 
analysis that the Congressional Budget Office and others have 
done of the Senate bill?
    Mr. MCCRERY. I thank the gentleman for his testimony.
    Mr. DOGGETT. It was a question.
    Mr. MCCRERY. The witnesses may present their answers in 
writing. Mrs. Tubbs Jones, if you would like to inquire. We 
have one more panel of two witnesses. I would like to get them 
in so they do not have to wait through the entire series of 
votes that we have.

    [Ms. Barnhart's response follows:]

    With respect to Mr. Doggett's question, concerning S. 2611's impact 
on revenue, on July 24, 2006, the SSA's Chief Actuary, Mr. Stephen C. 
Goss, sent a memo to Senator Charles E. Grassley concerning the effect 
of S. 2611 as passed by the Senate would result in increases in net 
immigration that would improve the long-range Old Age, Survivors, and 
Disability Insurance (OASDI) actuarial deficit by roughly 0.13 percent 
of payroll. This would reduce the long-range deficit from the estimated 
level of 2.02 percent of payroll under current law to roughly 1.88 
percent of payroll.

                               

    Mrs. TUBBS JONES. Mr. Chairman, thank you very much. Let me 
begin, please, with you, Mr. Horn. Ms. Hart's questions, there 
was the implication that children born of illegal aliens in the 
United States--illegal immigrants in the United States of 
America cause a burden financially on the United States of 
America.
    Can you tell me how much money there is that is paid to 
children born in the United States of America who are illegal 
immigrants, whose parents are illegal immigrants?
    Mr. HORN. We would not know that because States are allowed 
the flexibility to provide different levels of benefits. All 
that we know is the number of children who fall into that 
category.
    Mrs. TUBBS JONES. Can you tell me how many children?
    Mr. HORN. Approximately 152,000 families are in child only 
cases in which they reside with a parent of either unknown 
citizenship or alien status, where the child is receiving a 
benefit and the parent is not.
    Not all of those cases will be in the category that you are 
suggesting. Someone may just simply refuse if they are not 
applying for a benefit to say whether they are illegal, a U.S. 
citizen or an immigrant.
    Mrs. TUBBS JONES. If they are not applying for a benefit, 
we are not paying any money?
    Mr. HORN. We are paying a benefit on behalf of the U.S. 
born citizen child, but not the adult.
    Mrs. TUBBS JONES. It is a small number in comparison with 
what we pay for--excuse me. Have you estimated how many illegal 
immigrants there are in the United States?
    I am sure that at some juncture, the U.S. Government has 
contacted every State in the United States of America and asked 
them to assess how many people are receiving some type of 
benefit, that may be children of illegal immigrants.
    Mr. HORN. Under the TANF program?
    Mrs. TUBBS JONES. Any program.
    Mr. HORN. The only thing I can speak to would be the TANF 
program.
    Mrs. TUBBS JONES. Under the TANF program then, sir. If you 
have not done it, I would suggest that you do it. It only makes 
sense to me if you are going to figure out numbers of people in 
the United States, receiving that information.
    Would it not make sense?
    Mr. HORN. The States would not be able to tell us. The 
reason they would not be able to tell us is because you cannot 
deny a U.S. born child a benefit.
    Mrs. TUBBS JONES. They can tell you how many people say 
they are not legal immigrants, right, or assess that?
    Where do you come up with this number of 152,000 if they do 
not tell you?
    Mr. HORN. Some of them are legal immigrants who are under 
the 5 year bar. Some of them are----
    Mrs. TUBBS JONES. Tell me this, how many legal immigrants 
under the 5 year bar are families that are receiving money?
    Mr. HORN. Approximately 37,000.
    Mrs. TUBBS JONES. Approximately 37,000. Of those 37,000, 
have you ever contacted the State to find out how much money is 
being paid for those 37,000 families?
    Mr. HORN. No.
    Mrs. TUBBS JONES. Would you do that for me, please, and get 
back with me? I think it would help us determine how much money 
we are spending nationally. You can shake your head, but I want 
to know. Okay? Could you do that?
    Mr. HORN. There are limitations under the statute 
concerning what data we can ask States to collect under this 
program.
    Mrs. TUBBS JONES. Mr. Horn, do what you can.
    Mr. HORN. I will do what we can.
    Mrs. TUBBS JONES. Thank you. Let me go to Ms. Myers. Ms. 
Myers, I recall your making a statement with regard to 
prosecution, with regard to criminal prosecution, of companies.
    How many criminal prosecutions have you done?
    Ms. MYERS. This year, we have had 445 criminal arrests 
through June 30th.
    Mrs. TUBBS JONES. Who was arrested? Are these owners of 
companies?
    Ms. MYERS. It varies. In some cases, it was owners, 
managers. In some cases, we had illegal aliens who were also 
crew leaders who brought people in. In some cases, there were 
also criminal arrests of illegal alien work sites.
    Mrs. TUBBS JONES. Of those 445, how many of them emanate 
from this year, the original charge was brought this year?
    Ms. MYERS. Those are all this year.
    Mrs. TUBBS JONES. Previously, we have had testimony that 
only three companies in the United States of America in the 
past few years have been charged with failing to provide the 
Government SSNs for people, accurate SSNs.
    Ms. MYERS. Congresswoman, I think the number three that you 
are referring to reflects numbers of companies who were given a 
notice of intent to fine. That is a civil penalty system. We 
have shifted from that civil penalty system because we think 
that is not effective to bring criminal charges.
    Mrs. TUBBS JONES. I understand what you are saying. 
Previously, of the three civilly, how many criminally do we do? 
Companies. I do not want to know all the other illegal 
residents.
    Ms. MYERS. What I can tell you is that was 445 criminal 
arrests.
    Mrs. TUBBS JONES. How many are companies, ma'am?
    Ms. MYERS. It is a mix of employers, crew leaders, a 
range----
    Mrs. TUBBS JONES. Could you do me a favor? Could you send 
me a notice of how many are companies? I do not want to know 
about the workers. I want to know about the heads of companies 
that you have charged for failing to appropriately provide 
information with regard to their workers, particularly with 
regard to their SSNs.
    Could you do that?
    Ms. MYERS. Absolutely, yes. Just yesterday, by the way, 
there were two----
    Mr. MCCRERY. Ms. Myers, if you could get that to Mrs. Tubbs 
Jones in writing, that would be appreciated.
    Mrs. TUBBS JONES. I would think all of the Committee would 
like to hear it. Thank you, Mr. Chairman.
    Mr. MCCRERY. Thank you very much for your testimony and for 
your patience today in answering all our questions.
    We have one more panel. Michael Fix and Dr. Camarota, if 
you would come forward. Members, we have about 2 or 3 minutes 
left on the clock to vote.
    We are going to recess the Committee while members vote. We 
will return, I hope, in about 15 minutes.
    The Committee is in recess.
    [Recess.]
    Mr. MCCRERY. Our second panel is composed of Mr. Michael 
Fix, Vice President and Director of Studies, Migration Policy 
Institute, and Dr. Steven A. Camarota, Director of Research, 
Center for Immigration Studies.
    Gentlemen, welcome. Mr. Fix, we will start with you.

   STATEMENT OF MICHAEL FIX, VICE PRESIDENT AND DIRECTOR OF 
              STUDIES, MIGRATION POLICY INSTITUTE

    Mr. FIX. Thank you so much, Mr. McCrery.
    It is a great and somewhat daunting privilege to appear 
before you today. My name is Michael Fix. I am the Vice 
President and Director of Studies at the Migration Policy 
Institute, a non-profit, non-partisan research organization 
here in Washington.
    You have a copy of my rather tardily prepared testimony. I 
will simply summarize my main points, if you will.
    First, I would say that it is an often overlooked fact that 
the fiscal costs of providing many means tested benefits to new 
or legalizing immigrants are going to be circumscribed by 
restrictions imposed by the 1996 welfare reform law, which as 
we have heard, barred new legal immigrants from receiving SSI, 
from Medicaid, from TANF, and food stamps.
    The second point I would make is that the exacting demands 
that are written into proposed reform legislation and in 
combination with welfare reform policies are likely to 
forestall legalizing immigrants' eligibility for means tested 
programs for some time. CBO estimates until 2020.
    However, tax payments, including substantial potential 
payments for back taxes by the undocumented, if they legalize, 
would flow far sooner under the plan.
    My third point is that while the public and the media often 
believe that immigrants are swamping benefit programs, as 
Figure 1 on page four in my testimony indicates, research at 
Migration Policy Institute (MPI), along with the Urban 
Institute, where I was formerly, indicates that low income 
legal non-citizen immigrant families with children actually 
used TANF, actually used food stamps and SSI at lower rates 
than their citizen counterparts, and that their use rates have 
fallen substantially over the course of the past decade.
    Medicaid expenditures, if you look at that chart, follow a 
different path, in part because of what could be considered 
policy successes. There was strong outreach under the State 
Children's Health Insurance program in the late 1990s to 
provide care to low income children, and partly, I think, as a 
function of pull backs in private insurance among many 
employers of low wage immigrant workers in particular, and all 
low wage workers in general.
    My fourth point, as Figure 2 on page five of my testimony 
indicates, is that I would suggest that if you look at the 
settlement patterns of immigrants observed during the nineties, 
which is essentially away from States with generous eligibility 
programs for immigrants, on the map, they are the blue States, 
and most notably, California, their settlement pattern has 
moved to high growth States, such as Georgia, Tennessee, and 
Colorado, which are shown in the map in red colors, which 
indicates basically that these flows are labor driven and not 
welfare driven.
    My fifth point that I make in my testimony is that many 
commentators suggest that the new wave of immigrants are not 
going to experience the same kind of mobility as their 
predecessors, but as Figure 3 on page seven of my testimony 
shows, cohorts of immigrants who are in the United States for 
10 years or more, which are the blue bars, had substantially 
higher incomes than those who had been in the United States for 
less than 10 years, the yellow bars.
    We see that phenomenon reproducing itself when we decompose 
the immigrant population into refugees. They show great growth. 
Into legal immigrants, you see substantial growth, and 
naturalized citizens, you see substantial growth.
    The incomes and the gains among undocumented immigrants 
were far lower.
    Taking a longer view of this question of mobility, at MPI, 
we recently commissioned a study by Roger Waldinger of the 
University of California Los Angeles, who found substantial--I 
think this is important--intergenerational gains along almost 
all measures of economic progress that he examined, including, 
as Figure 4 indicates, incomes.
    You see this for all broad immigrant groups studied, 
including Mexicans.
    Sixth, and I guess my final empirical set of points, go to 
the fact that income gains are of course linked to the payment 
of taxes. We have had a lot of discussion on that today, and a 
variety of researchers who have documented the tax 
contributions that immigrants make, including Steve Camarota, 
but here I just want to highlight a recent study of taxes paid 
by immigrant households in the Washington metropolitan area 
that we conducted with the Urban Institute and Jeffrey Passel 
of the Pew Hispanic Center.
    What we found is that all households, including households 
led by the undocumented, paid substantial taxes.
    Tax payments of the region's immigrant populations were 
proportional to their share of the population. That is to say 
they make up about 18 percent of the regional population, and 
they pay about 18 percent of the taxes.
    Like income, the taxes again varied by legal status with 
the lowest paid by the undocumented, in part, we estimate, as a 
function of compliance rates.
    The results suggest to us that some form of legalization 
that mandates full tax compliance would lead to higher tax 
yields. Yields would be felt immediately and not down the road 
like most benefit costs.
    Reform legislation like the one passed by the Senate also 
would raise the caps on skilled legal immigrants and would also 
likely contribute and to boost tax revenue as well.
    Mr. McCrery, I am aware that these are only pieces of a 
much larger fiscal and still larger economic puzzle that 
surrounds this complex debate that we have heard today.
    For example, we found that immigrants are more likely than 
U.S. natives to be self employed. That immigrant 
entrepreneurship creates jobs and boosts tax payments in ways 
that many accounts do not capture.
    The foreign born population's willingness to follow jobs to 
other States and localities make the U.S. economy run more 
efficiently, and high skilled immigrants innovate in key 
sectors of the economy that are very difficult to measure.
    I would submit that even if we limit our discussion to tax 
payments and benefits use, the trends that I have discussed 
here offer, I think, a realistic anecdote to some of the most 
gloom and doom scenarios that we have heard in this discussion.
    Thank you very much for your attention.

    [The prepared statement of Mr. Fix follows:]

   Statement of Michael Fix, Vice President and Director of Studies, 
                       Migration Policy Institute

    Debate over immigration and proposals to reform it raise a number 
of issues that have been at the center of research conducted over the 
past decade on selected costs and benefits. In my testimony today I 
would like to raise several issues regarding immigrants' costs and 
contributions.
    In sum, my points are as follows:

      The 1996 welfare reform law substantially restricted new 
legal immigrants' access to public benefits, limiting fiscal exposure 
in the short-run.
      The exacting character of proposed legislation would bar 
the current undocumented population from social welfare programs 
through 2020.
      Since welfare reform's enactment, use of TANF, SSI, and 
Food Stamps has fallen substantially among legal immigrant families 
with children. Medicaid for immigrants, like citizens, does not follow 
this trend, and corresponds to a general decline in extension of 
private health insurance benefits to low-wage workers.
      During the 1990s many immigrants moved from states with 
comparatively generous public welfare programs for immigrants to states 
with strong economies but less generous programs, raising doubts about 
the strength of welfare magnets.
      Cohorts of immigrants in the U.S. 10 years or more had 
significantly higher incomes than those in the U.S. less than 10 
years--suggesting substantial income gains. Naturalized citizens in the 
U.S. 10 or more years had higher average incomes than natives. Lower 
incomes were found among both recent and established undocumented 
immigrants, again suggesting that regularization would boost wages and 
taxes.
      A study of taxes paid by immigrants in the Washington, DC 
region revealed that immigrant households pay substantial taxes. 
Immigrants' tax payments were proportional to their share of the total 
regional population.
      Tax payments in the Washington region varied by legal 
status, with payments and compliance ascribed to undocumented 
immigrants being lowest. This finding suggests that a legalization 
program that effectively mandates full tax compliance as a condition 
for earning LPR status would lead to higher tax yields, which would be 
felt immediately (unlike increased usage of social benefits--which to 
the degree it actually occurs--would be delayed for many years).
      Higher tax yields might be supplemented by higher 
incomes. The wage benefit of legalization under IRCA was approximately 
6 percent.

    I will address several points in turn:
    First, I will briefly explore the degree to which current 
comprehensive reform proposals are likely to affect social welfare 
systems by focusing on (1) the existing bars that restrict legal 
immigrants' access to benefits; (2) patterns of declining benefit use 
among legal immigrants; and (3) the labor-driven, rather than welfare-
driven, movement of immigrants that we see in today's settlement 
patterns.
    Second, I will note patterns of wage growth and mobility among 
immigrants over time, differentiating, among other things, between 
legal statuses.
    Third, in a related vein, I will say a word about the taxes paid by 
immigrants by highlighting the Washington Metropolitan area, a major 
new gateway region.
AVAILABILITY OF BENEFITS
    The 1996 welfare reform law imposed restrictions on new legal 
immigrants' access to means-tested federal public benefits. Recent 
discussion of immigration reform has often overlooked this fact and the 
likelihood that the law will limit benefit outlays associated with such 
immigration reforms as a legalization program or expanded legal 
immigration. The Senate bill's emphasis on skilled and educated 
immigrants and the proposed temporary worker program would mean that a 
large component of new permanent immigrants would not likely need 
social services, while temporary workers would by definition not 
qualify for most forms of assistance.
    Prior to 1996 welfare reform, legal immigrants were eligible for 
benefits on the same terms as citizens. Following the law's enactment, 
states were authorized to discriminate against legal immigrants in 
their public benefit programs. The most severe restrictions were 
imposed on immigrants arriving after August 22, 1996, the law's date of 
enactment. These restrictions essentially bar nearly all legal 
immigrants arriving after that date from receiving selected means-
tested public benefits--SSI, TANF, Medicaid, SCHIP, and Food Stamps--
for at least five years.
    These restrictions are not the only barriers to access to public 
benefits for post-96 immigrants. In addition, immigrants entering under 
the family unification provisions of immigration law must sign an 
enforceable affidavit of support that makes their sponsors liable for 
benefits they use. Further, the sponsor's income is deemed to the 
immigrant--commonly making the immigrant's income too high to qualify 
for means-tested public benefits. The sponsor deeming provision extends 
until an immigrant naturalizes or establishes a work history of 40 
quarters (i.e., at least 10 years)--in many cases a date substantially 
beyond the five-year bar.
    These multiple barriers serve to push back the date of new 
immigrants' eligibility for benefits. Fully 40 percent of legal 
immigrants in the U.S. today arrived after 1996, and so have been 
subject to the welfare restrictions; new or legalizing immigrants as a 
result of comprehensive immigration reform would be no different.
    Beyond the barriers to access embedded in welfare reform, the 
proposed comprehensive reform legislation (as reflected by S. 2611) 
further lengthens the time before a formerly undocumented immigrant 
will be eligible for means-tested public benefits.\1\ According to the 
Congressional Budget Office, the earliest most undocumented immigrants 
would be eligible for benefits would be 2020, almost 20 years after 
their entry into the United States. This delayed access owes to the 
fact that most of them might not become legal permanent residents until 
eight years after the initiation of the legalization process, at which 
time they would have to wait another five years as a result of welfare 
reform bars in order to access benefits. Further, the qualification 
process described in S. 2611--which includes extensive employment and 
acquisition of some English--is quite exacting. Those who attain 
permanent legal status and wait an additional five years are likely to 
have benefited financially from the wage gains that U.S. work 
experience and English skills bring and thus be less likely to need 
public assistance in the future than they do at time of arrival.
---------------------------------------------------------------------------
    \1\ Under current law, undocumented are eligible for emergency 
Medicaid. Their U.S. born children are citizens and hence eligible for 
benefits.
---------------------------------------------------------------------------
DECLINE IN BENEFIT USE BY LEGAL IMMIGRANTS
    Our research suggests two other trends in the use of public 
assistance among immigrants that have been downplayed in the current 
debate over the impact of immigration reform on the social welfare 
system. One is the decline in the use of most public benefits on the 
part of legal immigrants in the wake of welfare reform's 1996 
enactment.
    As Figure 1 indicates, following reform, we see sharp drops in TANF 
use among immigrant families. Immigrant use of TANF was lower than that 
of citizens both before and after welfare reform, falling from 19 
percent in 1994 to 4.5 percent in 2004. (Our analysis focuses on low-
income, legal noncitizen-headed families with children. We contrast 
them with low-income, citizen-headed families with children.) Similar 
patterns emerge through 2002 when we examine Food Stamps. There is a 
slight up-tick in use from 2002 through 2004, perhaps reflecting policy 
changes in the program introduced by the 2002 Farm Bill, which restored 
eligibility to working age adults who had been in ``qualified status'' 
in the United States for five or more years and to legal, noncitizen 
children regardless of date of entry. Finally, we see declines in SSI 
use among legal, noncitizen-headed families for the period 1996--2004; 
in fact, noncitizens' usage levels are just over half those of 
citizens.

        Figure 1: Low-Income Families' Benefit Usage, 1994-2004
[GRAPHIC] [TIFF OMITTED] T1575A.007


    For each program, then, benefit use among immigrant families has 
fallen since welfare reform and is substantially lower than that of 
citizens. This is not the image of immigrants and social welfare 
reliance that is commonly conveyed.
    We do, however, see different patterns when it comes to Medicaid--
with use among noncitizen families exceeding that of natives and rising 
since 1999. Generally higher levels of Medicaid use among legal, 
noncitizen families may reflect the introduction of the 1997 SCHIP 
program, broad outreach in the late 1990s to boost enrollment, and a 
reduction in private insurance coverage among low-wage immigrant 
workers and low-wage workers more generally.
DISPERSAL FROM HIGH TO LOWER BENEFIT STATES
    A third general point that has not received much attention in the 
current debate over immigration benefits is the dispersal of immigrants 
during between 1990 and 2000 away from states that have comparatively 
generous public benefit programs (California, most notably) toward many 
states with less generous state eligibility rules for legal immigrants 
such as Georgia, Tennessee, and Colorado (See Figure 2). This trend 
suggests that welfare remains a far less powerful magnet for newcomers 
than jobs.

                Figure 2: New Immigration Growth Centers
[GRAPHIC] [TIFF OMITTED] T1575A.008


    Declining benefit use, the continuation of stringent restrictions 
on legal immigrants' access to public benefits, and changing spatial 
migration patterns suggest that fears that welfare systems will be 
swamped by increased legal immigration and by a legalization program 
are overstated.
LABOR FORCE PARTICIPATION, WAGE GROWTH AND MOBILITY, AND TAXES
    We turn now to the other side of that fiscal equation that is so 
often discussed in debates over immigration reform: the contributions 
of immigrants to the federal purse. But first I'd like to highlight 
some of the most relevant facts about immigrants in the labor force and 
their wages that position them to make these contributions.
    Immigrants contribute significantly to the U.S. workforce and 
economy. Since 2000, immigrants have made up 46 percent of the growth 
in the U.S. labor force, and today there are more than 22 million 
foreign-born workers.\2\ While immigrants are one in eight U.S. 
residents, they are one in seven workers, and one in five low-wage 
workers. At the same time, the foreign-born now account for one in 
every five doctors; one in five computer specialists, and one in six 
professionals in engineering or science occupations in the United 
States.\3\
---------------------------------------------------------------------------
    \2\ Bureau of Labor Statistics, ``Foreign-Born Workers: Labor Force 
Characteristics in 2005,'' (Washington, DC: U.S. Department of Labor, 
2006). Available: http://www.bls.gov/news.release/pdf/forbrn.pdf.
    \3\ Neeraj Kaushal and Michael Fix, ``The Contributions of High 
Skilled Immigrants,'' (Washington, DC: Migration Policy Institute, 
forthcoming 2006).
---------------------------------------------------------------------------
    Clearly the skill levels of immigrants affect their income levels 
and tax contributions. Also of note, though, is evidence that the wages 
of immigrants rise over time and that the rates of growth outpace those 
of natives, perhaps by 10 to 13 percent in the first twenty years an 
immigrant is in the United States.\4\ While these gains do not fully 
compensate for the large average earning differential between natives 
and immigrants at arrival, the fact that immigrants are earning more 
over time means that they have more to contribute to the federal purse 
the longer they are in the United States.\5\
---------------------------------------------------------------------------
    \4\ Darren Lubotsky, ``Chutes or Ladders?: A Longitudinal Analysis 
of Immigrant Earnings,'' Princeton University Industrial Relations 
Section Working Paper No. 445, 2000. This paper is particularly 
rigorous in that it relies on longitudinal--as opposed to cross-
sectional--data.
    \5\ With regard to wage differentials between natives and new 
immigrants: David Card, ``Is the New Immigration Really So Bad?'' IZA 
Discussion Paper Series, No. 1119, 2004.
---------------------------------------------------------------------------
    Legal status is also related to wages. Research that followed 
illegal immigrants regularizing under IRCA in 1986 found that the wage 
benefit of the legislation for previously unauthorized immigrants was 6 
percent.\6\
---------------------------------------------------------------------------
    \6\ Sherrie A. Koussoudji and Deborah Cobb-Clark, ``Coming Out of 
the Shadows: Learning about Legal Status and Wages from the Legalized 
Population,'' Journal of Labor Economics 20 (3), 2002.
---------------------------------------------------------------------------
    Incomes and Legal Status. Figure 3 compares incomes of cohorts of 
immigrants in the United States for less than 10 years in 2002 with 
those who had been in the country for 10 years or more. We see that for 
all groups other than unauthorized immigrants the data reveal 
substantially higher family incomes for immigrants who had been in the 
United States for 10 years or more than their more recently-arrived 
counterparts. The data also reveal that the incomes of naturalized 
citizens in the United States for more than 10 years exceed those of 
natives' and that those of refugees and legal immigrants approach those 
of natives. We see much lower incomes and smaller differences in 
incomes among unauthorized immigrants, suggesting the potential value 
of legal status for economic integration and for tax contributions.

 Figure 3: Immigrants' Income by Time in United States and Immigration 
                                 Status
[GRAPHIC] [TIFF OMITTED] T1575A.009


    Generational Mobility. Any analysis of the contributions of 
immigrants should arguably take a somewhat longer view than most fiscal 
analyses do, as well. By that, I mean, looking at the second generation 
and its outcomes--in some ways the crucible for economic progress. In 
his analysis of this topic, Professor Roger Waldinger, the former 
Chairman of the Department of Sociology at the University of 
California, Los Angeles, broke the first and second generation into 
broad categories:

      Mexicans;
      Asians;
      Europeans, Canadians, and Australians; and
      Other Americans (from Central and South America and the 
Caribbean)

    Results were compared with white and black 3rd generations.\7\
---------------------------------------------------------------------------
    \7\ Roger Waldinger and Renee Reichl, ``Today's Second Generation: 
Getting Ahead or Falling Behind?'' Securing the Future: The U.S. 
Immigrant Integration Policy Agenda, Ed. Michael E. Fix (Washington, 
DC: Migration Policy Institute, forthcoming 2006).
---------------------------------------------------------------------------

   Figure 4: Median Yearly Wage and Salary Income ($) of Adults* by 
                  Generation, Origin, and Gender, 2000
[GRAPHIC] [TIFF OMITTED] T1575A.010


    He found that all of these broadly defined immigrant groups are 
making generational progress along almost all indicators: rates of high 
school graduation; college completion, incomes, and job quality as 
measured by health insurance and pensions (Figure 4). With regard to 
incomes, he found that while Mexicans lag all groups in the first 
generation, dramatic growth occurs in the wages and salaries of the 
second, with incomes approaching those of African American natives.
    Tax Contributions. In today's economy, then, the foreign-born are 
no strangers to the workforce, and as a consequence, they make sizable 
tax contributions. In the future, new tax contributions stemming from 
comprehensive immigration reform like that set forth in S. 2611 would 
be felt immediately, in contrast to the delayed impact of potential 
welfare benefit usage among legalizing or newly arriving immigrants.
    We highlight a localized example of these tax contributions through 
a recent study my colleagues Jeffrey S. Passel and Randy Capps and I 
conducted, which examined the federal, state and local taxes paid by 
immigrant households in the Washington Metropolitan Region.\8\ Despite 
polls that find most people believe that immigrants do not pay their 
fair share in taxes, our study found that immigrant households paid 
taxes at the nearly the same rates as native households. Further, as 
earlier studies in New York and Illinois have revealed, immigrants' tax 
payments are proportional to their share of the regional population. 
That is, immigrants paid the same share of the region's overall taxes 
(18 percent) as their share of the total population (17.4 percent).
---------------------------------------------------------------------------
    \8\ While the Washington region is a new gateway community, it may 
not be representative of the nation as a whole. Its immigrant 
population is unusually diverse and is composed of a comparatively 
large share of Asian immigrants. See, R. Capps, et. al. Civic 
Contributions: Taxes Paid by Immigrants in the Washington DC 
Metropolitan Area, (Washington, DC: The Community Foundation and the 
Urban Institute, 2006).
---------------------------------------------------------------------------
    The study also found that immigrant households in Northern Virginia 
paid eight percent of all state taxes paid by households in Virginia 
($810 million out of $9 billion). Immigrant households in suburban 
Maryland paid an equivalent share of Maryland state taxes ($560 million 
out of $6 billion). These findings highlight the fact that immigrants' 
tax payments support both local and state services on which residents 
draw, in addition to the federal coffers.
    While all immigrants pay a substantial share of their incomes in 
taxes, we found, as with incomes, that tax payments are correlated with 
legal status. Naturalized citizens paid higher taxes than households 
headed by native-born citizens. Households headed by legal permanent 
residents and refugees had slightly lower incomes and paid somewhat 
lower taxes. Those headed by undocumented immigrants had the lowest 
average incomes and therefore paid the lowest average taxes. Based on 
other analyses we assumed that a little over half of unauthorized 
immigrants paid payroll taxes. Here again it appears that legislation 
that would change this population's legal work authorization would 
effectively mandate full tax compliance and likely lead to higher 
incomes, thereby raising immigrants' fiscal contributions to the 
federal, state, and local coffers.
    In sum--these trends in welfare use and tax contributions are often 
ignored in debates over immigration's impacts and the merits of reform. 
While I make no attempt to sum them up, they suggest that reform's 
fiscal impacts may be much more positive than the current debate would 
lead one to believe and far more complex than the caricature portrayed 
by some of the literature.
OTHER ECONOMIC IMPACTS
    To close let me indicate a few additional ways that impacts affect 
the federal purse. Decade after decade we've found that immigrants are 
more likely than U.S. natives to be self-employed, and immigrant 
entrepreneurship may create jobs and as a result boost tax payments. 
Immigrants are increasingly associated with further openings to trade 
and other forms of exchange that promote business. The foreign-born 
population's willingness to follow jobs to other states and localities 
makes the U.S. economy run more efficiently. High-skilled immigrants 
innovate in key sectors of the economy. And immigrant workers both 
produce and, in turn, consume goods and services--thus creating jobs 
that might not otherwise have existed and making much wider ripple 
economic effects. The effects are felt up and downstream from the 
specific places and sectors of immigrant employment.

                               

    Mr. MCCRERY. Thank you, Mr. Fix. Dr. Camarota.

 STATEMENT OF STEVEN A. CAMAROTA, DIRECTOR OF RESEARCH, CENTER 
                    FOR IMMIGRATION STUDIES

    Mr. CAMAROTA. I would like to thank the Committee for 
inviting me to testify. My name is Steven Camarota. I am 
Director of Research at the Center for Immigration Studies in 
Washington.
    All of my comments can be found in detail at our website, 
cis.org.
    When it comes to immigrants and public coffers, there is a 
lot of agreement, in fact, overwhelming agreement, that their 
fiscal impact depends largely on the education level of the 
immigrants in question, while other factors also matter, 
immigrants with a lot of education tend to pay a lot in taxes, 
and use relatively little in services, while those with little 
education tend to have low incomes, pay relatively little in 
taxes, and often use a good deal in public services.
    In the case of illegal aliens, the public services are 
typically received on behalf of their U.S. born children.
    It should be pointed out that the fiscal drain that comes 
from less educated immigrants is not because they come to get 
welfare. In fact, use of cash assistance welfare programs is 
irrelevant to this debate.
    It is Medicaid. It is the food assistance program, 
particularly WIC and free school lunch, where use rates tend to 
be quite high.
    Nor does the fiscal drain from unskilled immigrants come 
from an unwillingness to work. Legal or illegal, they mostly 
hold jobs.
    It is simply due to the fact that there is no single better 
predictor of one's income, tax payments, or use of public 
services in the modern American economy than one's education 
level.
    All research shows that the vast majority of illegal aliens 
have very little education. It is estimated that some 60 
percent of illegal aliens have not even completed high school. 
Another 20 percent have only a high school degree, that is no 
additional schooling.
    Thus, the people who will be legalized under the Senate 
bill have significant negative fiscal implications.
    One of the most detailed studies of the fiscal effects of 
immigration ever done was done by the National Research 
Council. It is called ``The New Americans.'' It found that the 
life time drain on public coffers from an immigrant who comes 
to America without a high school degree is negative $89,000. 
That is he will use $89,000 more in services than he pays in 
taxes in his life time.
    The drain for an immigrant who has only a high school 
degree in his life time is $31,000.
    However, an immigrant with education beyond high school is 
a net fiscal benefit of $105,000. Again, educational attainment 
is the key to understanding fiscal effects.
    The fundamental problem with the Senate bill is that it 
ignores this basic insight. My research shows that in 2002, 
illegal alien families used $26 billion or imposed, I should 
say, $26 billion in costs on the Federal Government, but it is 
important to know that they also paid about $16 billion in 
taxes, for a net drain of $10 billion at the Federal level.
    However, I also find that if illegal aliens were legalized 
and they began to pay taxes and use services like households 
headed by legal immigrants with the same level of education, 
the fiscal costs would explode to $29 billion, net drain.
    That is the difference between what they pay in taxes and 
use in services.
    To understand why this happens, it might be helpful to look 
at a particular program, like the earned income tax credit, 
which goes to low income workers.
    Right now, I estimate that illegal aliens account for just 
1.5 percent of that program's total cost, a very small share. 
If they were legalized and had the income of legal immigrants 
with the same level of education, the costs of that program 
would increase ten fold.
    Again, this dramatic rise in costs is not due to laziness 
or net lack of work. In fact, only those that work get the 
credit. It simply reflects their education level.
    Let me shift my comments very briefly to Social Security 
and Medicare. I have estimated that illegal aliens pay into 
those two systems and create a net benefit for those two 
programs of $7 billion a year, but it makes little sense to 
focus just on those two programs because illegals create a net 
deficit of $17 billion in the rest of the Federal budget, for a 
total net drain of $10 billion.
    Again, the benefits to those programs, it should also be 
pointed out, would largely disappear upon legalization. The 
benefit comes from the fact that they pay and do not use. 
Again, that is probably not the way to think about the program, 
since they create such large problems for the rest of the 
Federal budget.
    Speaking more generally on Social Security, it is very 
important to note immigration has only a very small impact on 
the aging of American society, mainly because immigrants age 
like everyone else, and they do not have that many more 
children than everyone else, so they do have somewhat higher 
fertility.
    The Social Security Administration's projections show that 
the dollar value of the Social Security deficit would increase 
by just 6.6 percent if net immigration was $350,000 a year 
versus $800,000 a year, over 75 years.
    Put simply, an extra 34 million immigrants over 75 years 
has only a very tiny effect, and it is not even clear that this 
small net gain for Social Security even exists, because the SSA 
assumes that immigrants will have exactly the same incomes as 
natives immediately upon arrival, which is contrary to a very 
large body of literature.
    It also ignores the fact that we have something called the 
earned income tax credit, which is explicitly designed to 
refund people some or all of their Social Security payments.
    My own research suggests that legal immigrants are almost 
twice as likely to get this program as natives.
    As a general proposition, immigration is largely irrelevant 
to the Social Security system because it has such a tiny impact 
on the aging of American society.
    The bottom line is this. The Senate bill has large 
increases in legal immigration and is supposed to legalize some 
10 million illegals. For the most part, the bill does not 
attempt to select new immigrants based on their skills and 
skills are also irrelevant to the legalization of the illegals.
    There is the fundamental problem. If you take nothing else 
away from my testimony, it is simply this. It is not possible 
to fund social programs, including those for retirees, with 
large numbers of immigrants with relatively little education. 
Unfortunately, the Senate bill ignores this basic common sense.
    Thank you.

    [The prepared statement of Mr. Camarota follows:]
 Statement of Steven A. Camarota, Ph.D., Director of Research, Center 
                        for Immigration Studies
Summary
    There is general agreement that the fiscal impact of immigration 
depends largely on the education level of the immigrants in question. 
Immigrants with a lot of education pay more in taxes than they use in 
services, while those with little education tend to have low incomes, 
pay relatively little in taxes and often use a good deal in public 
services. In the case of illegal alien, the vast majority have little 
education, and this is the key reason they create fiscal costs. Illegal 
families often receive benefits on behalf of their U.S.-born children. 
As a general proposition, the large scale immigration of less-educated 
immigrants (legal or illegal) creates significant funding problems for 
social programs, including those for retirees, even though the 
immigrants work.
Key Findings of Research:
The Fiscal Impact of Immigration Generally
      The National Research Council (NRC) \1\ estimated that 
immigrant households create a net fiscal burden (taxes paid minus 
services used) on all levels of government of $20.2 billion annually.
---------------------------------------------------------------------------
    \1\ The National Research Council's 1997 is report entitled, The 
New Americans: Economic, Demographic, and Fiscal Effects of 
Immigration. A summary of the report's findings can be found at 
www.cis.org/articles/1999/combinednrc.pdf.
---------------------------------------------------------------------------
      The NRC estimated that an immigrant without a high school 
diploma will create a net lifetime burden of $89,000, an immigrant with 
only a high school education it is negative $31,000. However, an 
immigrant with education beyond high school is a fiscal benefit of 
$105,000.
      Estimating the impact of immigrants and their 
descendants, the NRC found that if today's newcomers do as well as past 
generations, the average immigrant will be a fiscal drain for his first 
22 years after arrival. It takes his children another 18 years to pay 
back this burden.
      The NRC also estimated that the average immigrant plus 
all his descendants over 300 years would create a fiscal benefit, 
expressed in today's dollars of $80,000. Some immigration advocates 
have pointed to this 300-year figure, but the NRC states it would be 
``absurd'' to do so.
Illegal Immigration
      The Center for Immigration Studies (CIS) estimates that 
in 2002 illegal alien households imposed costs of $26 billion on the 
federal government and paid $16 billion in federal taxes, creating an 
annual net fiscal deficit of $10.4 billion at the federal level, or 
$2,700 per household.\2\
---------------------------------------------------------------------------
    \2\ These estimates and those that follow dealing with illegal 
immigration come a Center for Immigration Studies report entitled, The 
High Cost of Cheap Labor: Illegal Immigration and the Federal Budget. 
The Report can be found online at www.cis.org/articles/2004/fiscal.pdf.
---------------------------------------------------------------------------
      Among the largest costs, were Medicaid ($2.5 billion); 
treatment for the uninsured ($2.2 billion); food assistance programs 
such as food stamps, WIC, and free school lunches ($1.9 billion); the 
federal prison/court systems ($1.6 billion); and federal aid to schools 
($1.4 billion).
      If illegal aliens were legalized and began to pay taxes 
and use services like households headed by legal immigrants with the 
same education levels, CIS estimates the annual net fiscal deficit 
would increase to $29 billion, or $7,700, per household.
      The primary reason illegal aliens create a fiscal deficit 
is that an estimated 60 percent lack a high school degree and another 
20 percent have no education beyond high school. The fiscal drain is 
not due to their legal status or unwillingness to work.
      Illegal alines with little education are a significant 
fiscal drain, but less-educated immigrants who are legal residents are 
a much larger fiscal problem because they are eligible for many more 
programs.
      Many of the costs associated with illegals aliens are due 
to their U.S.-born children who have American citizenship. Thus, 
barring illegal aliens themselves from federal programs will have 
little impact on costs.
      Focusing just on Social Security and Medicare, CIS 
estimates that illegal households create a combined net benefit for 
these two programs in excess of $7 billion a year. However, they create 
a net deficit of $17 billion in the rest of the budget, for a total net 
federal cost of $10 billion.
Funding for Retirement Programs
      Immigration has only a very small impact on the aging of 
society because although immigrants arrive relatively young, and have 
higher fertility than natives, they age like everyone else, and the 
differences with natives are not large enough to fundamentally alter 
the nation's age structure.
      In 2000 the average age of an immigrant was 39, which is 
actually about four years older than the average age of a native-born 
American.\3\
---------------------------------------------------------------------------
    \3\ These figures and those that follow dealing with the Social 
Security system can be found in a Center for Immigration Studies 
report, entitled, Immigration in an Aging Society: Workers, Birth 
Rates, and Social Security, which is available online at: www.cis.org/
articles/2005/back505.pdf. The data for the Center's Social Security 
study comes from the 2004 trustee's report which can be found online 
at: www.socialsecurity.gov/OACT/TR/TR04/index.html and from additional 
data provide by the SSA to Senators Chuck Hagel, which can be found 
online at: www.nfap.net/researchactivities/studies/
Appendix1toSocialSecurityStudy.pdf.
---------------------------------------------------------------------------
      If all post-1980 immigrants and all the children they 
have had are excluded from the 2000 Census, the working-age (15 to 64 
years old) share of the population would be 65.9, almost exactly the 
same as the 66.2 percent when they are all included.
      Looking to the future, Census Bureau projections indicate 
that if net immigration averaged 100,000 to 200,000 annually, the 
working-age share would be 58.7 percent in 2060, if net immigration 
average roughly 900,000 to one million, it would be still be 59.5 
percent.\4\
---------------------------------------------------------------------------
    \4\ The Census Bureau's population estimates from 2000 can be found 
at www.census.gov/population/www/documentation/twps0038.pdf. Table E on 
page 28 reports the different net immigration assumptions and Table F 
on page 29 reports the impact of these assumptions on the dependency 
ratio.
---------------------------------------------------------------------------
      The Social Security Administration (SAA) projections show 
that, net annual legal immigration of 800,000 a year over the next 75 
years versus 350,000 a year would create a benefit equal to less than 1 
percent of the program's projected total expenditures.
      As for the program's deficit, net annual legal 
immigration of 350,000 a year versus 800,000 would increase the dollar 
value of the actuarial deficit by just 6.6 percent over the next 75 
years.
      It is not clear that even this small benefit exists, 
because SSA does not take into account the lower average earnings and 
resulting lower average tax payments of legal immigrants.
      SSA also does not consider the Earned Income Tax Credit 
(EITC), which is explicitly designed to give back Social Security tax 
payments to low-wage earners. Legal immigrants use the EITC at 
significantly higher rates than natives.
      If illegal alines are legalized and began to receive the 
EITC at the same rate as legal immigrants with the same education, CIS 
estimates that costs for the Credit would increase 10-fold.\5\

    \5\ See footnote 2.
---------------------------------------------------------------------------
    Immigration's impact on public coffers has long been at the center 
of the immigration debate. Until recently, however, we actually had 
very little reliable data on the subject. While there is still much 
that is not known, we now have some reasonably good information about 
this important topic. As I tried to make clear in the summary above, 
there is a pretty clear consensus that the fiscal impact of immigration 
depends on the education level of the immigrants. Certainly other 
factors also matter, but the human capital of immigrants, as economists 
like to refer to it, is clearly very important. There is no signal 
better predictor of one's income, tax payments or use of public 
services in modern America than one's education level. The vast 
majority of immigrants come as adults, and it should come as no 
surprise that the education they bring with them is a key determinate 
of their fiscal impact. It is simply not possible to fund social 
programs, including those for retirees, by bringing in large numbers of 
immigrants with relatively little education and resulting low incomes.
    In my own research I have concentrated in two areas: the effect of 
illegal aliens on the federal government and the impact of immigration 
more generally on the Social Security system. I can only briefly touch 
on these two topics in my testimony. For those wanting a more detailed 
look at these questions, my most recent publications are available 
online at the Center for Immigration Studies web site, www.cis.org. My 
most recent studies of these issues are, ``The High Cost of Cheap 
Labor: Illegal Immigration and the Federal Budget'' and ``Immigration 
in an Aging Society: Workers, Birth Rates and Social Security.''
Illegal Immigrants and the Federal Budget
    A good deal of research has focused on the effect illegal have on 
taxpayers at the state and local level. Much of this work has examined 
only costs, or only tax payments, but not both. In my work I have tried 
to estimated both, and I have focused on the federal government. In 
Based on a detailed analysis of Census Bureau data, my analysis 
indicates that households headed by illegal aliens imposed more than 
$26.3 billion in costs on the federal government in 2002 and paid $16 
billion in taxes, creating a net fiscal deficit of almost $10.4 
billion, or $2,700 per illegal household. The largest costs are 
Medicaid ($2.5 billion); treatment for the uninsured ($2.2 billion); 
food assistance programs such as food stamps, WIC, and free school 
lunches ($1.9 billion); the federal prison and court systems ($1.6 
billion); and federal aid to schools ($1.4 billion).\6\
---------------------------------------------------------------------------
    \6\ See footnote 2 for the source of this information and all 
information dealing with the fiscal costs of illegal immigration on the 
Federal budget.
---------------------------------------------------------------------------
    A Complex Fiscal Picture. While the net fiscal drain they create 
for the federal government is significant, I also found that the costs 
illegal households impose on federal coffers are less than half that of 
other households, but their tax payments are only one-fourth that of 
other households. Many of the costs associated with illegals are due to 
their American-born children, who are awarded U.S. citizenship at 
birth. Thus, greater efforts to bar illegals from federal programs will 
not reduce costs because their citizen children can continue to access 
them. It must also be remember that the vast majority of illegals hold 
jobs. Thus the fiscal deficit they create for the federal government is 
not the result of an unwillingness to work. In 2002, I found that 89 
percent of illegal households had at least one person working compared 
to 78 percent of households headed by legal immigrants and natives.
    Legalization Would Dramatically Grow Costs. One of my most 
important findings with regard to illegal aliens is that if they were 
given legal status and began to pay taxes and use services like 
households headed by legal immigrants with the same education levels, 
the estimated annual net fiscal deficit would increase from $2,700 per 
household to nearly $7,700, for a total net cost of $29 billion. Costs 
increase dramatically because less-educated immigrants with legal 
status--what most illegal aliens would become--can access government 
programs, but still tend to make very modest tax payments. Of course, I 
also found that their income would rise, as would their tax payment if 
legalized. I estimate that tax payments would increase 77 percent, but 
costs would rise by 118 percent.
    These costs are considerable and should give anyone who advocates 
legalizing illegal immigrants serious pause. However, my findings show 
that many of the preconceived notions about the fiscal impact of 
illegal households turn out to be inaccurate. In terms of welfare use, 
receipt of cash assistance programs tends to be very low, while 
Medicaid use, though significant, is still less than for other 
households. Only use of food assistance programs is significantly 
higher than that of the rest of the population. Also, contrary to the 
perceptions that illegal aliens don't pay payroll taxes, we estimate 
that more than half of illegals work ``on the books.'' On average, 
illegal households pay more than $4,200 a year in all forms of federal 
taxes. Unfortunately, they impose costs of $6,950 per household.
    What's Different About Today's Immigration. It is worth noting that 
many native-born Americans observe that their ancestors came to America 
and did not place great demands on government services. Perhaps this is 
true, but the size and scope of government was dramatically smaller 
during the last great wave of immigration. Not just means-tested 
programs, but expenditures on everything from public schools to roads 
were only a fraction of what they are today. Thus, the arrival of 
immigrants with little education in the past did not have the negative 
fiscal implications that it does today. Moreover, the American economy 
has changed profoundly since the last great wave of immigration, with 
education now the key determinant of economic success. The costs that 
unskilled immigrants impose simply reflect the nature of the modern 
American economy and welfare state. It is doubtful that the fiscal 
costs can be avoided if our immigration policies remain unchanged.
    Illegals and Federal Retirement Programs. As for Social Security 
and Medicare, our findings show that illegals have an unambiguously 
positive effect for these two programs. We estimate that illegal 
households create a combined net benefit for these two programs in 
excess of $7 billion a year, accounting for about 4 percent of the 
total annual surplus in these two programs. Unfortunately, they create 
a net drain of $17 billion in the rest of the federal budget, for a 
total net loss of more than $10 billion. Nonetheless, their impact on 
Social Security and Medicare is unquestionably positive. Of course, the 
benefit to these two programs stems from the fact that they are 
illegal. In the long run, legalization would be a significant problem 
for these two programs because it would add millions of low-wage earns 
to the system. Also, if the Social Security totalization agreement with 
Mexico goes into effect, which allows illegals to collect Social 
Security, the impact could be very negative for both programs as well.
    Policy Options for Dealing With Illegal Immigration. The negative 
impact on the federal budget from illegal immigration need not be the 
only or even the primary consideration when deciding what to do about 
illegal immigration. But assuming that the fiscal status quo is 
unacceptable, there are three main changes in policy that might reduce 
or eliminate the fiscal costs of illegal immigration. One set of 
options is to allow illegal aliens to remain in the country, but 
attempt to reduce the costs they impose. A second set of options would 
be to grant them legal status as a way of increasing the taxes they 
pay. A third option would be to enforce the law and reduce the size of 
the illegal population and with it the costs of illegal immigration.
    Let Illegal Stay Illegal, But Cut Costs. Reducing the costs 
illegals impose would probably be the most difficult because illegal 
households already impose only about 46 percent as much in costs on the 
federal government as other households. Moreover, the fact that 
benefits are often received on behalf of their U.S.-citizen children 
means that it is very difficult to prevent illegal households from 
accessing the programs they do. It seems almost certain that if 
illegals are allowed to remain in the country, the fiscal deficit will 
persist.
    The High Cost of Legalization. As discussed above, our research 
shows that granting illegal aliens amnesty would dramatically increase 
tax revenue. Unfortunately, we also find that costs would increase even 
more. Costs would rise dramatically because illegals would be able to 
access many programs that are currently off limits to them. Moreover, 
even if legalized illegal aliens continued to be barred from using some 
means-tested programs, they would still be much more likely to sign 
their U.S.-citizen children up for them because they would lose 
whatever fear they had of the government. We know this because 
immigrants with legal status, who have the same education levels and 
resulting low incomes as illegal aliens, sign their U.S.-citizen 
children up for programs like Medicaid at higher rates than illegal 
aliens with U.S.-citizen children. In addition, direct costs for 
programs like the Earned Income Tax Credit would also grow dramatically 
with legalization. Right now, illegals need a Social Security number 
and have to file a tax return to get the credit. As a result, 
relatively few actually get it. We estimate that once legalized, 
payments to illegals under this program would grow more than ten-fold.
    Enforcing the Law. If we are serious about avoiding the fiscal 
costs of illegal immigration, the only real option is to enforce the 
law and reduce the number of illegal aliens in the country. First, this 
would entail much greater efforts to police the nation's land and sea 
borders. At present, less than 2,000 agents are on duty at any one time 
on the Mexican and Canadian borders. Second, much greater effort must 
be made to ensure that those allowed into the country on a temporary 
basis, such as tourists and guest workers, are not likely to stay in 
the country permanently. Third, the centerpiece of any enforcement 
effort would be to enforce the ban on hiring illegal aliens. At 
present, the law is completely unenforced. Enforcement would require 
using existing databases to ensure that all new hires are authorized to 
work in the United States and levying heavy fines on businesses that 
knowingly employ illegal aliens.
    Policing the border, enforcing the ban on hiring illegal aliens, 
denying temporary visas to those likely to remain permanently, and all 
the other things necessary to reduce illegal immigration will take time 
and cost money. However, since the cost of illegal immigration to the 
federal government alone is estimated at over $10 billion a year, 
significant resources could be devoted to enforcement efforts and still 
leave taxpayers with significant net savings. Enforcement not only has 
the advantage of reducing the costs of illegal immigration, it also is 
very popular with the general public. Nonetheless, policymakers can 
expect strong opposition from special interest groups, especially 
ethnic advocacy groups and those elements of the business community 
that do not want to invest in labor-saving devices and techniques or 
pay better salaries, but instead want access to large numbers of cheap, 
unskilled workers. If we choose to continue to not enforce the law or 
to grant illegals legal status, both the public and policymakers have 
to understand that there will be significant long-term costs for 
taxpayers.

Immigration and Federal Retirement Programs
    Many advocates argue for high levels of immigration on the grounds 
that it can solve the problem of our aging population. Those that make 
this argument worry that there will not be enough working-age people to 
support the economy or pay for government, particularly retirement 
programs. Immigration, it is argued, will make the country more 
youthful. Almost all of those making this argument, however, are not 
demographers. Actual demographic analysis shows immigration can have 
only a very tiny effect on the nation's age structure.
    Basic Demographics. We can measure the impact of current 
immigration on the aging of the United States very precisely. The 
Census asks immigrants when they arrived. (Some 90 percent of illegal 
immigrants are thought to have responded to the 2000 Census.) If we 
excluded all immigrants, including illegals, who arrived after 1980 
from the 2000 Census, the average age in the United States would have 
only been four months older. Another way to look at the aging of 
society is to examine the working-age (15 to 64) share of the 
population. Looking at the full impact of post-1980 immigrants reveals 
that if they and all their U.S.-born children are not counted, the 
working-age share would have been 65.9 percent in 2000, almost exactly 
the same as the 66.2 percent when they are all included. We can also 
look at fertility rates. In 2000 the average woman living in America 
had 2.1 children in her life time, compared to 1.4 for Europe. But if 
all immigrants are excluded the rate would still have been 2.0. The key 
to understanding why America has higher fertility than other 
industrialized democracies is not immigration. The relatively high U.S. 
fertility is one of the key reasons immigration has such a small impact 
on the aging of American society.\7\
---------------------------------------------------------------------------
    \7\ See footnote 3 for the source of information dealing with the 
impact of immigration on demographics in the United States and the 
Social Security system.
---------------------------------------------------------------------------
    Immigration's Projected Impact on Aging. Looking to the future, 
Census Bureau projections indicate that if net immigration averaged 
100,000 to 200,000 annually, the working-age share would be 58.7 
percent in 2060, while if net immigration averaged 900,000 to one 
million, it would be 59.5 percent A 2000 report by Census Bureau states 
that immigration is a ``highly inefficient'' means for addressing the 
ratio of working-age people to the rest of the population in the long 
run. The argument that immigration can have a significant impact on the 
aging of our society may seem plausible. Immigrants tend to arrive in 
America relatively young and they also tend to have more children than 
natives. But an evaluation of the actual data shows that the difference 
between immigrants and natives is not sufficiently large, nor are 
immigrants sufficiently numerous to be of any real help in changing the 
nation's age structure. Moreover immigrants age just like everyone 
else. Americans will simply have to look elsewhere to deal with this 
problem.\8\
---------------------------------------------------------------------------
    \8\ See footnote 3.
---------------------------------------------------------------------------
    Impact on Retirement Programs. Because, as pointed out above, 
immigration has little impact on the working-age share of the 
population, it follows that it will have only a very small impact on 
federally funded retirement programs. One can see this by looking at 
Social Security Administration (SSA) projections. The 2004 trustee's 
report, along with other information provided to Senator Hagel, 
indicate that net annual legal immigration of 800,000 a year versus 
350,000 a year would create a benefit equal to only 0.77 percent of the 
program's projected total expenditures. As for the program's deficit, 
annual legal immigration of 350,000 versus 800,000, would increase the 
dollar value of the actuarial deficit by just 6.6 percent of the 
projected deficit over the next 75 years. The bottom line is that even 
very large shifts in the number of people allowed into the country have 
only a minor impact on the program.\9\
---------------------------------------------------------------------------
    \9\ See footnote 3.
---------------------------------------------------------------------------
    Low-wage Workers Are a Problem for Social Security. It not even 
clear that the modest benefits estimated by the SSA from immigration 
actually exist. The SSA immigration projections do not account for the 
lower average income and resulting tax payments of legal immigrants. 
SSA basically assumes that legal immigrants will have average earnings 
from the moment they arrive, which is contrary to a large body of 
research. A 1998 study by the Urban Institute, which is generally 
regarded as a supporter of high immigration, found that legal 
immigrants in New York State paid only 85 percent as much in Social 
Security taxes as natives on average. This also matters because Social 
Security is redistributive in nature, making somewhat more generous 
payments to lower-wage earners relative to their tax contributions, 
than to more affluent earners.
    The lower income of immigrants also has implications for Earned 
Income Tax Credit (EITC), which as the IRS states on its web site, was 
partly created by Congress to ``offset the burden of Social Security 
taxes'' on low-wage workers. For example, a family of four (with two 
children) and earned income of $25,000 a year would received about 
$2,100 from the EITC in 2004, compared to Social Security tax payments 
of roughly $1,600, not including the employer contributions. The Center 
for Immigration Studies has estimated that households headed by legal 
immigrants received an average of $392 from the EITC in 2002 compared 
to $209 for native headed households. The SSA makes no attempt to 
adjust for the existence of the EITC in its projection, which are 
focused solely on Social Security. Even putting aside the EITC and the 
lower average earnings of immigrants, Census Bureau and SSA projection 
show that immigration of any kind can have only a modest impact on the 
aging of society and thus the Social Security system.

Conclusion
    If you take nothing else away from my testimony, it should be 
remembered that it simply is not possible to fund social programs, 
including those for retirees, by bringing in large numbers of 
immigrants with relatively little education. This is central to the 
debate over illegal immigration debate because 60 percent of illegals 
are estimated to have not completed high school and another 20 have 
only a high school degree. The fiscal problem created by less-educated 
immigrants exists even though the vast majority of immigrants, 
including illegals, work and did not come to America to get welfare. 
The realities of the modern American economy coupled with the modern 
American administrative state make large fiscal costs an unavoidable 
problem of large scale less-educated immigration.
    This fact does not reflect a moral defect on the part of 
immigrants. What it does mean is that we need an immigration policy 
that reflects the reality of modern America. We may decide to let 
illegals stay and we may even significantly increase the number of 
less-educated legal immigrants allowed into the country, which is what 
the immigration bill recently passed by the Senate would do. But we 
have to at least understand that such a policy will create large 
unavoidable costs for taxpayers.

                               

    Mr. MCCRERY. Thank you both, gentlemen, for your testimony. 
You both spoke primarily about identifiable fiscal effects on 
the Federal Government. What about a bigger economic effect?
    I hear quite often and read that these illegal immigrants 
are filling jobs that nobody else in this country will do, and 
that the agriculture industry really needs these workers to go 
in the fields and gather the crops, that the service industry 
really needs these workers to fill the jobs in the service 
industry, whether it is hotels or restaurants, that services 
for landscaping needs this, and on and on.
    Is that true? Do either of you have any research on that or 
an opinion on that?
    Mr. FIX. I think it is definitely true there is a demand 
for the labor in these comparatively low wage occupations, low 
skilled occupations. There has been an explosion in the numbers 
of people working in the low wage service sector. Agricultural 
workers have not declined significantly, as was expected. We 
did not think we would have two million field workers 20 years 
ago when we were thinking about the future.
    There is obviously a big demand here. It is not met at any 
level with the number of legal visas or legal opportunities to 
enter, that are in any way commensurate with the number of jobs 
in the sector.
    You have suggested another point, which is very important, 
which is you have to step back to think about the merits of the 
Senate bill. The fiscal impacts are very important, and I would 
not discount them.
    As Eugene Steurle, a tax economist at the Urban Institute 
points out to me all the time, the public sector represents 
about 10 percent of the total economy and a lot of the 
contributions of these populations, even though they may 
produce a fiscal deficit, their larger economic impacts may 
really look rather different.
    Mr. CAMAROTA. Let me answer it in a couple of ways. One is 
that the most definitive study done on the economic benefits of 
immigration was done by the National Research Council, part of 
the National Academy of Sciences.
    The report is called ``The New Americans.'' What they found 
is look, you add more workers, the economy is bigger, but is it 
richer?
    The impact on natives was mainly to drive down the wages of 
the poorest 10 percent, but the benefit to natives was so 
small, they could barely measure it, one tenth of one percent. 
You cannot add lots of unskilled workers to an economy like 
ours, which is mostly made up of skilled workers and capital, 
and get a big economic boost.
    What the lead author in that report, George Borjas at 
Harvard, who did the economic analysis for the National 
Research Council, pointed out is that the benefits that come 
from immigration would appear to be minuscule for natives, but 
huge for the immigrants themselves. That is something to think 
about.
    What is happening generally in the U.S. economy is native 
born Americans who would compete at the bottom end of the labor 
market, these are the 16 or 17 million native born Americans 
who do not have a high school education, and then there is 
about 10 million young natives who have only a high school 
education but they are in their twenties, they have been 
dropping out of the labor market in droves, in just the last 5 
years, three million fewer of those people hold a job.
    The actual number of these people in the working age groups 
has gone up, but natives with little education have been 
leaving the labor market in droves, and these are precisely the 
kind of people who, until very recently, worked in 
construction, worked in food service, and worked in hotel and 
restaurant maintenance.
    In fact, the vast majority of workers in all those 
occupations are still native born.
    When more educated and effluent people say illegal aliens 
only take jobs Americans do not want, what they really mean is 
they take jobs that I do not want, as a more educated and 
effluent American, since the vast majority of people who do 
those jobs are native born, and their wages are down, their 
unemployment is up, and their workforce participation has also 
fallen. Things look very bad for less educated natives.
    All the objective economic evidence suggests there simply 
is no shortage of high school drop outs in America or young 
people with only a high school degree.
    Mr. MCCRERY. If all of the illegal immigrants who are here 
were found and deported, you have no concerns that we could 
find the workforce to fill all these jobs?
    Mr. FIX. In fact, the number of U.S. born drop outs has 
been dropping quite rapidly over the years. If I could add to 
that, there is very little literature--we have just done a 
review of this--I have to say there is very little literature 
that supports a strong competitive wage effect. In the main 
literature, these strong competitive effects are not found.
    Mr. CAMAROTA. What Mr. Fix is referring to is literature 
that tries to look at wages. If you have lots of immigrants, 
does it seem to reduce wages.
    I think the evidence on that--we disagree on the 
literature. I think it is pretty significant, but it is 
confined to the poorest and most vulnerable American workers.
    The bottom line is this. If there is no wage effect, then 
there is no economic benefit. You cannot argue that immigration 
creates large economic benefits for the United States but wages 
in hotels and construction and so forth are exactly the same 
with or without immigrants.
    You cannot have it both ways. You cannot be a single 
married man. Either immigration saves consumers a lot of money 
by holding down labor costs or it has very little or no effect 
on wages.
    If you say it has no effect on wages, then you are saying 
it has no significant economic benefits for everyone else. 
Businesses could do the same with or without them, is what you 
are saying. Their presence is not having an effect.
    In terms of could we get rid of them and be okay, yes, I 
think we could. It would not happen overnight. As I understand 
the approach in the House bill, it is attrition through 
enforcement. Go after the employers. Police the border. Get the 
cooperation of local law enforcement, and over time make many 
more illegal aliens go home on their home then come in.
    Even if there is any temporary disruption, it happens 
gradually. There are millions--let me give you a statistic. 
There are seven million native born Americans of working age 
who do not have a high school degree who are not even in the 
labor market.
    There are something like 13 million natives of working age 
who have only a high school degree who are not in the labor 
market. These figures do not even include the unemployed.
    Mr. MCCRERY. Why would they enter the labor market?
    Mr. CAMAROTA. My contention would be in the absence of 
immigration, wages, benefits and working conditions would 
improve. We would expect that a larger share would go into the 
labor market.
    There is no such thing as a job Americans do not do, 
depending on the wage. When I worked in farm work in New Jersey 
20 some years ago, that job paid over $7 an hour, adjusted for 
inflation, it would have to be over $16 an hour today. Farm 
jobs pay generally speaking $8 to $12 an hour.
    There has been a significant decline in wages in the farm 
sector in the last 25 years. That is strong prima facie 
evidence there is no labor shortage.
    Mr. MCCRERY. There is a reason I did not study economics. 
You two are illustrating that quite well. I think you have just 
used both hands.
    I do not think there is anyone who disagrees with one of 
Dr. Camarota's principal themes, which is given a choice, we 
would rather have immigrate to this country people with higher 
educations. Clearly, there is a bigger bang for the buck, so to 
speak, if we get a highly educated immigrant, a scientist, an 
engineer, than an immigrant with very little formal education.
    I am hopeful that when we do get a comprehensive 
immigration policy reform in this country, and I think we will, 
we have to, we are certainly going to invite more highly 
skilled, highly educated immigrants to join us in this country.
    I think it is a real question, and demonstrated by your 
conflicting testimonies and opinions, as to whether we should 
close the door on lower skilled, lower educated immigrants.
    If you would, just kind of sum up. Mr. Fix, you talked 
about the ripple effects through the economy of immigration, 
positive impacts. Can you just kind of talk about that a 
minute?
    Dr. Camarota, if you want to respond about any negative 
ripple effects.
    Mr. FIX. I would simply reiterate a number of the 
statements that I made earlier. When you look at these cost 
accounts of the impacts of immigration on the economy, one of 
the problems is they simply cannot take into account a couple 
of things.
    First of all, entrepreneurship and the spill over effects 
of job creation that immigrant entrepreneurship generates. We 
know immigrants are more likely to be self employed than 
natives, as well as the tax effects of entrepreneurship.
    I think another piece of the puzzle which is often left out 
is the consumption of immigrants. We forget that immigrants 
spend a lot of money and their money ripples through the 
economy and creates jobs for natives as well.
    Immigrants are more mobile than are natives, and they move 
to jobs, and by moving to jobs, they make the economy more 
fluid and they make it more productive.
    Finally, the point that you just made, I just want to 
underscore the point that you have made, that high skilled 
immigrants are incredibly important to the economy and to the 
productivity of the economy, and in particular, to innovation 
within the U.S. economy.
    In terms of low skilled immigrants, I think we have to be 
realistic. Our economy is structured in many ways so that it 
needs lots of low wage, comparably low skilled workers.
    It would be good if we could manage that supply, manage 
that flow. This is a global flow. We should regulate that flow. 
If we do regulate that flow, perhaps we could move to higher 
wages, as Steve has suggested.
    To just ignore that these people are going to come and 
these jobs are going to be created and we can exclude them 
through attrition, I do not think it is realistic at this stage 
in the game.
    Thank you.
    Mr. CAMAROTA. Let me answer it this way. If the argument is 
look, we just cannot enforce our law. People want to come to 
America, and quite frankly, it does not matter what this 
Congress--if we want to let a million legal immigrants a year 
but another million foreigners want to break our laws and come, 
tough. We have to accept that.
    I would urge Congress to reject that fundamentally anti-
democratic position. It is we who decide how many come in and 
then we enforce the law. We do not say, well, look, the 
willingness of foreigners to break our laws really should be 
the key determinant. Another million want to come on top of the 
legal million that we let in, we just have to let them in.
    I think that is fundamentally un-democratic and a very 
dangerous argument to go down in a democratic republic.
    We decide how many come in and then we enforce. If we want 
two million, then we should have two million a year, instead of 
the one million.
    On the question of entrepreneurship, let me say I believe 
Michael and I just have a fundamentally different view of this. 
I think all the literature shows that now natives have slightly 
higher self employment rates.
    The current population surveys show this. The census shows 
this. For example, the 2005 current population survey showed 
that 11 percent of immigrants were self employed and 13 percent 
of natives were self employed.
    It is true that historically, immigrants once had a higher 
entrepreneurship rate. That is no longer the case.
    On this point, I guess we disagree, and it has not been 
true for a number of years now. Immigrant entrepreneurship has 
fallen a lot, partly because the education level of immigrants 
relative to natives has deteriorated.
    On a larger question, let me sum it up this way, when the 
National Research Council looked at this question, again, they 
found the economy is bigger, the immigrants benefit, but the 
benefit to natives appears to be so small, that they could 
barely find it, one-tenth of 1 percent increase in the income 
or per capita Gross Domestic Product of natives.
    You cannot get a big boost to the U.S. economy by 
increasing the supply of unskilled workers. That is the big 
effect that immigration has on the United States, because 
fully, one-third of all the foreign-born in the United States 
have not completed high school.
    Thank you.
    Mr. MCCRERY. Thank you both for your testimony and your 
patience today. I would just say, Dr. Camarota, I do not think 
anybody is suggesting that we not enforce our laws.
    What some are suggesting is that we change our laws, and we 
change our underlying policy. I think that is a legitimate area 
for Congress to explore. That is what we do.
    We are certainly not suggesting that we not enforce our 
laws, but maybe we need to change our laws to accommodate more 
immigrants or a different mix of immigrants or whatever.
    Clearly, we need to be able to enforce our laws. That is 
certainly part of the equation of protecting our border, being 
able to enforce our border is certainly part of the overall 
equation.
    I think we also have to look, as the President has 
suggested, at the other parts of the equation, which would 
include the mix of immigrants, and the overall number of 
immigrants that we would like to join us here.
    Those are the questions we are trying to explore. Yes, we 
do need to know the impact of those various proposals for 
change on the Social Security system, on other benefit 
programs, and that is why we appreciate your coming today and 
sharing with us your expertise on those issues.
    Thanks very much. The hearing is adjourned.

    [Whereupon, at 5:55 p.m., the hearing was adjourned.]

    [Questions submitted from Chairman Thomas to Ms. Barnhart, 
Mr. Everson, and Ms. Myers, and their responses follow:]
     Questions from Chairman William Thomas to Ms. Jo Anne Barnhart
    Question: What effect did the last major immigration reform--The 
Immigration Reform and Control Act 1986 (P.L. 99-603) have on the 
Social Security Administration's (SSA's) workloads?

    [The response from Ms. Barnhart not received at time of printing.]

    Question: What new workloads would the Senate-passed Comprehensive 
Immigration Reform Act (S. 2611) create for the SSA, and how would 
these additional workloads affect current workloads? In other words, if 
the Senate bill were enacted, would you expect retirees and individuals 
with disabilities to have to wait even longer for their claims to be 
processed? Would Americans who need to conduct business at their local 
Social Security office have to wait in even longer lines?

    [The response from Ms. Barnhart not received at time of printing.]

    Question: What percent of the work authorizations performed by the 
Basic Pilot are processed by the SSA versus the Department of Homeland 
Security (DHS)? What work is involved, other than a data match between 
SSA computers and DHS computers? How many employees and how many 
dollars does it take for the SSA to conduct its share of the Basic 
Pilot--name, SSN, & U.S. citizenship verification? What would be the 
effect on the SSA's workloads of a mandatory Basic Pilot program? Will 
the SSA have the capacity to handle the increased number of 
verifications that would be required under either the Border 
Protection, Antiterrorism, and Illegal Immigration Control Act of 2005 
(H.R. 4437) or the Comprehensive Immigration Reform Act (S. 2611)?

    [The response from Ms. Barnhart not received at time of printing.]

    Question: The current ``no-match'' letter the SSA sends to 
employers when they submit W-2s with names and SSNs that do not match 
the SSA's records contains language saying the employer should not take 
adverse action against the employee due to the letter. The DHS rule 
could eventually result in the employee being fired if the discrepancy 
identified in the no-match letter is not resolved. Did the DHS consult 
with the SSA in developing the rule? Does the SSA plan to change any of 
the language in the letter if the DHS rule becomes final?

    [The response from Ms. Barnhart not received at time of printing.]

                               

       Questions from Chairman William Thomas to Mr. Mark Everson

    Question: The Social Security Administration (SSA) provides SSN 
(SSN) information to the Internal Revenue Service (IRS) along with an 
indicator showing whether the SSN was issued to the individual for a 
non-work purpose (i.e., the SSN recipient was not authorized to work in 
the United States at the time the SSN was issued). The IRS has 
explained that it cannot estimate the amount of Earned Income Tax 
Credit (EITC) dollars paid in error because the SSA's indicator does 
not specify whether the non-work SSN was issued solely for the purpose 
of receiving Federal benefits versus another non-work purpose. Would 
you please clarify the rules regarding eligibility for the EITC for 
non-citizens who are not authorized to work in the United States, and 
explain whether the IRS is able to detect EITC fraud and enforce the 
law based on the information it receives from the SSA?

    Answer: In 1996, Congress enacted a provision (IRC sec. 32(m)) that 
was intended to deny the EITC to noncitizens who were not authorized to 
work in the United States. However, this provision requires noncitizens 
EITC claimants to provide a SSN issued for work purposes for themselves 
and their qualifying children. It explicitly denies the EITC to 
noncitizens who are not authorized to work in the United States but 
who, under clause (II) of sec. 205(c)(2)(B)(i) of the Social Security 
Act, obtain an SSN solely for the purpose of claiming Federally funded 
government benefits (such as public assistance).
    The 1996 Act also gave the IRS the authority to automatically deny 
such claims during processing using ``mathematical error'' procedures. 
(Without mathematical error authority, the IRS can still deny 
ineligible claims through the examination process. However, more 
ineligible claims can be denied through the less labor-intensive 
mathematical error procedures.)
    At the time of enactment, it was thought that this provision would 
effectively restrict EITC eligibility to U.S. citizens, permanent 
residents (``green card'' holders), and other noncitizens who obtain an 
SSN because their visas authorize them to work in the United States. 
These individuals are entitled to obtain an SSN under clause (I) of 
sec. 205(c)(2)(B)(i) of the Social Security Act.
    However, Sec. 32(m) inadvertently allows some undocumented workers 
to receive the EITC. Prior to October 2003, it was possible for some 
undocumented workers to receive SSNs for certain reasons other than to 
obtain federal benefits--e.g., to obtain a driver's license in some 
states or, before the adoption of ITINs, to file a tax return. In 
addition, it is still possible for some noncitizens who are legally in 
the United States without authorization to work to receive SSNs for 
state general assistance benefits. Further, while SSA records contain 
an indicator showing that an SSN holder is not authorized to work in 
the United States, the records do not distinguish between those who 
receive an SSN in order to obtain federal government benefits and those 
who obtain an SSN for other nonwork purposes. As a result, the IRS has 
never used its mathematical error authority to deny EITC claims of 
certain noncitizens, for fear of denying the credit to individuals who 
are technically eligible (albeit undocumented workers).
    In the FY 2007 budget, the Administration proposed that sec. 32(m) 
be rewritten to state that for purposes of the EITC, IRS will recognize 
only an SSN assigned either to a citizen of the United States or 
pursuant to clause I of section 205(c)(2)(B)(i) of the Social Security 
Act. This modification would effectively deny EITC eligibility to 
individuals who were assigned SSNs for any non-work reason--as was the 
intent of Congress in 1996. Further, this modification would allow the 
IRS to implement the existing math error authority to deny the EITC to 
undocumented workers, because the IRS would be able to use SSA and DHS 
provided data to detect claimants who were neither U.S. citizens nor 
work-authorized aliens and thus ineligible for the EITC.

    Question: The Senate proposal requires the Treasury Secretary to 
establish rules and procedures for the IRS to determine an illegal 
alien's payment of taxes in exchange for legal status. It seems that 
this requirement would place an undue burden on the IRS. How would the 
IRS know if a taxpayer reported all of his or her income and how would 
the IRS ensure that those ineligible to receive tax credits and refunds 
did not receive them for previous years?

    Answer: Upon request, we are able to provide taxpayers, including t 
onewho has filed using Individual Tax Identification Numbers (ITINs), a 
transcript of his or her tax records. However, this process would not 
provide a verification of the accuracy of the tax return or information 
the taxpayer has submitted. Due to disclosure concerns, we would also 
not provide information to a taxpayer on multiple identification 
numbers, which might be necessary if the taxpayer had been filing 
Federal income tax returns using various ITINs or SSNs belonging to 
other taxpayers. To take the necessary steps to verify that all income 
has been reported and prior year credits and refunds were appropriate, 
the IRS would have to divert significant resources from current 
functions. In particular, the IRS could have to conduct labor-intensive 
examinations of millions of undocumented workers, going back a number 
of years and sorting out complex return reporting that may involve 
improper use of ITINs or SSNs belonging to other taxpayers. This high 
cost of enforcement will result in little revenue.

                               

       Questions from Chairman William Thomas to Ms. Julie Myers

    Question: A Government Accountability Office (GAO) study found some 
weaknesses with the existing Basic Pilot program. For example, it does 
not detect identity theft, the databases are not always up-to-date, 
employers may misuse the system to discriminate against workers, and 
the system may not be able to handle a significant increase in users. 
How would the Department of Homeland Security (DHS) address these 
problems if the Basic Pilot were made mandatory for all employers?

    Answer: The Basic Pilot relies in part on the employer's I-9 
document inspection to detect identity fraud. Since the Basic Pilot 
currently does not have a biometrics component, it is not possible for 
it to detect all identity theft. However, as the Department makes 
technological advances in capturing, storing and using biometrics over 
time, the Basic Pilot program will consider modifications to its 
current business processes to leverage those advances. Detecting 
identity theft generally and fraud related to false claims to U.S. 
citizenship would require a biometrics check on all new hires, 
including those claiming to be U.S. citizens. The Basic Pilot verifies 
the name, Social Security Number, and date of birth for all new hires, 
including U.S. citizens, by comparing the employee's information with 
the records in the SSA Numident database, which does not include 
biometrics. USCIS is currently evaluating ways of displaying the 
photograph of non-citizen new hires who have been issued a secure DHS 
document (i.e., a Lawful Permanent Resident card or a secure Employment 
Authorization Document (EAD)), as part of the Basic Pilot. In addition, 
USCIS will explore the technical feasibility of adding visa 
photographs, including photographs of nonimmigrants who do not have to 
obtain an EAD, and passport photographs of U.S. citizens, to the Basic 
Pilot database.
    USCIS recently briefed the GAO about its initiatives to reduce the 
percentage of noncitizen queries that cannot be verified electronically 
through the Basic Pilot database. These initiatives include: (1) adding 
real-time CBP arrival information and change and extension of status 
information about nonimmigrants to that database and (2) developing a 
query method that verifies noncitizen work authorization status against 
the USCIS repository of secure card information.
    With respect to potential discrimination, USCIS has worked closely 
with the Department of Justice's Office of Special Counsel for Unfair 
Immigration-Related Employment Practices (OSC) from the earliest 
development of the Basic Pilot program to minimize any such potential. 
While any verification system, including the I-9 form itself, can 
potentially be misused, we believe the requirements and capabilities of 
the Basic Pilot, such as verifying all new hires at participating 
employment sites, reduce rather than enhance the potential for any 
discrimination, when used properly by employers. In FY2007, USCIS plans 
to add a data monitoring and compliance function to the Basic Pilot 
program. We have reached out to the DHS Office of Civil Rights and 
Civil Liberties and to OSC to solicit their further input into how to 
best detect possible misuse of the system for discriminatory purposes 
and work with employers to prevent such misuse.
    Finally, the greatest challenges in scaling the system to handle a 
significant number of additional users lie, not in adding hardware to 
handle more queries, but in streamlining current employer registration 
procedures, and in improving the electronic sharing of data to more 
effectively resolve queries that require secondary processing and 
reduce the percentage of those queries. USCIS already has initiatives 
in place to address each of the challenges.

    Question: The law requires Federal agencies to take steps to ensure 
the security of their computer systems. The DHS does not have a good 
track record in this area, and received a failing grade from the House 
Committee on Government Reform based on the agency's 2005 report, which 
is required under the Financial Information Security Management Act 
(FISMA) of 2002. How secure are the Basic Pilot program and the 
databases that support it, including components of the Basic Pilot 
operated by a contractor? Do they meet the law's requirements? Have 
there been any data breach or security incidents related to the Basic 
Pilot, the databases it uses, or the contractor?

    Answer: The Verification Information System (VIS) database, which 
supports the Basic Pilot program, is certified and accredited as 
required by FISMA and in accordance with security guidelines from the 
National Institute of Standards and Technology. The VIS database is 
housed in a secure and accredited contractor-owned facility. There have 
been no data breach or security incidents of any kind relating to the 
Basic Pilot program, the VIS database, or its contractor.

    Question: In a June 2004 report to the Congress, the DHS found that 
too frequently, work-authorized employees receive an initial response 
that they are not authorized to work when in fact they are authorized 
to work (a ``false negative'' response), especially in the case of 
foreign-born employees. How accurate is the Basic Pilot? What happens 
to employees who receive a response that they are not authorized to 
work? Has an employee ever been wrongly fired from a job due to an 
incorrect response from the Basic Pilot? Has an employee who was 
authorized to work ever sought compensation from the DHS or the Federal 
Government because he or she wrongly lost a job due to the Basic Pilot? 
What recourse, if any, does an employee have if he or she wrongly loses 
a job because of data provided to the employer by the Basic Pilot?

    Answer: Employees who are not instantaneously confirmed by the 
Basic Pilot are issued tentative non-confirmations. These tentative 
non-confirmation findings mean that additional information and/or 
review of SSA or DHS records is required before work authorization can 
be confirmed; they do not mean that the employee is not work 
authorized. Sometimes the need for further verification results from 
actions or corrections that employees have not made, and in other cases 
it results from employer input errors or missing or inaccurate 
government records. USCIS is currently taking aggressive steps to 
improve the quality and timeliness of its data to reduce the number of 
tentative non-confirmations issued by the Basic Pilot for work 
authorized non-citizens. Basic Pilot procedures require that employers 
cannot terminate the employment of workers for verification-related 
purposes while the verification is pending. If action is not taken to 
resolve the discrepancy or if SSA's records do not indicate U.S. 
citizenship and USCIS finds that the person is not work authorized, a 
final non-confirmation is issued and the employer may terminate 
employment of the individual.
    We are not aware of any cases where employees have been wrongfully 
fired from jobs due to tentative non-confirmation findings where 
employers and employees have followed all of the requirements of the 
Basic Pilot program or where an employee sought compensation for such a 
termination.

    Question: The Comprehensive Immigration Reform Act, S. 2611, 
includes an appeal process for workers who believe they were wrongly 
fired from their job due to an error attributable to the mandatory 
electronic employment verification system in the bill, which is modeled 
on the Basic Pilot. What are your thoughts on the Senate bill's 
provisions? Is an appeal process necessary?

    Answer: Because the incidence of tentative nonconfirmations of work 
authorized noncitizens is quite low and getting lower, we have serious 
concerns about subjecting the system to the prospect of extensive 
administrative and judicial review procedures that could prevent it 
from getting off the ground, particularly since those provisions appear 
to make DHS potentially liable in situations where it was not the cause 
of the error. We believe that making back wages an available remedy 
could result in an incentive for litigation. We would oppose any 
provision that would allow attorney fees. We would further note that 
since the verification system is specifically a two-step process 
involving review of any initial tentative nonconfirmation, the benefit 
of any further administrative steps is substantially reduced compared 
to the disadvantages of lengthy delays before work authorization is 
finally resolved to the employer and the employee themselves, as well 
as to the Government.

    Question: Are there requests for verification from the Basic Pilot 
that are never resolved because the DHS cannot determine whether or not 
the individual is authorized to work? What is the longest period of 
time it takes to resolve a request for verification?

    Answer: No. USCIS is always able to issue either a confirmation or 
final nonconfirmation of a noncitizen new hire's work authorization 
status. In FY 2006, we resolved 99.56% of DHS tentative 
nonconfirmations within 10 days of the employer notifying the employee 
of the DHS tentative nonconfirmation response (Note: the new hire may 
take up to eight days to contact USCIS and provide additional 
information, and we have an additional 2 days to resolve.) In that same 
time period, there was one instance where we took 57 days to resolve a 
DHS tentative nonconfirmation, but appropriate steps were taken to 
ensure it will not happen again. Of course, a number of final 
nonconfirmations are the result of employees who are the subject of a 
tentative nonconfirmation because there is no matching DHS record that 
verifies their claim on the Form I-9 that they are work authorized. 
This is the normal, expected, and indeed desirable result of a system 
that catches false claims to lawful status and/or work authorization.

    Question: The Basic Pilot is intended to help employers comply with 
immigration law that prohibits the hiring of an unauthorized immigrant. 
To what extent has the Basic Pilot achieved that goal?

    Answer: Basic Pilot has proven to be a critical tool in helping 
employers comply with hiring requirements of non-U.S. citizens. Through 
participation in the Basic Pilot program employers are able to go 
beyond the law's minimum requirements related to the Form I-9 and 
actually verify work authorization against Federal databases. It is the 
best procedure available to ensure that an employer's workforce is work 
authorized, and as a web-based program it is easy to use with more than 
80 percent of responses provided electronically within 3 seconds.
    Additionally, while voluntary participation in the program has 
grown steadily since 2001, there was a significant increase from FY 
2005 to FY 2006, with the number of employers nearly doubling to over 
11,000.

    Question: Are there alternatives, short of a mandatory Basic Pilot 
program, that would help prevent the hiring of unauthorized immigrants, 
such as changes in the list of acceptable documents proving identity 
and employment eligibility, or increased data-sharing among agencies?

    Answer: While there are other initiatives that could help prevent 
the hiring of unauthorized aliens, such as changes in the list of 
acceptable documents, these initiatives are missing the critical 
component found in Basic Pilot--verification of work authorization. A 
mandatory employment eligibility verification program is essential to 
more effectively enforce our immigration laws.
    DHS is examining the list of acceptable documents with an eye 
toward further streamlining while balancing the need for simplicity 
against the need to ensure that those who are authorized to work, 
including U.S. citizens, have access to the appropriate documentation. 
DHS also supports increased data sharing among agencies. These, 
however, are complements to Basic Pilot that should also be pursued, 
rather than ``alternatives'' to it. Because the opportunity for 
employment is a major factor behind most illegal entry and visa 
overstays, mandating the use of the Basic Pilot by all U.S. employers 
would have the biggest effect on reducing the ability of unauthorized 
persons to work in the United States.

    Question: Prior to FY 2006, the DHS reimbursed the Social Security 
Administration (SSA) for its work related to the Basic Pilot. However, 
it stopped effective with FY 2006, even though the SSA is still 
providing services. Why? How much will the DHS owe the SSA by the end 
of Fiscal Year 2006 (approximately $1 million)?

    Answer: USCIS did not receive appropriated funds for Basic Pilot in 
FY 2006 and thus was unable to reimburse SSA, as it had done in prior 
years. The 2007 budget includes approximately $6 million to reimburse 
SSA for its cost of resolving SSA tentative nonconfirmations when the 
new hire contests SSA's inability to verify the worker's claimed name, 
SSN and date of birth or U.S. citizenship. We note that we view this 
program as one that Congress has directed SSA and USCIS to work 
together on to implement in the public interest, and both have done so 
in what we believe has been a model example of interagency cooperation.

    Question: In June 2006, the DHS proposed a rule that would require 
employers to take certain steps to verify a worker's name, SSN, and 
work authorization status if the SSA sends the employer a letter 
notifying them of name/SSN mismatches in the W-2s the employer files. 
When responding to evidence of potential unauthorized work, employers 
may be placed between a rock and a hard place--if they don't reverify 
employment authorization, they may be subject to DHS penalties; if they 
do reverify, they may be sued for discrimination. Are you concerned 
that the proposed rule would exacerbate that situation?

    Answer: No, rather than exacerbate the situation, DHS believes that 
the Notice of Proposed Rule Making will go a long way toward resolving 
it. The proposed rule describes an employer's current obligations under 
the immigration laws, and provides employers with an optional ``safe-
harbor'' procedure to avoid violations of the employer sanctions 
provisions in the INA. The proposed addition of SSA no-match letters to 
8 C.F.R. 247a.1(I) would clarify, not change, employers' duties under 
existing law. Previous guidance from INS and DHS noted that employers 
who ignore SSA no-match letters may, depending on the circumstances, be 
found to have constructive knowledge. This led to confusion among 
employers, who did not know how to respond to SSA no-match letters in a 
manner that satisfies DHS and is consistent with the anti-
discrimination provisions in the INA. The proposed rule still allows 
employers to address SSA no-match letters in any reasonable way they 
choose, but it also provides a DHS-approved method for doing so. 
Further, we do not see any conflict between the INA's anti-
discrimination and employer sanctions provisions. Conduct that is 
justified under the INA's employer sanctions provisions does not 
violate the INA's anti-discrimination provisions, which were designed 
to ensure that employers did not overreach to the threat of employer 
sanctions. The anti-discrimination provision does not prohibit an 
employer from taking reasonable action in response to the receipt of 
reliable information that leads the employer to question an employee's 
eligibility to work in the United States.

                               

    [Questions submitted from Mrs. Tubbs Jones to Mr. Everson 
and his responses follow:]
             Questions from Mrs. Tubbs Jones to Mr. Everson
    Question: To your knowledge, how many of the patents that have been 
issued are being ``marketed'' by the patent holder? That is, how many 
of the tax strategies that have received patents do you know are being 
``shopped around'' to taxpayers?

    Answer: Based on our focused review of 14 patents and published 
applications we observed little conspicuous marketing of the related 
patents. In one case a web-site restriction (we needed to be a client) 
hampered our ability to drill into the site without a client password. 
Nevertheless, it is important to note that there is no requirement in 
U.S. patent law to work (or market) the patented invention.

    Question: If taxpayers are believing that a particular tax strategy 
has some sort of ``seal of approval'' because it has been patented, 
then should the IRS not be intimately involved in the process of 
issuing tax patents?

    Answer: No. The process of examining and granting patents is 
outside the IRS' jurisdiction and expertise. Importantly, the granting 
of a patent on a tax strategy provides protection to the patent holder 
against infringement by other parties, but has no bearing on its 
legitimacy or illegitimacy under the tax laws, which remain under the 
jurisdiction of the IRS. The IRS is, however, considering taking steps 
to clarify for taxpayers that the tax treatment of a strategy is 
unrelated to any patent protection and that a patent is not an IRS 
``seal of approval.''

    Question: To what extent is the IRS currently involved?

    Answer: The IRS has no involvement with the USPTO in the patent 
review process and does not review patents to determine whether they 
are valid or meet the criteria for patentability. We monitor the USPTO 
database to gauge the level and type of potential Tax Strategy Patents. 
When warranted, we review public applications and previously granted 
patents to learn more about the strategy in order to assess the extent 
of potential aggressiveness of the strategy/technique and to gain 
insight into areas where activity is occurring. Furthermore, in the 
summer of 2005 we conducted a cross-Agency workshop that encompassed 
topics requested by the USPTO. This was an awareness workshop and was 
similar to what industries have historically done with the USPTO to 
keep them abreast of the latest sources of information, trends in 
practice, and the like. Our goal was to assist the USPTO in developing 
the resources to determine ``prior art'' in the area of tax strategies 
and structures.

    Question: Of those tax patents that you have reviewed, how many do 
you think are abusive tax shelters?

    Answer: In 2004 and 2005, we performed two searches of the USPTO 
data base. The first search, conducted in November 2004, was designed 
to identify patents and public applications of known tax shelter 
strategies. Specifically, we were looking for transactions the IRS has 
identified as ``listed'' transactions in Notices 2004-67 and 2005-13. 
These Notices describe over thirty transactions the IRS considers tax 
avoidance transactions. That search, which was updated in November 
2005, and again in June 2006, found no evidence of patents or public 
patent applications embodying any abusive tax shelters or listed 
transactions.

    Question: How many do you think are aggressive--there is a good 
likelihood that if audited the legality of the tax strategy will be 
challenged by the IRS?

    Answer: It is impossible to definitively determine that a patented 
structure will constitute an aggressive tax strategy as used by 
taxpayers. This determination is inherently factual and depends on how 
the transaction is implemented in the real world. However, we have 
reviewed patents and applications to determine whether, as described in 
the application itself, the patented structure represents a high risk 
of aggressive tax planning.
    We conducted this type of search in July 2005, and update it 
periodically.
    The initial search just asked for patents that included the word 
``tax'' in applications and granted patents in all classifications. We 
had fewer than 300 ``hits''. A further analysis showed that 
approximately 100 of these dealt with ``business methods'' and the 
majority of those appeared to be software models for computing tax 
impact or effect, and not tax strategies.
    We pared the potential population to 14 patents and public 
applications primarily in the areas of employee compensation, wealth 
transfer, and financial products. Upon initial examination, none of the 
14 patents were found to clearly involve abusive tax avoidance 
transactions. We have subsequently completed our review of 12 of the 
14, one of which was allowed by the applicant to expire for non-payment 
of fees. While we do not consider them to be abusive tax avoidance 
transactions, we are continuing to review two of the transactions to 
fully satisfy ourselves that they do not present an apparent compliance 
risk requiring follow-up action on our part.

    Question: Of those tax patents that you have reviewed, how many 
would you say are common tax strategies and how many are truly unique?

    Answer: Considering our lack of expertise in the patent review 
process and the difficulty in determining ``uniqueness,'' most (11 of 
the 14) of the tax strategy patents and public applications reviewed 
involved strategies familiar to us and thus appear to be commonly used 
``tried and true'' techniques. Of course, it is USPTO's role to decide 
whether these patents meet the criteria of patentability, such as 
novelty and nonobviousness.

                               

    [Submissions for the record follow.]
Statement of The Honorable John R. Carter, a Representative in Congress 
                        from the State of Texas
    Chairman Thomas:
    The purpose of this hearing is to review the impact of current and 
proposed border security and immigration policies on programs in the 
Committee's jurisdiction.
    As you are aware, Section 2029 (y) of the Social Security Act 
requires aliens in the United States to be ``lawfully present'' in 
order to receive Social Security benefits. Even though most illegal 
workers pay taxes, they do not place a burden on the Social Security 
Administration (SSA) as they are not eligible for said benefits unless 
they become legal residents of the United States.
    Currently, there are over 10 million illegal immigrants living and 
working in our borders. Several surveys indicate that households headed 
by illegal workers pay, on average, less than $5,000 annually in 
federal taxes. This is less than two-thirds of the average paid by all 
legal households. While providing much less to the treasury, each 
illegal household results in a net loss of over $2,700 annually due to 
healthcare costs and other social programs. However, the Social 
Security Administration actually sees a net profit from illegal workers 
because while they pay in, they are not eligible to receive benefits.
    Under current law, the path to citizenship for an illegal alien is 
difficult. However, language in S 2611 would allow some 10 million 
illegal aliens a path to citizenship. This newfound amnesty will place 
a severe strain on Social Security to meet the needs of the 10 million 
new workers suddenly eligible to receive benefits--benefits they have 
accrued by openly ignoring our laws.
    I am concerned about the obvious incentives of S 2611 to additional 
illegal workers. Our first priority should be to employ U.S. citizens, 
whether native born or legal immigrant. As we learned in the years 
following the 1986 amnesty, a path to citizenship for illegal workers 
only serves to invite more illegal aliens across our borders, not shut 
the door. This open invitation will serve only to place additional 
strain on welfare programs and drive down wages for American workers.
    I am also concerned about the cost associated with the Senate Bill 
as projected to all social security wage earners. Through Tax Year 
2003, over 255 million wage files have been placed in the Earnings 
Suspense File (ESF) by SSA. In the 1990's alone, nearly $190 billion in 
unmatched wages were placed in the ESF. Some have argued that this 
serves as a ``savings account'' for illegal workers to later draw 
benefits once they reach a legal status. Make no mistake that this is 
not the case. The ESF, by its very definition, is comprised of money we 
cannot attribute to any worker, legal or not. Each wage report placed 
in the ESF merely shows that SSA cannot match the file with a worker in 
its system. Because of this, any wages attributable to an illegal 
worker that are placed in this file are wages earned through either 
identity theft or Social Security fraud. I find it reprehensible that 
we would consider granting benefits to those who work in our country 
illegally while the solvency of Social Security for America's seniors 
remains a very real problem.
    Furthermore, the Earnings Suspense File does not include 
contributions made by illegal workers under fraudulently obtained, 
valid Social Security numbers or Individual Taxpayer Identification 
Numbers legally obtained from the IRS. While these records result in 
deposits to Social Security, they are not drawn on due to the illegal 
status of the record holder. Should these monies, deposited over 
several decades, be drawn we should expect nothing less than bankruptcy 
of the Social Security system.
    As we attempt to forecast the effects of the amnesty included in S 
2611, it is important to note that in 2010, the first of the ``baby-
boomers'' generation will be eligible for Social Security benefits. It 
is an unfortunate coincidence that just as an entire generation of 
Americans begins to draw Social Security benefits, the first wave of 
the10 million illegal aliens granted amnesty would also become eligible 
for these very same benefits, thereby placing an even greater strain on 
the system.
    Because of these concerns, I urge the Ways and Means Committee to 
look into methods by which we can utilize the Social Security 
Administration and the Internal Revenue Service to assist with not only 
controlling, but decreasing the levels of illegal work in the country. 
The primary tools to fight this battle are through more accurate 
verification of a person's eligibility to work legally in the United 
States, and enforcement of current law against employers who so 
willingly violate it. I also urge the Committee to undertake a serious 
study of the potential costs to federal, state, and community welfare 
programs and educational systems associated with the legalization of 
millions of illegal immigrants.

                               

Statement of U.S. Citizenship and Immigration Services, U.S. Department 
                          of Homeland Security
    Mr. Chairman, Ranking Member Rangel, and Members of the Committee:
I. Introduction
    We appreciate the opportunity to submit testimony for the record to 
the Committee about the U.S. Citizenship and Immigration Services' 
(USCIS) Basic Pilot Employment Verification Program (Basic Pilot), 
which provides information to participating employers about the work 
eligibility of their newly hired workers. We will also describe the 
agency's plans to improve and expand the Basic Pilot in preparation for 
a nationwide mandatory Employment Verification Program.
    An Employment Verification Program is a critical step to improving 
worksite enforcement and directly supports the President's goal of 
achieving comprehensive immigration reform. In his speech to the U.S. 
Chamber of Commerce on June 1, President Bush endorsed the Basic Pilot 
as ``a quick and practical way to verify Social Security numbers'' that 
``gives employers confidence that their workers are legal, improves the 
accuracy of wage and tax reporting, and helps ensure that those who 
obey our laws are not undercut by illegal workers.''
    Clearly, if we are to control illegal immigration, we can't just 
focus on the border. Illegal immigrants are living and working in every 
state of the nation, and our solution must be just as comprehensive. We 
must make sure that our immigration laws are enforced in New York and 
Colorado and Georgia, not just along the southwest border. Today, an 
illegal immigrant with a fake ID and Social Security card can find work 
almost anywhere in the country without difficulty. It's the prospect of 
jobs that leads people to risk their lives crossing a hundred miles of 
desert or to spend years in the shadows, afraid to call the authorities 
when victimized by criminals or exploited by their boss.
    That is why the Administration has proposed a comprehensive 
overhaul of the employment verification and employer sanctions program 
as part of the President's call for comprehensive immigration reform.
    There is much we can do in advance of the enactment of 
comprehensive immigration reform. Here's what we are working on at 
USCIS to improve and expand the Basic Pilot:

      Ensuring that more aliens authorized to work have secure 
biometric cards.
      Accessing our card databases for verification of work 
authorization--which will decrease the number of Basic Pilot queries 
that require a manual check.
      Streamlining the enrollment process for employers by 
making it completely electronic.
      Creating monitoring and compliance units that will search 
Basic Pilot and Employment Verification Program data for patterns to 
detect identification fraud and employer abuse.

    The President's FY07 budget requests $110 million for expansion of 
the Basic Pilot to make it easier for employers to verify 
electronically the employment eligibility of workers. Based on our 
planning to date, we believe a feasible timetable allowing for phased-
in expansion of mandatory verification along with flexible, user-
friendly program requirements are essential to expand and operate the 
program as efficiently and effectively as possible.
    We will also reach out to employers, including small businesses, 
for feedback and real-world input, such as ideas on the best ways to 
submit data on new hires with the least collective burden and how to 
make electronic employment verification as user-friendly as possible.

II. The Current Basic Pilot Program and Employment Verification Program
    With that backdrop, we would like to take this opportunity to 
outline how the current Basic Pilot works and the plans USCIS is 
putting in place to expand and improve it in preparation for a national 
mandatory program.
    Congress established the Basic Pilot as part of the Illegal 
Immigration Reform and Immigrant Responsibility Act (IIRIRA) in 1996, 
creating a program for verifying employment eligibility, at no charge 
to the employer, of both U.S. citizens and noncitizens. The Basic Pilot 
program began in 1997 as a voluntary program for employers in the five 
states with the largest immigrant populations--California, Florida, 
Illinois, New York and Texas. In 1999, based on the needs of the meat-
packing industry as identified through a cooperative program called 
Operation Vanguard, Nebraska was added to the list. The program was 
originally set to sunset in 2001, but Congress has twice extended it, 
most recently in 2003 extending its duration to 2008 and also ordering 
that it be made available in all 50 States. However, the program 
remains only voluntary, with very limited exceptions. A small 
percentage of U.S. employers participate, although the program is 
growing by about 200 employers a month to a current 10,000 agreements 
between USCIS and employers. These employers are verifying over a 
million new hires per year at more than 35,000 work sites.
    We seek in operating the Basic Pilot program to encourage the 
voluntary participation of small businesses, and to be responsive to 
their needs and concerns. Most (87%) of our participating employers 
have 500 or fewer employees. We would welcome your support in reaching 
out to enroll even more employers in the program. Interested employers 
can register by going to our Basic Pilot Employer Registration Site at: 
https://www.vis-dhs.com/employerregistration

How the Basic Pilot Works
    After hiring a new employee, an employer submits a query including 
the employee's name, date of birth, Social Security account number 
(SSN) and whether the person claims to be a U.S. citizen or work-
authorized noncitizen (for noncitizens, DHS issued identifying # is 
also submitted) and receives an initial verification response within 
seconds. For an employee claiming to be a U.S. citizen, the system 
transmits the new hire's SSN, name and date of birth to the Social 
Security Administration (SSA) to match that data, and SSA will confirm 
citizenship status on the basis of its Numident database. For the 88% 
of employees whose status can be immediately verified electronically, 
the process terminates here; in the remaining cases, the system issues 
a tentative nonconfirmation to the employer. The employer must notify 
the employee of the tentative nonconfirmation and give him or her an 
opportunity to contest that finding. If the employee contests the 
tentative nonconfirmation, he or she has eight days to visit an SSA 
office with the required documents to correct the SSA record.
    Noncitizen employees face a more elaborate process. Once SSA 
verifies the name, date of birth, and SSN, the system will attempt to 
verify the person's work authorization status against the Basic Pilot 
database. (If a noncitizen's SSN information does not match, the 
individual is first referred to SSA) If the system cannot 
electronically verify the information, an Immigration Status Verifier 
will research the case, usually providing a response within one 
business day,\1\ either verifying work authorization or, in 19 percent 
of cases, issuing a DHS tentative nonconfirmation. If the employer 
receives a tentative nonconfirmation, the employer must notify the 
employee and provide an opportunity to contest that finding. An 
employee has eight days to call a toll-free number to contest the 
finding and cannot be fired during that time because of the tentative 
nonconfirmation. Once the necessary information from the employee has 
been received, USCIS generally resolves the case within three business 
days,\2\ by issuing either a verification of the employee's work 
authorization status or a DHS Final Nonconfirmation.
---------------------------------------------------------------------------
    \1\ Statistics gathered from the Basic Pilot database, Oct. 1, 2005 
to March 31, 2006.
    \2\ Ibid.
---------------------------------------------------------------------------
    As you know, the House and Senate have both passed significant 
immigration legislation this Congress, including provisions that 
require a mandatory electronic employment eligibility verification 
program for all 7 million U.S. employers. Although the House and Senate 
provisions differ in some significant ways, both bills would require 
the eventual expansion to all U.S. employers of an Employment 
Verification Program generally modeled on the Basic Pilot.
    USCIS is already planning for the expansion of the program. The 
President's FY07 budget request includes $110 million to begin 
expanding and improving the Basic Pilot, including conducting outreach, 
instituting systems monitoring, and compliance functions. USCIS is 
exploring ways to improve the completeness of the immigration data in 
the Basic Pilot database, including adding information about 
nonimmigrants who have extended or changed status and incorporating 
arrival information in real time from U.S. Customs and Border 
Protection. In addition, USCIS is enhancing the Basic Pilot system to 
allow an employer to query by the new hire's card number, when that 
worker has a secure I-551 (``green card'') or secure Employment 
Authorization Document. This enhancement will improve USCIS' ability to 
verify promptly the employment eligibility of noncitizens because the 
system will validate the card number against the repository of 
information that was used to produce the card, thereby instantly 
verifying all legitimate card numbers.

Planned Monitoring and Compliance Functions
    No electronic verification system is foolproof or can fully 
eliminatedocument fraud, identity theft, or intentional violation of 
the required procedures by employers for the purpose of hiring 
unauthorized persons or keeping them on the payroll. But an Employment 
Verification Program that includes all U.S. employers, along with 
monitoring and compliance functions and a fraud referral process for 
potential ICE Worksite Enforcement cases, can substantially deter and 
detect the use of fraud by both employers and employees as the 
Administration works to strengthen its overall interior enforcement 
strategy.
    The current Basic Pilot is not fraud-proof and was not designed to 
detect identity fraud. In fact, a recent analysis of Basic Pilot 
systems data found multiple uses of certain I-94 numbers, A-numbers, 
and SSNs in patterns that could suggest fraud. As currently envisioned, 
the Employment Verification Program will include robust processes for 
monitoring and compliance that will help detect and deter the use of 
fraudulent documents, imposter fraud, and incorrect usage of the system 
by employers (intentionally and unintentionally). USCIS will forward 
enforcement leads to ICE Worksite Enforcement in accordance with 
referral procedures developed with ICE. The monitoring unit will 
scrutinize individual employers' use of the system and conduct trend 
analysis to detect potential fraud. Findings that are not likely to 
lead to enforcement action (e.g., a user has not completed training) 
will be referred to USCIS compliance officers for follow-up. Findings 
concerning potential fraud (e.g., SSNs being run multiple times in 
improbable patterns; employers not indicating what action they took 
after receiving a final nonconfirmation) will be referred to ICE 
Worksite Enforcement investigators.
    It is essential that DHS have the authority to use information 
arising from the Employment Verification Program to enforce our 
Nation's laws, including prosecuting fraud and identifying and removing 
criminal aliens and other threats to public safety or national 
security. It is also important that the system contain security and 
other protections to guard personal information from inappropriate 
disclosure or use, and to discourage use of the system to discriminate 
unlawfully or otherwise violate the civil rights of U.S. citizens or 
work-authorized noncitizens.

Planning for the Employment Verification Program
    We are confident in our ability to get a substantially expanded 
Employment Verification Program operational with the President's budget 
request.
    The Administration supports a phased-in Employment Verification 
Program implementation schedule on a carefully drawn timeframe to allow 
employers to begin using the system in an orderly and efficient way. We 
favor having the discretion to phase in certain industry employers 
ahead of others. As noted elsewhere in my testimony, USCIS already is 
working to improve and expand the Basic Pilot program to support the 
proposed expansion.
    USCIS is also committed to constructing a system that responds 
quickly and accurately. In order for this system to work, it must be 
carefully implemented and cannot be burdened with extensive 
administrative and judicial review provisions that could effectively 
tie the system, and DHS, up in litigation for years.

III. Improved Documentation
    In the President's May 15, 2006 address to the nation on 
comprehensive immigration reform, he indicated that businesses often 
cannot verify the legal status of their employees because of widespread 
document fraud. We need, he said, ``a better system for verifying 
documents and work eligibility. A key part of that system should be a 
new identification card for every legal foreign worker. This card 
should use biometric technology . . . to make it tamper-proof. A 
tamper-proof card would help us enforce the law, and leave employers 
with no excuse for violating it.''
    Many foreign workers already possess a secure, biometric card 
evidencing their immigration status as either an immigrant (an I-551 
card, commonly known as a ``green card'') or a work-authorized 
nonimmigrant (an Employment Authorization Document or EAD). Some 
nonimmigrants currently have non-secure EADs, but USCIS is planning to 
eliminate the issuance of these cards in favor of secure cards. In 
addition, USCIS is considering requiringmore classes of work-authorized 
nonimmigrants to obtain a secure EAD. Requiring all work-authorized 
nonimmigrants to obtain secure documentation would help ensure that 
their work eligibility can be instantly verified in the Basic Pilot or 
Employment Verification Program. As discussed previously, USCIS already 
is developing the system capability to verify a new hire's immigration 
card number against the card information repository. Under this new 
system, a legitimate card number matched with a name and date of birth 
will electronically verify in a matter of seconds--and only a 
fraudulent card would fail to verify.

IV. Conclusion
    We in USCIS are in a unique position to understand the importance 
of having legal means for individuals to enter and work in the United 
States. That is why we, and the President, support comprehensive 
immigration reform that includes interior and border enforcement in 
addition to a temporary worker program.
    We thank both the House and the Senate for recognizing the need for 
change in this area. With a strong cooperative effort now, the prospect 
of a truly effective national mandatory Employment Verification 
Program, combined with improved documentation, will reduce pressure on 
border and interior enforcement, simplify today's processes, put 
employers on an equal footing, and support a temporary worker program 
that is vital to our economy.

                                  
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