Immigrant-Native Wage Gaps and Immigration Tariffs: Examining the Case for an H-1B Visa Tax

Michael Clemens

No 26072, RFBerlin Discussion Paper Series from ROCKWOOL Foundation Berlin (RFBerlin)

Abstract: The US government in 2025 imposed a $100,000 tax on each high-skill foreign worker entering with an H-1B work visa. The only public economic justification calculates the tax to offset an estimated wage penalty for H-1B workers relative to US natives. But this estimate suffers from substantial bias. Reexamining the same data shows that H-1B workers receive a modest wage premium relative to comparable natives, roughly 6 percent on average-inconsistent with any wage penalty-when using equivalent wage concepts and comparing workers of the same age, gender, education, and tenure, in the same occupation and local labor market. I trace most of the discrepancy to four methodological choices that inflate the prior estimate: 1) undisclosed imputation of missing data, 2) pooling of non-contemporaneous years, 3) a definition of local labor markets contradicting standard economic practice and US law, and 4) failure to consider H-1B workers' low job tenure. The remaining discrepancy arises from comparing incompatible wage concepts for H-1B versus native workers. Beyond measurement, the theory of public economics implies that a revenue-maximizing immigration tax reduces welfare relative to alternative policies, even with zero weight for immigrant welfare.

Keywords: migration; migrant; immigrant; immigration; earnings; wages; taxes; tariffs; barriers; restrictions; skill; skilled; h-1b; welfare; native; citizen; college; stem; worker; foreign; labor; labour (search for similar items in EconPapers)
JEL-codes: H21 J08 J38 J68 (search for similar items in EconPapers)
Date: 2026-03
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