Exclusive: ‘Phantom Employees’ Scandal Spurs GOP Crackdown on $36B Incentive for Companies to Bypass Americans

The discovery of 10,000 “phantom employees” exploiting a federal work program has helped spur Republicans to tackle the financial incentives behind a foreign worker pipeline costing Americans hundreds of thousands of jobs per year.

Under current federal law, hundreds of thousands of foreign students and employers participating in the Optional Practical Training (OPT) extension program are exempt from paying Social Security and Medicare payroll taxes, which companies are required to pay for domestic workers. This has led to the creation of a “significant financial incentive” for employers to hire foreign OPT workers over Americans.

Republican Rep. Glenn Grothman of Wisconsin introduced a bill Thursday, titled the “OPT Fair Tax Act,” that eliminates that incentive by requiring employers to pay the same Social Security and Medicare payroll taxes paid for American workers. By closing the loophole, Grothman believes the bill “helps create a more level playing field for American graduates entering the workforce.”

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Grothman’s bill is the House companion to a Senate bill introduced by Sen. Tom Cotton, R-Ark., in September.

Though Cotton’s bill has not passed, OPT has faced increased scrutiny after Acting ICE Director Todd Lyons announced federal investigators uncovered more than 10,000 foreign students connected to “suspect employers” as part of a massive fraud scheme involving the program.

Lyons said that OPT, which lets international students on F-1 visas work temporarily in the country in jobs related to their field of study, had “ballooned into an uncontrolled guest worker pipeline with hundreds of thousands of foreign students working in the United States.”

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