Businesses Need Sound Tax Policy to Attract and Keep H-1B Workers

A federal appellate panel is weighing whether a new $100,000 fee for the H-1B visa constitutes a tax. Based on the US Supreme Court’s recent ruling in the tariff case Learning Resources, Inc. v. Trump, plaintiffs argue the Trump administration overstepped its authority by increasing these fees.

If the Supreme Court rules for the plaintiffs, fees may return to the status quo, but foreign-born workers may not. Businesses that need foreign-born talent must think outside the box to develop a stable policy that can endure and attract these workers.

The distinction between fees and taxes “doesn’t really matter,” as a Department of Justice attorney acknowledged in arguments, and is meaningless to the payer and to economic analysis. The real questions are:

• Why tax guest worker programs at all?
• What type of tax should be instituted?
• Who should pay?
• What should the tax fund?

Congress has never wanted US taxpayers to shoulder the administrative costs of temporary foreign worker programs.

We should replace the upfront, employer-paid H-1B fee with a payroll tax because the current system acts as a “hiring tax” that discourages employers from hiring temporary workers. This limits workers’ ability to quit and employers’ ability to hire, lowering wages for the workers and introducing the potential for many of the worst abuses of the program.

So why not just make the visa portable?

Visas will never be portable if employers face a process plagued by paperwork, legal costs, and delays. And they will never have durable popular support unless integrated into the US’ already robust system for managing labor policy.

A monthly payroll tax that splits fee costs into smaller, regular payments is the best way to achieve portability. Instead of filing paperwork to switch employers, payroll records that follow guest workers would automatically indicate a change of employment, prevailing wage compliance, and continuous employment, relieving employers of the administrative paperwork and fee burden.

Payroll taxes are labor policy. The payroll system is highly adaptable and better positioned to respond to economic crises. Nearly every worker and employer already participates, and state-federal insurance and tax systems already exist, so implementing this would be only slightly more complex than adding a new benefits plan.

Labor organizations such as the Economic Policy Institute argue temporary worker programs are dominated by staffing companies and large corporations, and doesn’t ensure temporary workers are paid fairly, or protect US workers from substitution. The US Chamber of Commerce has sought to increase the number of visas available to address shortages, and argues that without visas, business will move overseas. A tax fix framework could address the many complaints businesses and labor have with the H-1B program, and would set the program on a path that could prove resilient to shocks and open to experiments—and better than rigid upfront fees.

Under a payroll tax, who pays a visa’s fee (employee, employer, or some split) could be a question worth exploring. Estimates suggest that giving guest workers the freedom to quit would raise their wages by 4-33%, according to multiple studies—likely higher than any such tax would be.

Many economists argue that payroll taxes on firms are ultimately paid by workers through lower wages. If workers on visas made monthly contributions through payroll, it would be a strong rebuttal against complaints that these programs benefit and subsidize corporations.

When Congress last revisited these fees, it increased them to fund state workforce development systems (such as apprenticeships and job-seeker assistance). The US is third-to-last in spending on these systems among 33 countries tracked by the OECD and needs additional funding.

Bolstering US workforce development is already part of a national bipartisan conversation about a national talent strategy. That discussion shouldn’t overlook global talent and the vital role of temporary worker programs.

Likewise, workforce development is often overlooked in national immigration debates. The federalism inherent in the payroll system would allow for local labor and economic policy innovation, flexibility, and more democratic decisions that balance competing interests.

A small federal tax could cover program administration, while a minimum state payroll tax—with an option to increase up to a maximum—could directly fund local workforce development in the states. A $100,000 fee split into monthly payments might make sense in California, but a smaller fee might make more sense in Mississippi.

A uniform policy doesn’t meet the needs or capture the situation in different states, as a recent report made by the Center for Strategic and International Studies observes. If guest worker programs directly subsidized local US workforce development and state policymakers set the parameters, these migration policies might finally earn legitimacy as part of a cohesive, sustainable talent strategy.

Engaging states could also improve the system’s responsiveness and accountability. Currently, federal policy sets strict national caps and prevents states from investigating wage violations, adjusting caps to local needs, or setting higher prevailing wages. This shift could allow states to experiment with ideas such as auctions for visas, or invest in place-based policy, generating better evidence through the laboratories of democracy.

Payroll taxes would yield reliable, local, and timely data on the effects of guest worker programs. As businesses, universities, and policy makers rethink the future of US talent strategy, shifting to a payroll tax model could offer a sustainable solution—one capable of attracting global talent while maintaining durable popular support.

The case is Chamber of Commerce v. DHS, D.C. Cir., No. 25-05473, oral arguments 3/9/26.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.

Author Information

Peter Norlander is an associate professor of management at Loyola University Chicago.

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