EXCLUSIVE: ‘Phantom employees’ scandal spurs GOP crackdown on $36B incentive for companies to bypass Americans

FIRST ON FOX: 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."

The congressman told Fox News Digital that "Americans should not be put at a disadvantage because Washington created a loophole that favors hiring foreign workers over qualified U.S. citizens." He added that "too many young Americans graduating from our colleges and universities are forced to compete against a system that tilts the playing field against them."

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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."

He said that "as the program size exploded, so has the fraud."

 "Today, we are announcing we have identified over 10,000 foreign students who claim to be working for highly suspect employers, and that’s just among the top 25 OPT employers. This is only the tip of the iceberg," he said.

The ICE director also said investigators uncovered what he referred to as "phantom employees," who he said are foreign students who obtained work authorization through OPT but never actually showed up for work at the sites they claimed to work out of.

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Grothman told Fox News Digital that these findings "point to serious vulnerabilities within the OPT program."

He said that "reports that thousands of foreign students in the OPT program were tied to phantom employees and suspicious employers should alarm every American," adding, "Right now, the federal government has created a financial incentive to hire foreign workers over Americans."

Grothman said the scale of the tax preference has been significant. He pointed to data gathered by the technology and industry think tank Institute for Progress, which found that between fiscal years 2017 and 2022, an average of approximately 330,000 students participated in OPT annually. The think tank also estimated that eliminating the tax exemption would increase federal revenue by between $27 billion and $36 billion over a 10-year period.

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"Congress should be focused on opening doors for young Americans, helping U.S. graduates find good-paying jobs and ensuring employers are encouraged to hire Americans first. Not creating incentives for companies to bypass American talent," he emphasized.

"The American people deserve to know how so many questionable employers were able to operate within the system for so long," he continued. "Congress should be prioritizing American workers and restoring integrity to programs that have become increasingly vulnerable to abuse and exploitation."