GOP Targets $36 Billion Subsidy for Companies Hiring Foreign Workers Over Americans
ICE uncovered 10,000 phantom employees in OPT program fraud as GOP lawmakers move legislation to eliminate tax exemptions that subsidize foreign labor at the expense of American workers.
Immigration and Customs Enforcement has uncovered 10,000 "phantom employees" across eight states, exposing widespread fraud in a government program that effectively subsidizes companies hiring foreign students over qualified American graduates.
The Optional Practical Training system allows foreign students to work in the United States while giving employers an 8 percent cost advantage. A January 2026 Institute for Progress analysis estimates the resulting FICA tax loophole costs American taxpayers between $27 billion and $36 billion over ten years.
For American workers competing for the same jobs, the subsidy system means facing employers who can hire internationally trained candidates at a steep financial discount.
Acting ICE Director Todd Lyons announced the fraud findings May 12, calling OPT "the magnet of fraud." His investigators visited 18 OPT work sites in North Texas during a single week, finding empty buildings and residential addresses where hundreds of foreign students claimed employment.
"This is not accidental," Lyons stated. "This is deliberate, coordinated and criminal."
Rep. Glenn Grothman's OPT Fair Tax Act targets the payroll tax exemption fueling the broken system. The legislation would require corporations to pay the same Social Security and Medicare taxes for foreign OPT workers as they do for American employees.
"Americans should not be put at a disadvantage because Washington created a loophole that favors hiring foreign workers over qualified U.S. citizens," Grothman said in a May 21 statement.
The investigation uncovered shell company schemes in which single operators established multiple OPT employers at identical addresses. John Connick, HSI Executive Associate Director, confirmed investigators found "shell company schemes where multiple OPT employers are established by the same owner operator."
The 10,000 foreign students connected to suspect employers represent only those from the top 25 OPT employers. Lyons warned the cases constitute "just the tip of the iceberg."
Foreign students on F-1 visas currently enjoy FICA tax exemption for their first five calendar years in the United States. A Center for Immigration Studies analysis shows this creates an 8 percent hiring cost advantage for employers choosing international students over American workers at identical salaries.
At a $60,000 salary, employers save approximately $14,850 over the three-year STEM OPT period.
The Institute for Progress estimates eliminating the FICA exemption would increase federal revenue by $27 billion to $36 billion over ten years. Their January 2026 analysis places the central estimate at $32 billion in recovered taxpayer funds. Currently, 85 percent of OPT participants avoid FICA taxes for at least some portion of each year, with master's degree graduates enjoying near-total exemption.
Sen. Tom Cotton introduced companion legislation in September 2025, stating "our tax code shouldn't incentivize businesses to hire foreign workers." The Senate bill S.2940 currently awaits action in the Finance Committee.
Cotton argued ending the exemption "will put American workers first" by leveling the economic playing field.
Between fiscal years 2017 and 2022, approximately 330,000 students participated in OPT annually, including more than 215,000 master's degree holders. USCIS data shows a 37 percent jump in detected OPT fraud cases since 2023, indicating escalating abuse of the program.
The legislation forms part of a broader administration effort to reform student visa programs. The Department of Homeland Security sent a "Duration of Status" rule to the Office of Management and Budget May 5 that would cap F-1 student stays at four years. USCIS also paused processing for nationals of 40 countries and increased OPT filing fees to $1,780.
Vice President JD Vance endorsed the fraud crackdown, calling it "another great win for our fraud task force" in a May 13 social media post. He added the administration "will not tolerate foreign nationals abusing our visa system at the expense of the American people."
Proponents of OPT argue the program retains STEM talent and fosters innovation, but critics note it bypasses carefully constructed employment visa pathways. Elizabeth Jacobs of the Center for Immigration Studies wrote in a May 20 op-ed that "federal immigration law already contains carefully constructed pathways for employment-based immigration" with explicit rules and labor protections that OPT circumvents.
The bipartisan Keep Innovators in America Act introduced March 19 seeks to codify OPT in law, but faces uncertain prospects. Business groups estimate curbing OPT could cost 443,000 jobs over a decade, though those figures include positions held by both foreign and domestic workers.
For American graduates entering a competitive job market, the OPT system represents government-subsidized competition. The FICA exemption means employers choosing foreign labor avoid thousands in payroll taxes that fund Social Security and Medicare programs benefiting American workers and retirees.
The OPT Fair Tax Act represents a necessary correction to stop taxpayer dollars flowing to corporations using government loopholes to bypass American workers. By forcing employers to pay the true cost of their labor choices, the legislation removes artificial incentives that have created a multi-billion dollar subsidy for foreign employment at domestic expense.