Proposed H-1B Surcharge Could Cripple Startups, Wharton Economist Warns
The Department of Homeland Security has proposed a $103,265 surcharge on H-1B visas, a move it acknowledges would significantly impact 76% of small businesses. Wharton professor Britta Glennon says such restrictions often push multinational firms to offshore jobs, while startups face reduced innovation and success. The proposal is now open for a 30-day public comment period.
The proposed surcharge would apply on top of standard H-1B filing fees, with DHS estimating it would affect 76% of analyzed small entities. A prior $100,000 payment mandate was struck down in June, and an appeal is pending. The new rule follows formal notice-and-comment procedures, which may strengthen its legal standing. DHS justifies the fee by dividing $8.8 billion in annual immigration costs across 85,000 visas, projecting $74.9 billion in employer costs over a decade. However, critics note that reduced petition volumes could undermine the revenue estimate.
Wharton’s Britta Glennon highlights that large multinationals often respond to visa restrictions by shifting hiring abroad, while startups lack such flexibility. Research indicates startups denied H-1B workers show lower patenting rates and reduced chances of successful exits. The proposal is open for public comment for 30 days.
This fee could disproportionately burden early-stage companies that rely on specialized foreign talent, potentially slowing innovation and job creation in the U.S. While large firms may absorb costs or relocate roles overseas, startups might face higher failure rates or reduced growth. Consumers could see fewer new products and services, and the broader economy may lose competitive edge. The policy’s impact hinges on legal challenges and whether the fee actually deters applications, as projected revenue may not materialize.