(UNITED STATES) Congress is weighing two bills that would reshape how international students and global service providers are taxed, drawing sharp attention from universities, employers, and advocacy groups. The proposals would end long‑standing payroll tax relief for foreign students in the OPT program and add a new 25% levy on outsourcing payments tied to U.S. consumers. As of September 25, 2025, both measures remain proposals, not law, and would still need passage in both chambers and a signature from President Biden.
Overview of the two proposals
- The Dignity Act would require F‑1 students working under the Optional Practical Training (OPT) program to pay the same payroll taxes as U.S. workers and would require employers to pay their share.
- The Halting International Relocation of Employment (HIRE) Act, championed by Senator Bernie Moreno, would impose a 25% tax on outsourcing payments made by U.S. persons to foreign entities when the services benefit U.S. consumers, effective for payments made after December 31, 2025.
Supporters argue the bills would raise revenue and protect jobs. Critics warn of higher costs, compliance headaches, and a potential drop in international enrollment.
What the Dignity Act would change
Under the Dignity Act, OPT participants and their U.S. employers would owe the full payroll rates now standard in the American system:
- Employee: 6.2% Social Security + 1.45% Medicare
- Employer: 6.2% Social Security + 1.45% Medicare
- Combined: 15.3% on covered wages
Additional details:
- Social Security tax applies only up to the annual wage base (projected at $176,100 for 2025).
- Medicare tax applies to all wages.
- A typical OPT worker earning $40,000 could face about $3,060 in added yearly payroll taxes when both employee and employer shares are counted.
Today’s exemption for most F‑1 students on OPT is grounded in federal tax rules that treat these nonresidents differently for Social Security and Medicare. The Dignity Act would remove that special treatment. According to analysis by VisaVerge.com, the change would affect a broad swath of recent graduates, including many STEM students who rely on post‑study work to gain experience and help repay tuition.
What the HIRE Act would change
The HIRE Act targets offshoring by adding a 25% tax on outsourcing payments made by U.S. individuals or businesses to foreign entities when the services benefit U.S. consumers.
- Effective for payments made after December 31, 2025.
- Supporters say revenue would fund training and placement programs for American workers who lost jobs due to outsourcing.
- The proposal aims to make remote, cross‑border services less attractive when end users are located in the United States 🇺🇸.
Impact on students
Key concerns for students on OPT:
- Higher payroll costs: Ending the FICA tax exemption increases withholding from the first paycheck and raises employer expenses.
- Lower take‑home pay: A new 7.65% employee share reduces net earnings, squeezing budgets—especially in high‑cost cities.
- Administrative shifts: Schools and employers would need to update payroll systems to treat OPT workers like regular employees for FICA withholding.
Arguments and risks:
- Supporters: the Dignity Act would “level the field” so companies don’t get a tax edge when hiring OPT workers instead of U.S. workers.
- Opponents: fear a talent drain as students choose other destination countries for post‑study work and worry about confusion if the law takes effect mid‑year or if implementing rules are delayed.
Practical steps students may take now:
- Adjust salary expectations and savings goals.
- Reconsider housing choices or cost-of-living plans while awaiting final outcomes.
Impact on businesses
For companies, the HIRE Act and the Dignity Act raise different but overlapping concerns.
For the HIRE Act specifically:
- Cost escalation: A 25% surcharge may erase savings from offshoring routine tasks, IT support, or back‑office work.
- Model changes: Firms could bring roles back onshore, reassign work among foreign affiliates, or redefine services so they clearly serve non‑U.S. markets.
- Legal and treaty friction: Businesses may seek clarity on how the levy interacts with tax treaties and trade commitments.
For the Dignity Act’s employer obligations:
- Employers would face higher payroll costs when hiring OPT workers.
- Companies may need to update payroll and compliance systems and revisit vendor contracts and delivery hubs.
- Some firms might absorb added costs to avoid service disruption and pass remaining costs to customers.
Broader political and sector reactions
- The bills reflect a period of tighter labor market policies and an increased emphasis on favoring domestic job growth.
- Universities warn of lost tuition revenue and reduced research strength if fewer international students enroll.
- Business groups caution the measures could dampen growth and innovation if costs jump too quickly.
- Foreign governments may object to what they see as punitive treatment of their nationals studying or working in the U.S.
These are sweeping changes: ending the OPT program’s FICA tax exemption would raise costs for both sides of the paycheck, and a 25% outsourcing surcharge would force hard choices about where and how work gets done.
Practical next steps and uncertainties
- The timeline is uncertain: committee markups, amendments, and floor votes could alter or block the bills.
- If passed by Congress, the White House could sign or veto the measures.
- Even after enactment, agencies would need to issue implementing rules to explain timing, coverage, and exceptions.
- Until then, payroll treatment for OPT remains unchanged.
Workers, HR teams, and institutions should prepare by:
- Running scenario analyses on compensation and budgets.
- Building contingency plans for payroll and cross‑border payment compliance.
- Monitoring agency guidance and legislative progress closely.
Resources and further reading
Workers and HR teams looking for current rates and thresholds can review the IRS overview of Social Security and Medicare payroll taxes at the agency’s official page: IRS Social Security and Medicare taxes guidance. That page explains today’s percentages, wage base limits, and how withholding works, providing a baseline for comparing the proposed changes in the Dignity Act.
Final takeaway
Stakeholders across campuses and boardrooms are watching closely. The final language—definitions, dates, and any carve‑outs—will determine how heavy the impact feels on the ground. Until Congress and the White House act and implementing rules are issued, the proposals remain potential changes rather than law.
This Article in a Nutshell
Two congressional proposals could significantly change tax treatment for international students and cross‑border services. The Dignity Act would eliminate the long‑standing FICA exemption for F‑1 students on OPT, making both workers and employers pay Social Security (6.2%) and Medicare (1.45%) each—15.3% combined—potentially adding about $3,060 annually for a $40,000 OPT salary. The HIRE Act would impose a 25% levy on outsourcing payments to foreign entities when services benefit U.S. consumers, effective for payments after December 31, 2025. Proponents argue the measures raise revenue and protect domestic jobs; opponents warn of increased costs, administrative burdens, and declines in international student enrollment. Both bills remain proposals requiring congressional approval and the president’s signature, with implementing rules and definitions still to come.
