04/13/2011 12:29 pm ET Updated Jun 13, 2011

Mitch Daniels Backs Away From Harsh Immigration Policy

WASHINGTON -- Indiana Gov. Mitch Daniels (R) is backing off a controversial immigration bill styled after Arizona's SB 1070. Daniels announced Tuesday that he wants the legislation’s enforcement measures to be retooled to go after employers, rather than undocumented immigrants.

Daniels, a rumored candidate for the 2012 Republican presidential nomination, told the Indianapolis Star editorial board that he wants a major overhaul of the immigration bill, which passed the state Senate in February and will be taken up by a House committee this week. The current bill, like Arizona's immigration law, calls for an increase in enforcement by local police, who would be required to ask those they stop for proof of legal residence in some instances.

"I think that legislation will be changed," Daniels told the Star. "I support this, to drop the law enforcement provisions that have been the ones that have bothered most people."

The bill has faced strong opposition from immigrant rights groups, who say it could lead to racial profiling, and the business community. Arizona faced boycotts after passing its anti-illegal immigration law, costing the states lost tourism revenue and legal fees estimated in the tens of thousands of dollars.

Arizona's bill has also proven a legal liability. Many of its contested provisions were blocked by a federal judge last summer, a decision that was upheld by the Ninth Circuit U.S. Court of Appeals on Monday.

In light of the backlash against the Arizona law, a number of states dropped their plans for copycat legislation this session, including Kentucky, Nebraska, South Dakota and Virginia.

The Indiana Chamber of Commerce lobbied against the immigration bill passed by the Senate, particularly the provisions that would target individuals. George Raymond, vice president of the Indiana Chamber, told The Huffington Post his organization was concerned the bill would drive out conventions, which contribute millions of dollars to the economy.

Raymond said the Chamber also feared that businesses would have trouble drawing highly-skilled foreign workers to the state if Indiana developed a reputation as hostile to outsiders. He said one such business could be Eli Lilly and Co., a pharmaceutical giant where Daniels formerly served as president of North American operations.

"It's hard enough to get people to come to Indiana, and it's even harder to get people to come to Columbus, Indiana," Raymond said. "If you're a foreign national and you have concerns that you're going to be stopped, and you have other options, you may take one of those."

But Daniels told the Star he was not convinced by economic arguments. He said he simply believed the bill as written would not work.

"We don't tend to believe in things that are policies that are emotionally satisfying to somebody but don't have any practical effect," he said.

Instead, the bill may be reworked in the state House Public Policy Committee on Thursday to focus on employers who hire undocumented immigrants.

"The idea I like is to deny them the tax deduction if they're caught doing it," Daniels said. "It's a fairly clean way to get at it, and really employment is the magnet that leads to the illegality."