Some advocates say illegal immigrants should be granted driver's licensees, at least as a way to keep track of them. But critics complain it would reward aliens who have already broken U.S. law.
The debate has led some U.S. lawmakers to threaten financial consequences to their own states.
Click in the video box to the right to watch a report by FOX News' Jonathan Serrie.
Five Republican members of Congress from North Carolina are trying to use federal highway funds as leverage to force their home state to crack down on illegal immigration.
"North Carolina is issuing driver's licenses with taxpayer ID numbers, which really doesn't prove who you are," said Rep. Sue Myrick.
North Carolina is one of six states that accept taxpayer ID numbers as proof of eligibility for driver's licenses. Myrick says thousands of undocumented workers are taking advantage of the system.
She has proposed the "True ID Act," which would penalize these states unless they beef up their identification requirements. Withholding funds would translate to a loss of more than $800 million in North Carolina alone.
"What we're saying very simply is that if you continue to do this, we will take your federal highway dollars away," Myrick said.
Such threats rarely work, however, said Emory University political science professor Merle Black.
"This may be more an issue to position [Myrick] for a run for the governorship than an effort to really change federal policy at the national level because ordinarily members of Congress don't sponsor legislation that denies federal funds to their states," Black said.
In North Carolina, Republican efforts to beef up driver's license requirements have been resisted by Democrats, who control the governorship and both houses of the legislature. State Sen. Eleanor Kinnaird says the current system provides at least some oversight of illegal immigrants who will be driving regardless of whether they have a license or not.
"This is a protection for us -- to let everybody who is driving a car have a driver's license so that they'll buy insurance," Kinnaird said.
Myrick said she doesn't think that is a plausible defense.
"They came into the country illegally and they should be rewarded with a driver's license? I mean, come on!" she said.
In a world of pork-barrel spending, politicians are often accused of trying to throw money at problems. It's yet to be seen whether Myrick will solve one problem by threatening to take money away.