A proposal promoted by Republican lawmakers in the United States seeks to impose a 3.5% tax on remittances sent by non-U.S. citizens. Although lower than the initial 5% version, this measure continues to draw strong criticism from experts, who warn of negative consequences both inside and outside the country.
According to an analysis by Manuel Orozco, director of the Migration, Remittances, and Development program at the Inter-American Dialogue think tank, the economic, social, and diplomatic impact of this bill would be significant, especially for the millions of families in Latin America who depend on these money transfers.
Direct Impact on Migrants and Their Families
Orozco said that the tax could potentially affect over 50 million people in the United States, including legal residents, temporary visa holders, asylum seekers, undocumented immigrants, and even citizens who would be forced to prove their status to avoid being charged.
The 3.5% tax would nearly double the current average cost of sending money. A standard $400 transfer could go from costing $8 to almost $22, which could discourage regular remittance sending and encourage the use of informal and less secure methods.
Orozco estimates that an increase in costs could reduce the total amount of remittances sent by up to 7%, resulting in significant losses for recipient families, many of whom rely on these funds to meet basic needs such as food, healthcare, and education.
Setback for Financial Inclusion and Risk of Informality
One of the most concerning effects, according to the analysis, is the potential shift from formal sending channels to unregulated methods such as peer-to-peer transfers, cryptocurrencies, or informal apps, which would weaken controls against money laundering and illicit financing.
Moreover, requiring money transfer companies to verify the citizenship of their clients could open the door to errors, discrimination, and operational burdens, without a clear legal basis to demand such private information.
Economic Blow to Receiving Countries and Bilateral Trade
Remittances are a vital source of income in countries such as Mexico, Guatemala, Honduras, and El Salvador, where they account for between 10% and 30% of GDP. Orozco warns that a significant drop in these flows would affect the economic stability of millions of households, deepening the structural causes of migration.
In addition, there is a direct relationship between remittances and U.S. exports. In 2024, the United States exported over $380 billion to remittance-receiving countries and a decline in purchasing power in these economies could negatively impact U.S. foreign trade and its trade balance.
Symbolic Measure with Counterproductive Effects
Although proponents of the tax argue that it would deter irregular migration, the analysis concludes that the effect would be the opposite: by reducing families’ disposable income, motivations to migrate would actually increase.
“A tax of this kind does not distinguish between migrants with or without legal status, punishes those who already pay taxes, and threatens to weaken diplomatic relations with allied countries in the hemisphere,” Orozco explains.
Call for Comprehensive and Cooperative Policies
The study proposes that, instead of punitive measures, the United States should work with countries of origin on agreements that promote economic development, productive investment, and democratic governance. “The solution to the migration challenge does not lie in new taxes, but in strategies of regional cooperation, economic development, and shared responsibility,” it concludes.
Mexican Press Agency is part of ALMA, which is dedicated to news and information about Mexico and Mexicans in the United States and is a fiscally sponsored project of Social Focus, a 501(c)(3) nonprofit organization based in Redwood City, California.
