Without exaggeration, remittances are vital in many households around the world, especially in Latin America. Many families depend on these funds to survive, especially in rural areas or those with high unemployment rates.
Part of the money goes to pay for schools, public works, or medical expenses. Some recipients use them to start small businesses that create jobs.
By reducing poverty, the need for government social assistance decreases and migration pressures are reduced.
Mexico received $65 billion in remittances last year alone, and in Central American countries, they represent a substantial part of their income.
Therefore, the Republican proposal to include a 5% tax on remittances sent home by foreigners in the United States is somewhat surprising.
Except for citizens and legal residents, all unauthorized persons, even those with temporary employment visas, would be subject to this tax.
When I say it’s something of a surprise, I’m referring to the fact that, even before becoming president, Donald Trump proposed seizing remittances to fund his wall.
Although the idea never materialized, it was revived by Republicans in their “big and beautiful” tax reform initiative, which would cut social programs like Medicaid to fund a “big and beautiful” tax cut.
The Mexican government is right when it states that, “the implementation of this tax would disproportionately affect the most vulnerable workers, many of whom perform essential functions for the proper functioning of the US economy.”
In their opinion, “taxing remittances would constitute a form of double taxation, since migrants pay taxes in the country where they work.”
According to the American Immigration Council, households headed by undocumented immigrants paid $89.8 billion in total taxes in 2023 in the United States. This includes $33.9 billion in state and local taxes and $55.8 billion in federal taxes.
In other words, millions of undocumented workers contribute without receiving many of the public benefits available to citizens and legal residents.
And the tax raises questions: How would the government identify undocumented senders without violating financial privacy laws or engaging in discriminatory practices?
Remittances are not a luxury; they’re a lifeline. Taxing them is not only a bad idea but also a distraction from real solutions.
Instead of punishing undocumented workers, Congress should focus on integrating them into the formal economy, regularizing their status as quickly as possible, and treating all workers with the hard-earned dignity they deserve.
