{"id":73443,"date":"2025-06-11T10:27:43","date_gmt":"2025-06-11T17:27:43","guid":{"rendered":"https:\/\/lapost.us\/?p=73443"},"modified":"2025-06-11T10:27:43","modified_gmt":"2025-06-11T17:27:43","slug":"trumps-remittance-tax-a-penalty-on-the-american-dream","status":"publish","type":"post","link":"https:\/\/lapost.us\/?p=73443","title":{"rendered":"Trump\u2019s Remittance Tax: A Penalty on the American Dream"},"content":{"rendered":"
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By<\/span>Sunita Sohrabji<\/a><\/div>\n<\/div>\n<\/div>\n
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Critics of Trump\u2019s proposed 3.5% tax on remittances say it essentially amounts to double taxation, crippling many of the poorest people in the world.<\/p>\n<\/div>\n<\/div>\n

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Tucked into the 1,000+ pages of Congress\u2019 \u201cbig, beautiful\u201d spending bill is a 3.5% tax on remittances, the money immigrants and others send back to families and others in their home countries.<\/p>\n

The proposed tax would apply to an estimated 40 million\u00a0non\u2013<\/a>US\u00a0<\/a>citizens, including green card holders, temporary workers, and undocumented immigrants. Critics of the tax on remittances say it amounts to double taxation. The Constitution does not directly protect double taxation, although some legal experts argue that the remittance tax is in violation of the\u00a0Commerce Clause.<\/a><\/p>\n

The House narrowly passed the spending bill last month; the Senate is now considering it. The proposed tax on remittances scarcely made the news during House consideration of the spending bill. Debate focused largely on drastic cuts to safety net programs such as Medicaid and the Supplemental Nutrition Assistance Program \u2014 SNAP. Many members of Congress later told media they had not read the entire bill before voting on it.<\/p>\n

Potential for Fraud<\/h2>\n

Implementation of the remittance tax will allow the federal government to have greater access to immigration data, as senders would have to prove they are citizens in order to avoid the tax. Remittance agencies would be mandated to share their databases with federal immigration entities. Analysts also fear the measure could expose both citizens and non-citizens to fraud and scams.<\/p>\n

For many countries, remittances make up more of GDP than foreign aid or foreign direct investment. Remittances make up 26% of Honduras\u2019 GDP, 20% of Guatemala\u2019s, and 24% of El Salvador\u2019s. Almost 41% of Tonga\u2019s GDP is composed of remittances.<\/p>\n

In 2024, about $905 billion was sent in remittances worldwide, according to data from the World Bank. India receives the largest share of global remittances \u2014 $125 billion per year \u2014 while Mexico receives the largest share of remittances from the US: $67 billion last year. Remittances are 4% of Mexico\u2019s GDP.<\/p>\n

\u2018Instrument of Development\u2019<\/h2>\n
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\u201cRemittances have for decades is become an instrument of development within themselves. They usually provide benefits and access to services, especially for daily expenses,\u201d said Ariel Ruiz Soto, senior policy analyst at the Migration Policy Institute. \u201cWe\u2019re talking about utility bills, food, and in some cases, hospitals,\u201d he said, at a June 6 American Community Media news briefing.<\/p>\n

In some places, remittances also can be able to access other development projects: building homes, schools, or hospitals in places where there is little government investment, said Soto.<\/p>\n

During the pandemic \u2014 when work was scarce \u2014 remittances to Latin America actually increased. \u201cThat shows us that even when economics in the United States or policies change in the United States, migrants in the U.S. continue to have that commitment to their families, communities, and cities. They still want to send this life-changing lifeline for the many people that depend on them,\u201d said Soto.<\/p>\n

\u2018Double Blow to World\u2019s Poorest People\u2019<\/h2>\n
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\u201cThis remittance tax will also have an impact on the world\u2019s poorest people. And in many countries, an even bigger impact than aid cuts have had,\u201d said Helen Dempster, policy fellow and assistant director for the Migration, Displacement, and Humanitarian Policy Program at the Center for Global Development.<\/p>\n

\u201cThis effectively deals a double blow to the world\u2019s poorest people,\u201d said Dempster, referring to the Trump Administration\u2019s shuttering of USAID.<\/p>\n

Severe Blow to Central America and Africa<\/h2>\n

The CGD released a\u00a0report<\/a>\u00a0last month detailing which countries would be hardest-hit by the proposed tax. Research suggests that if the proposed tax raises costs for sending money by 3.5%, that could lead to a 5.6% drop in remittances. Mexico heads the list: it will lose an estimated $2.6 billion. Mexicans residing in the US currently send about $400 back to their families each month.<\/p>\n

Guatemala will lose an estimated $600 million in remittances, according to CGD data. Gautemalans residing in the US send about 48% of their salaries back to the home country each month. Cumulatively, Central American countries stand to lose about $4.65 billion if the remittance tax is approved, said Dempster.<\/p>\n

India, the Philippines, and China will each lose +\/- $500 million in remittances from the US. India also receives significant remittances from the United Arab Emirates, Saudi Arabia, the United Kingdom, and Singapore<\/p>\n

Countries in Africa stand to lose about $488 million, a small fraction of losses elsewhere. \u201cBut Africa is arguably even more important, especially off the back of devastating aid cuts to many low-income countries in the region,\u201d said Dempster.<\/p>\n

Difficult Implementation<\/h2>\n
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\u201cThe vast amount of remittance money is going to be spent on consumption. So you have countries that already face massive aid cuts, food insecurity, the effects of climate change, the lack of ability to be able to invest in education and resilience building. And now having remittances cut is going to have that compounding effect,\u201d she said.<\/p>\n

No other countries currently impose a tax on remittances, noted Dempster.<\/p>\n

Implementation of the proposed remittance tax will be difficult, said Dr. Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue. In order to be exempt from the tax, senders have to provide proof of US citizenship and proof of being a taxpayer.<\/p>\n

Risk to National Security<\/h2>\n

\u201cTo do that, money transfer companies \u2014 including banks, cryptocurrency companies, and other non-banking financial institutions like the remittance service provider or money transfer operator \u2014 have to register before the US treasury in order to integrate their platforms to verify citizenship and tax status,\u201d said Orozco. Proof of US citizenship can be verified by a birth certificate, passport, or naturalization certificate. Few people carry such documents around, he noted.<\/p>\n

\u201cThis legislation really is shooting the foot in many ways against U.S. citizens,\u201d said the researcher. \u201cIt poses a hurdle, but it also opens a vulnerability in national security.\u201d<\/p>\n

\u201cIt allows the opportunity for hackers and criminal organizations to break into systems and collect information about individuals\u2019 taxpayer and citizenship status. This can lead to identity fraud, or can create ghost US citizens. So it\u2019s a serious, national security problem,\u201d stated Orozco.<\/p>\n

Pushback<\/h2>\n
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The Latino American community is flexing the political muscle it gained during the 2024 election cycle, to push back on taxes for remittances, said Ana Valdez, President and CEO of The Latino Donor Collaborative. The Latino community has purchasing power of over $4 trillion, she noted.<\/p>\n

LDC took several polls in the weeks after the tax on remittances was announced. \u201cWhat we found is that people are not going to stop sending remittances. We hear comments like, \u2018my mom is going to get her $1,000 every month, whatever it takes.\u2019 And unfortunately, probably what it will take from the families is to stop spending in the United States.\u201d<\/p>\n

\u201cPeople have said: \u2018If I have to stop going to the movie theater, if I have to stop buying clothes, if I have to reduce my expenses in terms of other luxuries, I will.\u2019 And that\u2019s going to slow down the US economy.<\/p>\n

The cost of hiring immigrant employees will also rise, predicted Valdez. \u201cPeople are going to ask their employers for help in sending money back to their families.<\/p>\n

Tangentially, many immigrant families are withdrawing large amounts of money from their bank accounts, fearing their assets will be frozen, said Valdez. Cash amounts handed to families back home are a means of getting around the tax.<\/p>\n

The LDC has pursued an aggressive social media strategy to make members of Congress and their constituents aware of the ramifications of the proposed tax.<\/p>\n

\u201cThis is a penalty on the American dream. Because immigrants are the American dream,\u201d said Valdez.<\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

BySunita Sohrabji Jun 10, 2025 Critics...<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11,7],"tags":[],"class_list":["post-73443","post","type-post","status-publish","format-standard","hentry","category-business","category-u-s-a"],"_links":{"self":[{"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/posts\/73443","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/lapost.us\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=73443"}],"version-history":[{"count":1,"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/posts\/73443\/revisions"}],"predecessor-version":[{"id":73444,"href":"https:\/\/lapost.us\/index.php?rest_route=\/wp\/v2\/posts\/73443\/revisions\/73444"}],"wp:attachment":[{"href":"https:\/\/lapost.us\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=73443"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/lapost.us\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=73443"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/lapost.us\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=73443"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}