Proposed 5% tax on remittances sent from the United States, now under debate in the House of Representatives, distresses migrants whose families depend on this money.
The levy, tied to the controversial federal budget currently being debated by the House of Representatives with an uncertain future, concerns immigrants.
The tax would affect over 40 million people, including undocumented individuals, green card holders, and other non-immigrant visa holders, according to the Congressional Hispanic Caucus (CHC).
A 5% tax with a high cost
The initiative, part of the controversial budget and fiscal plan pushed by U.S. President Donald Trump and debated this week in the House, would impose a 5% tax on remittances sent from the U.S. abroad.
This would impact countries like Mexico, the world’s second-largest recipient of remittances, as well as Nicaragua, Honduras, and El Salvador, where these funds account for nearly a quarter of their gross domestic product (GDP), according to the World Bank.
While the tax rate is 5%, it would be added to other existing fees, so the cost of sending $350 from the United States to Mexico would rise from $6 to $23.50, according to an estimate by BBVA Mexico.
Due to these figures, migrants are urging their governments to act against the tax. Mexican President Claudia Sheinbaum argued that the tax violates a 1994 treaty to avoid double taxation between the U.S. and Mexico, which received a record nearly $65 billion in remittances in 2024.
Juan Flores, president of the September 15 Foundation in Miami, called on Honduran President Xiomara Castro to respond, citing data from the Central Bank showing that remittances make up 27% of Honduras’ GDP.
A blow to migrants
As the country with the most immigrants, the United States is also the world’s leading source of remittances, accounting for a quarter of the total, with an estimated over $200 billion, according to World Bank data updated at the end of 2022.
But the voices of these immigrants are far from being heard. Trump has made it a priority to push the bill that includes the remittance tax through before July.
How would this tax be applied?
The tax would apply to all money transfers abroad made by non-citizens. Remittance service providers, such as Western Union or MoneyGram, would be responsible for verifying the sender’s citizenship and applying the corresponding tax. Only senders who can prove U.S. citizenship would be exempt.
For example, sending $350 to Mexico currently costs around $6 in fees. With the new 5% tax, the total cost would increase to approximately $23.50, representing a significant rise in expenses for senders.
Economic and social impact
Remittances are a vital source of income for many countries, representing up to 30% of GDP in nations like Haiti, Honduras, and El Salvador. Implementing this tax could reduce remittance flows, negatively affecting these countries’ economies and the families who depend on this income.
Additionally, there are concerns that the tax could encourage the use of informal channels for sending money, increasing risks of fraud and money laundering. It could also create diplomatic tensions with remittance-receiving countries like Mexico, whose president, Claudia Sheinbaum, has called the proposal harmful.
Opposition and current status of the bill
The proposal has faced opposition both inside and outside Congress. A group of 24 Hispanic Democratic lawmakers has called for the measure to be halted, arguing that it harms millions of immigrants and their families abroad.
Currently, the bill is under debate in the House of Representatives. Congress is expected to vote on the proposal before May 26, with the possibility of President Trump signing it on July 4, coinciding with Independence Day.
