At a time when families across the globe rely on loved ones abroad to help make ends meet, a controversial new policy proposal could deal a crushing blow. A 3.5% tax on remittances sent by non-citizens in the United States is tucked into President Trump’s latest budget bill, sparking alarm among immigrant communities and economic experts alike.
Remittances, the funds sent by migrants to family members in their countries of origin, have long served as a financial lifeline. In many developing nations, these transfers eclipse foreign aid and foreign direct investment. As Arielle Soto of the Migration Policy Institute notes, $905 billion was sent globally in 2024, with $685 billion going to low- and middle-income countries. In places like Honduras, Guatemala, and El Salvador, remittances make up more than 20% of GDP.
Soto explained that despite economic hardships, such as those seen during the pandemic, remittance flows often increased, underscoring migrants’ unwavering commitment to their families. He warned that taxing these vital funds could lead to a temporary surge in remittances before implementation, followed by a dangerous drop. This could force some to seek alternative, possibly unsafe, methods to transfer money—exposing migrants to fraud or even cartel violence.
Helen Dempster from the Center for Global Development reinforced these concerns with data. Her findings project that the tax could cause a 5.6% decline in remittances, costing countries like Mexico over $2.6 billion annually. For low-income nations such as Liberia, the loss would compound recent cuts to U.S. foreign aid, creating a double economic blow. Dempster emphasized that remittances support not just basic needs like food and housing, but also long-term investments in education and resilience to climate shocks.
Dr. Manuel Orozco of the Inter-American Dialogue and Harvard University highlighted the logistical and security concerns this tax would introduce. Under the proposed policy, money transfer agencies would be responsible for verifying the immigration status of senders—a task for which they are neither trained nor legally equipped. This, he warned, could open the door to privacy violations and identity fraud. Orozco also pointed to a potential rise in informal transfers, which could undermine financial regulation and national security.
Furthermore, Orozco pointed out the contradiction in the policy’s goal: reducing irregular migration. He explained that remittances help stabilize economies and reduce the impulse to migrate. A cut in these funds might instead drive more migration, undermining the policy’s intent.
Ana Valdez, President of the Latino Donor Collaborative, shared insights from community polling and direct feedback. She reported that Latino immigrants, especially those sending regular support to families, are determined to keep doing so—even if it means cutting back on U.S. spending. This could hurt the domestic economy. Valdez also revealed that some immigrants are already withdrawing large sums from U.S. banks in anticipation, raising red flags for financial institutions. She noted this tax is perceived as a betrayal by immigrant communities who contribute nearly $4 trillion in purchasing power to the U.S. economy.
Valdez summed it up powerfully: “This is a penalty on the American dream.”
This issue cuts to the heart of what it means to be an immigrant in America. Remittances are not just money transfers—they are symbols of love, sacrifice, and connection. Taxing them sends the wrong message.
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