Buried deep in the more than 1,000 pages of President Trump’s new “big, beautiful” spending bill is a provision that has largely escaped public scrutiny: a 3.5% tax on remittances — the money immigrants send to family members abroad.

In a media briefing on June 6, hosted by American Community Media, a panel of experts discussed how this taxation on remittances is a huge threat to the immigrants and, ultimately, the country’s economy.

Speakers

  • Helen Dempster, Policy Fellow and Assistant Director for the Migration, Displacement, and Humanitarian Policy Program at the Center for Global Development
  • Dr. Manuel Orozco, Director of the Migration, Remittances, and Development Program at the Inter-American Dialogue, and Senior Fellow at Harvard University’s Center for International Development
  • Ariel Ruiz Soto, Senior Policy Analyst, Migration Policy Institute
  • Ana Valdez, President and CEO of the Latino Donor Collaborative

The tax would apply to an estimated 40 million non–U.S. citizens, including green card holders, temporary workers, and undocumented immigrants. Critics argue it amounts to double taxation and may violate the Constitution’s Commerce Clause. The House narrowly passed the bill last month; the Senate is now reviewing it. Amid broader debates about steep cuts to Medicaid and SNAP, many lawmakers admitted they hadn’t read the entire bill before voting.

Federal Data Access & Fraud Risk

If passed, the remittance tax would allow the federal government unprecedented access to immigration data. In order to avoid the fee, senders would have to prove U.S. citizenship. That requirement would compel remittance agencies to share their databases with federal immigration authorities — a move that experts warn could increase fraud and scams targeting both citizens and non-citizens.

“Implementation of this legislation poses serious national security risks,” said Dr. Manuel Orozco. “It opens the door to hackers and criminal networks who could exploit personal information to commit identity fraud or create ghost U.S. citizens.”

Lifelines to Developing Nations

In 2024, global remittances totaled $905 billion, according to the World Bank. Remittances surpass foreign aid and investment in many countries: they make up 26% of Honduras’ GDP, 24% of El Salvador’s, and 41% of Tonga’s. Mexico received $67 billion in remittances from the U.S. last year — about 4% of its GDP — while India, the top global recipient, brought in $125 billion.

“Remittances for decades have been an instrument of development in their own right,” said Ariel Ruiz Soto. “They fund utility bills, hospital visits, even infrastructure projects like homes, schools, and clinics — especially in places where governments underinvest.”

Despite job insecurity during the pandemic, remittances to Latin America increased, reflecting the unwavering commitment many immigrants feel toward supporting their families back home.

Double Blow to the World’s Poor

Helen Dempster warned the tax would have far-reaching global consequences. “It deals a double blow to the world’s poorest,” she said, citing recent U.S. aid cuts, including the shuttering of USAID under the Trump administration.

Dempster’s research projects that a 3.5% tax would trigger a 5.6% decline in total remittance flow. Mexico could lose $2.6 billion annually. Guatemala, where U.S. migrants send home nearly half their salaries, could lose $600 million. Central America as a whole may see $4.65 billion in lost funds. India, the Philippines, and China each stand to lose around half a billion dollars. In Africa, the estimated $488 million loss — though smaller in dollar terms — would hit hardest due to the region’s existing aid shortfalls and growing climate-related pressures.

“No other country taxes remittances,” said Dempster. “To do so now, in the wake of aid cuts and rising global instability, is dangerously shortsighted.”

Logistical Nightmare

To be exempt from the tax, senders must prove both citizenship and taxpayer status using documents like a passport or naturalization certificate — which most people don’t carry on them. Money transfer companies, banks, and cryptocurrency platforms would have to register with the U.S. Treasury and integrate systems to verify this information.

“This tax creates serious implementation hurdles,” said Orozco. “It’s not just a hassle — it’s a national security liability.”

Political Pushback and Economic Repercussions

Latino leaders are mobilizing in response. Ana Valdez noted that her community wields over $4 trillion in purchasing power. Recent polls show that immigrants will continue sending money home — even if it means cutting back on spending in the U.S.

“People told us, ‘My mom’s getting her $1,000 a month no matter what,’” said Valdez. “If that means skipping the movie theater or buying fewer clothes, so be it. But that’s going to slow down the U.S. economy.”

Valdez also warned that the cost of hiring immigrant workers could rise, as employees seek help transferring money to relatives abroad. In anticipation of the tax, many immigrants have already begun withdrawing large sums of cash from banks, opting to send money home directly — bypassing formal channels and potentially increasing risks of theft or loss.

The Latino Donor Collaborative is leveraging social media to raise awareness among lawmakers and the public. “This tax is a penalty on the American dream,” said Valdez. “Because immigrants are the American dream.”

 

All images provided by ACoM