Foreign nationals working in the U.S. will have to pay a 5% excise tax on money they send family in other countries if Donald Trump’s “big beautiful bill” becomes law.
Known as remittance transfers, the transactions are a crucial way immigrants and other non-American citizens working legally in the U.S. help their families and, in turn, the economies in their home nations.
“For many countries, money transfers from citizens working abroad are a lifeline for development,” according to the International Monetary Fund. “They have been growing rapidly in the past few years and now represent the largest source of foreign income for many developing countries.”
“For many countries, money transfers from citizens working abroad are a lifeline for development.”
The U.S. leads the world in remittance transfers. In 2022, an estimated $79 million was sent to friends and families in other countries, Americans for Financial Reform reported.
The language of the budget plan passed by the House in May and currently before the Senate requires remittance transfer providers to collect the tax and send it to the U.S. Treasury Department. U.S. citizens sending remittances would have to verify citizenship to avoid the tax.
A study by the Tax Foundation concluded the tax will create more headaches than revenues with requirements for extra ID-verification and reporting on Americans and U.S. financial institutions.
“The tax will be hard to enforce. Cash hand-offs, cryptocurrency wallets, and informal value-transfer networks sit outside the statutory net, so the rule will divert flows to opaque channels rather than capture meaningful revenue,” the report said.
And using tax policy in an attempt to reduce immigration will only hurt the U.S. economy, the Tax Foundation found. “Perhaps an even more harmful consequence of the excise tax will be its dissuasion of foreign investment into the country. It makes it more difficult for foreigners to use U.S. banks, even for purposes unrelated to immigration or remittance.”
In many low- and middle-income nations, remittances have surpassed foreign direct investments in creating economic growth and reducing poverty, according to the Baker Institute for Public Policy at Rice University.
“Perhaps an even more harmful consequence of the excise tax will be its dissuasion of foreign investment into the country.”
“When remittances are used to purchase goods and services, this increased consumption has a positive impact on aggregate demand and generates economic growth. And when used to invest in human capital (e.g., in education), remittances can contribute to economic development in the medium and long terms,” the Baker Institute said.
The tax would add insult to injury for noncitizens already facing growing transaction fees on remittances, according to Americans for Financial Reform. “In the last three years, some of the most financially vulnerable people in the United States, mostly lower-income immigrant workers, lost $15.4 billion in hidden exchange rate markups — about 20% of the value of total transfers — when they sent money home to support their families.”
The proposed excise tax on remittances is little more than a shakedown of people already struggling financially, said Guerline Jozef, executive director of Haitian Bridge Alliance. “This is not sound policy — it is legalized extortion targeting Black, brown and immigrant families who have already sacrificed so much to sustain both their adopted countries and their nations of origin.”
According to the alliance, remittances account for 20% of the GDP in Haiti, 26% in El Salvador and 28% in Honduras. The Philippines received $40 billion in remittances in 2023 while Nigeria received $20 billion.
“The overwhelming majority of remittance senders are not wealthy elites but working-class immigrants who hold multiple jobs, pay U.S. taxes, contribute to Social Security, and still carry the responsibility of supporting loved ones back home,” the organization added.
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