A proposed 3.5% remittance tax on money sent from the US to noncitizens abroad has sent shockwaves through countries that rely on international transfers.
Part of the “One Big Beautiful Bill” Act currently before the US Senate, the levy would affect 40 million to 50 million noncitizens in the US, including undocumented migrants as well as green card and visa holders, with those from India, Mexico, China, and the Philippines particularly exposed. Some experts suggest the effect would be enough to send Mexico’s economy into a recession this year.
Mexican President Claudia Sheinbaum has called the bill “unacceptable” and vowed to negotiate with the US. “We don’t want there to be a tax,” she said at a press conference. “We’re going to keep working so there is no tax on the remittances our compatriots send to their families in Mexico.”
Over 80% of remittances from the US to other countries are used for consumption, especially daily groceries, health, housing, and education; and any tax would adversely affect the receiv- ing country’s economy. A report by the Inter-American Dialogue warned that the tax could lead to a 7% decrease in remittances, impact trade, increase migration, and reduce control over foreign currency transfers.
Latin America and the Caribbean received $160.9 billion in remittances in 2024, with Mexico alone accounting for $64.7 billion. In the Central American Northern Triangle of El Salvador, Guatemala, and Honduras, heavily represented among undocumented persons entering the US, remittances make up 20% to 27% of national GDP. The tax would cost the three countries almost $2 billion a year, based on 2024 figures.
Honduran Deputy Foreign Minister Antonio Garcia described the tax as “a bucket of cold water” for Honduran migrants.
Caribbean governments have pointed out that the bill threatens to lower international reserves of dollars. This has been a long-term problem in the region and has prompted some credit card issuers to lower limits to $100 for new applications.
The bill has until September 30 to pass and could face legal opposition over provisions that affect vulnerable communities and international treaties. Proponents suggest that the tax gives the US a slice of the estimated $905 billion remittance industry. A remittance tax would not be unprecedented, however. Oklahoma imposed the first state tax on international transfers—1% on every $500 sent—in 2009.
