U.S. Moves Forward with Remittance Tax; Possible Repercussions for Mexican Economy
The U.S. House of Representatives approved a tax bill on Thursday that includes the imposition of a 3.5% tax on remittances sent abroad, a measure that will now be reviewed by the U.S. Senate. This amendment, which lowers the originally proposed tax from 5%, is part of a legislative package backed by former President Donald Trump. The package also includes cuts to social programs and the elimination of incentives for clean energy.
If approved by the Senate, the initiative would represent a significant change for the flow of money that millions of Mexican families receive from the United States. Mexico’s ambassador to the U.S., Esteban Moctezuma, stated via social media that, if enacted, the tax would severely impact migrant communities and undermine bilateral agreements. Meanwhile, Mexican officials such as Economy Secretary Marcelo Ebrard and Finance Minister Édgar Amador have warned that the tax could violate the United States-Mexico-Canada Agreement (USMCA), in addition to constituting double taxation for Mexican residents in the United States.
Remittances, which totaled $14.27 billion during the first quarter of 2024—a 1.3% increase compared to the same period last year—are a crucial source of income for countless Mexican families. Within Mexico, their importance has grown, playing a central role in consumer spending and social well-being across several regions, especially in high-migration states like Michoacán, Jalisco, and Guanajuato. The implementation of this tax could reduce remittance flows to Mexico, making it more expensive to send money and eroding the purchasing power of recipients in the country.
The broader bill that includes the new remittance tax passed the lower chamber by a narrow margin of 215 to 214, facing strong opposition from Democrats and some Republicans. In addition to taxing remittances, the bill promotes tax cuts for businesses and individuals in a manner similar to the 2017 reforms, reduces support for environmental programs, and tightens immigration policies by increasing the number of border security personnel and strengthening deportation measures.
The debate comes at a time when U.S. public debt is at historically high levels, having surpassed 120% of GDP, and facing negative outlooks from international ratings agencies such as Moody’s. Meanwhile, Mexican financial authorities are keeping a close eye on any potential sanctions that could affect not only remittances but also the broader commercial and financial relationship between the two countries.
In summary, the House of Representatives’ initial approval of this tax adds uncertainty to the Mexican economic outlook, especially for households dependent on remittances. While the fate of the measure depends on upcoming Senate discussions, it is expected that Mexico will continue to pursue diplomatic and legal channels to protect the interests of its migrant population and seek to prevent negative impacts on the national economy.
