Proposal for a Remittance Tax: An Effective Strategy or Just a Mirage?

In the United States, the Republican Party is pushing for a remittance tax aimed at increasing tax revenue. However, several experts argue that this initiative seems more like an attempt by the Trump administration to generate income than a viable solution, as it would have minimal effects on the money transfers to Mexico. "Trump is seizing the opportunity to expand his electoral base through a fundraising issue, while placing the burden on those who aren't part of his base," commented David Razú, an economist from ITAM.

An analysis by Banamex revealed that, out of 17.7 million workers in the U.S., about 5 million wouldn’t qualify for tax credits due to their immigration status. On the other hand, BBVA Mexico emphasized that the impact of this measure cannot be accurately assessed until the reform is approved and the details of how the tax would operate are clarified. "We don’t believe the impact will be significant, as many Mexican workers are already citizens, and there are other ways to send remittances," added Carlos Serrano, chief economist at BBVA Mexico. During her press conference, Claudia Sheinbaum mentioned that most remittances received by Mexico come from California, Texas, and Colorado.

Which states receive the most remittances in Mexico? In the first quarter of this year, a total of $14.269 billion in remittances was sent to Mexico. Michoacán leads in receipt with $1.269 billion, followed by Jalisco with $1.250 billion, and Guanajuato with $1.2183 billion, according to data from the Bank of Mexico.

Details of the Proposal On May 13, Republican lawmakers introduced a fiscal reconciliation proposal for 2025, which includes a 5% tax on remittances sent from the U.S. to other countries. This measure is projected to generate $22 billion over a period of 10 years, with the intention of allocating these funds to border security and combating drug trafficking. The Mexican government has denounced that this proposal is discriminatory since it mainly affects those who cannot prove their citizenship.

Is it already approved? As of now, the proposal has not yet been approved by the House of Representatives, so it remains just that: a proposal under discussion. The administration of Claudia Sheinbaum has been holding meetings with different sectors in the U.S. to advocate against this measure.

Final Comment: Implementing a remittance tax could have a negative impact not just on direct beneficiaries but also on the Mexican economy, which heavily relies on these funds. It is crucial for both the Mexican government and collaborators in the U.S. to work together to create policies that protect immigrants and focus on strengthening economic opportunities in our country.