Remittances Under Scrutiny: A Questionable and Ineffective Tax
The Republican Party in the U.S. is considering implementing a tax on remittances, looking for ways to increase revenue. However, analysts warn that this plan seems more focused on helping the Trump administration meet its fiscal goals than on having a real impact on the money sent to Mexico. David Razú, an economist at ITAM, stated, "Trump is opting for a revenue-generating approach that could benefit his electoral base while imposing burdens on those who are not."
According to a report from Banamex, out of 17.7 million workers in the United States, approximately 5 million would not qualify for tax credits due to their immigration status. Moreover, BBVA Mexico indicated that without the approval of the reform and specific details on how this tax would work, it’s challenging to assess its true impact. Carlos Serrano, chief economist at BBVA Mexico, remarked that "the effect shouldn't be substantial, as many Mexican workers are already citizens and there are other methods for sending remittances." During a morning conference, Claudia Sheinbaum pointed out that most of the remittances arriving in Mexico come from California, Texas, and Colorado.
What are the main destinations for remittances in Mexico? In the first quarter of this year, Mexico received 14.26 billion dollars in remittances. Of this amount, Michoacán was the state with the highest concentration, receiving 1.27 billion dollars, followed by Jalisco with 1.25 billion and Guanajuato with 1.22 billion, according to data from Banco de México.
Details of the Proposal On May 13, Republican lawmakers presented a fiscal reconciliation proposal for 2025 that includes the implementation of a 5% tax on remittances sent from the U.S. to other countries. This measure is estimated to generate 22 billion dollars over a decade, with the funds allocated to border security and the fight against drug trafficking. The Mexican government has labeled this proposal as discriminatory, as it disproportionately affects those who cannot prove their citizenship.
Is it already in effect? So far, the initiative has not been approved by the House of Representatives and remains an unvalidated proposal. The government of Claudia Sheinbaum has been meeting with various stakeholders in the U.S. to argue against this measure and halt its approval.
This issue highlights the complexity of fiscal policies and their impact on migrants. The proposal for a tax on remittances could have repercussions not just economically, but also socially. Alternative channels for sending money and the diversity of Mexican workers in the U.S. may play a crucial role in the outcome of this policy. It is essential that economic measures consider the well-being of communities and not merely the revenue goals of the government.
