PULSE POINTS:

❓What Happened: A tax provision in the House Republicans’ budget reconciliation bill would enact a five percent tax of foreign remittances, which causes a drain on the U.S. economy and enriches foreign nations at the expense of Americans.

👥 Who’s Involved: House Republicans, President Donald J. Trump, foreign workers, and American workers.

📍 Where & When: The tax provisions for the budget reconciliation bill were revealed on Monday, May 12, in the form of an amendment to the broader legislation. The amendment is currently undergoing mark-up in the House Ways and Means Committee.

💬 Key Quote: “We should take fees on the remittances sent [to] other countries around the world when people come to our country illegally and wire money back home, we should tax those remittances. Take that money and use it to pay for the wall, to pay for ICE agents, to pay for Border Patrol,” Representative Chip Roy (R-TX) said in a floor speech late last year.

⚠️ Impact:

IN FULL:

Buried in the House Republicans’ budget reconciliation bill is a tax provision long sought by immigration hawks in the U.S. Under the plan, foreign workers who send portions of their income back to their home countries will pay a five percent tax on the transfer. Notably, U.S. citizens who make foreign transfers can recoup the five percent tax through a credit when filing annually or quarterly.

President Donald J. Trump attempted to institute a tax on remittances, the act of foreign workers making non-commercial transfers of money or goods to their families in their country of origin, during his first term in office. However, the measure was sidelined by the COVID-19 pandemic. Under the House Republican plan, remittances will be taxed at a modest five percent, on top of existing income and payroll taxes foreign workers pay on their wages.

Remittances are the single largest form of financial inflow from one country to another worldwide, dwarfing foreign aid. In 2021, remittance payments accounted for $780 billion being sent to 800 million people, from one country to another. In the same year, foreign aid only accounted for a total cross-national flow of around $200 billion.

Notably, remittances from the United States comprise a significant portion of Mexico’s gross domestic product (GDP). In 2022, remittances made up about four percent of Mexican GDP. A similar percentage has been forecast for 2024. Remittances from the U.S. to Mexico constitute the latter’s largest foreign income source, even larger than foreign direct investment (FDI).

The remittance tax is reflective of President Trump’s broader America First agenda, which is focused on boosting domestic American industries and protecting American workers from foreign predatory actions. Additionally, the measure will effectively punish an economic behavior that removes dollars and consumption from the U.S. and transfers that economic activity to Mexico. Trump has repeatedly worked to end unearned benefits that Mexico enjoys from the U.S. unless it ramps up efforts to stymie the flow of fentanyl and other drugs into the U.S. and moves to end the influence and power of drug cartels.

Following Trump’s landslide presidential election victory last November, the idea of taxing remittances gained steam in the House of Representatives. During a floor speech shortly after the election, Representative Chip Roy (R-TX) stated: “We should take fees on the remittances sent there and other countries around the world when people come to our country illegally and wire money back home, we should tax those remittances. Take that money and use it to pay for the wall, to pay for ICE agents, to pay for Border Patrol.”