
Remittance tax could shave half point off GDP in some Latin American nations
A 3.5% tax on money sent by people in the United States to relatives in other countries, including Latin America, would have a major impact on some of these nations' economies. Photo by RDNE Stock Project/ Pexels
ASUNCIÓN, Paraguay, May 29 (UPI) -- A proposed 3.5% tax on remittances from the United States could cost some Latin American countries up to half a percentage point of gross domestic product, sparking concern in nations where money sent to families back home account for a significant portion of economic output.
On May 22, the U.S. House of Representatives narrowly passed a budget bill 215-214 that includes a 3.5% tax on remittances sent by non-U.S. citizens. The bill still needs approval from the Senate. A vote has not yet been scheduled, but lawmakers are expected to move forward in the coming weeks with a goal of passing the bill before the July 4 recess.
The measure is part of President Donald Trump's proposed fiscal package known as the "Big Beautiful Bill" and would particularly affect countries like Nicaragua, Honduras, El Salvador, Guatemala, Haiti and Jamaica, where remittances account for between 17.9% and 27.2% of GDP, according to the U.N. Economic Commission for Latin America and the Caribbean.
Remittances are not only a vital source of foreign currency for these countries, but they also play a critical role in sustaining local economies, especially in rural and low-income communities.
Related How Donald Trump can short sell Mexico to become president
While the commission emphasizes that remittances do not resolve structural poverty, they serve as a financial lifeline for many families.
Remittances improve quality of life and provide access to essential goods and services. José Manuel Salazar-Xirinachs, executive secretary of the Economic Commission for Latin America and the Caribbean, said a remittance tax could reduce the amount those families receive or even discourage people from sending money altogether.
"The Inter-American Development Bank estimates that remittances reduce poverty by up to 5.8% in El Salvador and by 0.8% in Mexico. Put another way, poverty in these countries would be higher without remittances," Salazar-Xirinachs said.
In a country like Guatemala, which relies heavily on remittances from the United States, a 3.5% tax on those transfers could have multiple effects. One likely consequence is a negative impact on the balance of payments, which runs a yearly deficit and is offset in part by remittance inflows, Guatemalan economist Juan Roberto Hernández said.
A drop in the supply of dollars could also put pressure on the exchange rate and make imports of food, medicine and fuel more expensive. This would likely be accompanied by a decline in consumption and investment. In 2024, Guatemala received $21 billion in remittances, representing about 20% of its GDP.
The Inter-American Development Bank estimates that between 70% and 80% of remittances go toward basic needs such as food, housing, health and education.
"Any decline would likely contract domestic demand and hurt key sectors like retail and services, with consequences for tax revenues and overall growth," Hernández said.
In Mexico, although remittances represent a smaller share of GDP, the country receives the highest volume in the region -- $65.2 billion in 2024. Thousands of families could see their incomes reduced if the 3.5% tax takes effect, Salazar-Xirinachs said.
A study by the Center for Latin American Monetary Studies found that about 11% of Mexican households received remittances between July 2023 and August 2024. Those households received an average of $549 per adult recipient each month, a significant amount considering the country's minimum wage is about $450 per month.
Remittances from the United States to Latin America totaled an estimated $160.9 billion in 2024, a record for the region. However, while the total volume increased, growth slowed to just 5% -- the lowest rate in a decade due to limited labor mobility and slower job growth among migrant populations.
The Trump administration estimates that a 3.5% remittance tax would generate $22 billion between 2026 and 2034, an annual average of $2.7 billion, or roughly 0.01% of U.S. GDP and 0.03% of federal spending.
However, experts warn that revenue may fall significantly as senders shift to alternative transfer methods, including cryptocurrencies. Still, recipient families would most likely feel the impact through reduced remittance amounts or higher transfer costs, according to the U.N. economic commission.
Hashtags

Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles


Fast Company
22 minutes ago
- Fast Company
Gavin Newsom is having his social media moment
'Fuck around' and 'find out,' read a TikTok post, following a screenshot announcing that California is suing President Donald Trump for deploying the National Guard to the streets of Los Angeles. But the TikTok wasn't shared by a typical meme account—it came from California Governor Gavin Newsom. 'I damn near fell over when I realized this was Gov. Newsom's page,' one user commented. Since Friday, demonstrations have erupted across Los Angeles in protest of the president's immigration policies and the ongoing Immigration and Customs Enforcement raids. Although many of the demonstrations have remained peaceful, there have been violent incidents including authorities deploying tear gas and rubber bullets, and protestors setting Waymo vehicles ablaze throughout the city. As tensions escalated, the Trump administration deployed the National Guard and Marines—despite objections from local officials—sparking a lawsuit from the state, threats of arrest against Governor Newsom, and a surge of defiant memes. 'And remember kids, the next time anybody tells you 'the government wouldn't do that', oh yes they would,' says the popular TikTok sound used on Newsom's official account video, playing over screenshots of news headlines and images of armed forces confronting demonstrators. In another viral video from the governor's page, which amassed over 5.4 million views, Taylor Swift's 'You Need To Calm Down' plays over a series of photos of the two politicians. 'r u ok?' the post asks, with a caption reading: 'America's keyboard warrior.' Newsom's clapback drew widespread praise in the comments. 'I do disagree with Newsom a lot but him standing up to tyranny and standing with your state takes some serious guts. Hats off to you Newsom,' wrote one user. He's also taken to his personal account to deliver meme-laced messages to Trump—one featuring a photoshopped image of the president wearing a crown, captioned 'send in the troops.' The slideshow ends with a shot from the musical Hamilton, with text reading: 'Democracy is under assault right before our eyes. It's time for all of us to stand up.' The online showdown has significantly boosted Newsom's social media presence, growing his personal TikTok account by approximately 397,000 followers and his official Governor account by 479,000 since Friday. Newsom is the latest in a growing number of politicians leveraging memes and social media to bypass traditional media and speak directly to the public through humor. Famously, Kamala Harris gained momentum during her presidential campaign with ' Brat summer ' and the coconut tree trend, while Joe Biden leaned into the viral ' Dark Brandon ' meme during his reelection campaign. Although meme strategies can generate enthusiasm and visibility, the 2024 election results suggest that online popularity doesn't always translate at the polls.
Yahoo
22 minutes ago
- Yahoo
UnitedHealth Seeks $1B Latin America Exit: Sources
UnitedHealth Group Incorporated (NYSE:UNH) is one of the best Dow stocks to invest in. The company is considering several offers for its Latin American business, according to two insiders familiar with the situation, as it works to recover from a series of major setbacks, including the removal of its CEO and a reported criminal accounting investigation. The largest US health insurer has aimed to exit Latin America since 2022, but selling its Banmedica unit has become more urgent recently due to multiple challenges, one source said. A senior healthcare professional giving advice to a patient in a clinic. New CEO Steve Hemsley told shareholders last week that he is focused on regaining their confidence following a disappointing earnings report and a Wall Street Journal story about a criminal probe into alleged Medicare fraud. UnitedHealth Group Incorporated (NYSE:UNH) maintains it has not been notified by the Department of Justice and stands by its business integrity. UnitedHealth Group Incorporated (NYSE:UNH) has received four non-binding bids for Banmedica, which operates in Colombia and Chile, totaling around $1 billion, according to sources who requested anonymity due to the confidential nature of the negotiations. While we acknowledge the potential of UNH as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock. READ NEXT: and Disclosure. None. Sign in to access your portfolio
Yahoo
25 minutes ago
- Yahoo
Entire Fulbright Scholarship board quits, citing Trump admin actions
All members of the Fulbright Foreign Scholarship Board announced their resignation on Wednesday, releasing a statement accusing President Donald Trump's administration of political interference in the prestigious exchange program. The 12-member board alleged the Trump administration "usurped the authority of the Board" by denying Fulbright awards to "a substantial number of individuals" who were selected for the 2025-2026 academic year. The board also alleged the administration is currently "subjecting" an additional 1,200 international Fulbright recipients to "an unauthorized review process and could reject more." "We believe these actions not only contradict the statute but are antithetical to the Fulbright mission and the values, including free speech and academic freedom, that Congress specified in the statute," the board said in its statement. MORE: State Department delivers crushing news to Fulbright scholar hopefuls in Afghanistan The board oversees the Fulbright Foreign Student Program, which offers international graduate students, young professionals and artists the opportunity to study and conduct research in the United States. The government-funded, non-partisan program -- which was established by Congress in 1942 under then-President Harry Truman's administration -- operates in more than 160 countries worldwide, providing scholarships to approximately 4,000 foreign students annually. In the joint letter on Wednesday, the board said the awards that were overridden by the administration were concentrated in biology, engineering, architecture, agriculture, crop sciences, animal sciences, biochemistry, medical sciences, music and history. MORE: State Dept. suggests Afghan Fulbright hopefuls seek other options as program stalls The board claimed it has raised "legal issues and our strong objections with" senior Trump administration officials "on multiple occasions," including in writing, but says the concerns have not been acknowledged. In a statement to statement to ABC News after the board announced its resignation, a senior State Department official called the decision "a political stunt attempting to undermine President Trump." "It's ridiculous to believe that these members would continue to have final say over the application process, especially when it comes to determining academic suitability and alignment with President Trump's Executive Orders." the official said. The board, however, said in its statement that the decision was not one "we take lightly," woth the board calling on Congress, the courts and future Fulbright Boards to "prevent the administration's efforts to degrade, dismantle, or even eliminate one of our nation's most respected and valuable programs." "Injecting politics and ideological mandates into the Fulbright program violates the letter and spirit of the law that Congress so wisely established nearly eight decades ago," the board concluded in its statement. Entire Fulbright Scholarship board quits, citing Trump admin actions originally appeared on