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Newsweek
16-05-2025
- Business
- Newsweek
Donald Trump's Mexico Tax Plan Could Backfire
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Experts warn that Republican plans to tax remittance payments could unintentionally increase migration to the United States. Why It Matters House Republicans have added a provision to President Donald Trump's "big beautiful bill" that would impose a 5 percent excise tax on remittance transfers. The legislation was put forward by the U.S. House Committee on Ways and Means. The measure, exempting U.S. citizens, would impact more than 40 million people, including green card holders and those on temporary work visas such as H-1B, H-2A, and H-2B. Remittances are money transfers that individuals send to family or friends in their home country, typically from a country where they are working. Millions of immigrants send money back they earn in the U.S to their home countries. What To Know Policy experts are sharply criticizing the proposal, saying it risks backfiring. Rather than deterring migration, as intended, the tax could deepen economic strain in parts of Mexico and Central America that rely on remittances, potentially increasing the pressure on individuals to migrate north in search of work. "Rather than serving as a deterrent, a remittance tax could actually incentivize more migration. If individuals believe they'll need to earn even more to meet family needs due to the remittance penalty, they may be more likely to come—and stay longer—to offset that financial loss," Veronique de Rugy, George Gibbs Chair in Political Economy and senior research fellow with the Mercatus Center, told Newsweek. "Remittances are a lifeline for millions of households in Mexico. In many rural areas, they support basic consumption, education, housing, and small-scale investment," De Rugby said. "Taxing these transfers effectively reduces household income in those communities, potentially pushing families back into poverty or forcing them to forgo essential spending. "That, in turn, reduces local demand, suppresses entrepreneurship, and weakens social cohesion in already vulnerable regions." President Donald Trump signs the guest book after touring the Abrahamic Family House in Abu Dhabi on May 16, 2025. President Donald Trump signs the guest book after touring the Abrahamic Family House in Abu Dhabi on May 16, 2025. Alex Brandon/AP In 2023 alone, Mexico received more than $66.2 billion in remittances—primarily from individuals working in the United States—accounting for roughly 4 percent of the country's GDP, according to the Migration Policy Institute. In poorer, rural areas of Mexico with few job opportunities, remittances fund essentials like food, housing, school supplies, and medications. This flow of money often makes it possible for families to remain in their communities rather than risk a dangerous journey north. "There is no question that such a policy would have an impact on certain communities. Remittances pay for everything, including food, clothes, housing, medications, and school supplies," immigration attorney Hector Quiroga told Newsweek. "A decrease of any kind will lead to belt tightening as people are forced to choose between two different necessities or do without some things altogether. The resulting economic impact would spread to local businesses, as the supply of cash would decrease overall," he said. Mexican President Claudia Sheinbaum has already rejected the proposal, calling it unjust and harmful to migrant families. She said it "would damage the economy of both nations and is also contrary to the spirit of economic freedom that the U.S. government claims to defend." Michelle Mittelstadt, director of Communications at the Migration Policy Institute, told Newsweek that it's unclear how much of the remittance flow would be impacted by the proposed tax, since U.S. citizens send some portion. Still, she warned that such a measure could drive people toward unofficial channels. Experts have argued that the policy could inadvertently increase migration to the U.S. rather than deter it. "It's a classic case of economic nationalism backfiring," said de Rugy. "Instead of reducing migration, it may increase the financial desperation that pushes more people to leave home in search of opportunity. "In addition to being economically harmful, this policy sets a troubling precedent. It penalizes lawful financial behavior, distorts labor markets, and risks damaging diplomatic relations with Mexico—all while doing nothing to meaningfully address border security or fiscal sustainability." Quiroga echoed those concerns, saying the tax would likely have unintended consequences. "Some individuals who send remittances to Mexico might conclude that it makes more economic sense to bring family members to the US and support them here rather than send remittances back, remittances that would not be worth as much if taxed at 5 percent," he said. Others warn that even a small cut to remittance income could have ripple effects in low-income communities. Mark Krikorian, executive director of the Center for Immigration Studies, takes the opposite view, arguing that the tax might discourage migration by reducing its economic benefit. Other high-ranking Trump officials have backed the measures. Vice President JD Vance, then an Ohio senator in 2023, co-sponsored the WIRED Act, which would have imposed a 10 percent fee on remittances out of the U.S. What People Are Saying Veronique de Rugy, George Gibbs Chair in Political Economy and Senior Research Fellow with the Mercatus Center, told Newsweek: "The logic of the tax assumes migration is driven purely by opportunity, but in reality, many migrants are responding to economic necessity. Making remittances more expensive only increases the pressure to work longer hours, stay for more years, or bring additional family members to the U.S." Michelle Mittelstadt, director of communications at the Migration Policy Institute, told Newsweek: "More than $66.2 billion in remittances were received by Mexico, chiefly from individuals living in the U.S., in 2023. "This represented 4 percent of Mexico's GDP that year. So U.S. taxation on this flow of money sent by individuals to their families and other loved ones in Mexico could have an effect on remittance sending, though it is not clear at this point 1) what share is sent by U.S. citizens and thus would not be subject to this proposed tax; and 2) whether this tax would prompt people to send money through unofficial channels rather than continuing to use formal money transfer routes." Immigration attorney Hector Quiroga told Newsweek: "I personally don't think that this would have any impact one way or another. While $320 million is a lot of money, the average remittance to Mexico is about $390 per month. Five percent of that is $20. That amount would likely not be enough to dissuade migrants from coming to the United States because the economic opportunity is clearly not available in Mexico, and there really is nowhere else to go." Mark Krikorian, executive director of the right-wing Center for Immigration Studies, said: "One of the main reasons people come here is to work and send money home. If that's much more difficult to do, it becomes less appealing to come here." What Happens Next Critics say the tax is unlikely to stop people from migrating since it does not address the deeper issues driving them to leave, such as poverty and limited job prospects. By cutting into the money families rely on, the policy could worsen conditions in their home countries and push more people to seek work in the U.S.
Newsweek
15-05-2025
- Business
- Newsweek
Republicans Want to Raise Taxes Targeting 40 Million Immigrants
Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources. Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content. Republicans included a new tax that would affect 40 million immigrants in President Donald Trump's tax bill. Newsweek reached out to House Speaker Mike Johnson, a Louisiana Republican, for comment via email. Why It Matters Remittances, money that migrants send to family members in their home countries, are a major source of income for communities across Latin America, Asia and Africa. These payments represent a financial lifeline in many rural and economically strained areas across the globe. In 2023, global remittances to low and middle income countries are estimated to have reached $647 billion, according to data from the World Bank, though experts have notoed it's difficult to know the true total of these transfers. What to Know A new 5 percent tax on remittances is in the House Republican tax bill that addresses key priorities for the president, according to the Associated Press. The tax would exempt U.S. citizens but affect green card holders and nonimmigrant visa holders such as those on H-1B, H-2A and H-2B visas—meaning more than 40 million people would be impacted by the tax. Critics have raised concerns that such a tax could have negative ramifications for communities that depend on remittances, where residents have less access to economic opportunity. Proponents, however, view this as a way to increase tax revenue for the federal government while taxing immigrants who may be living in the U.S. illegally—particularly as Congress eyes more tax cuts. Miguel D. Ramirez, professor of economics at Trinity College, told Newsweek Republicans believe the tax could generate significant revenues and discourage immigration. House Speaker Mike Johnson speaks during a press conference in Washington, D.C. on May 14, 2025. House Speaker Mike Johnson speaks during a press conference in Washington, D.C. on May 14, 2025."However, this is debatable because migrants might find ways of bypassing the tax by not sending them via established networks (e.g., Western Union or participating banks), and it might lead them to migrate more to the U.S. to make up for the loss revenues," he said. This would adversely affect some of the poorer states in Mexico, where remittance flows represent at least five percent of gross state product, Ramirez said. These payments can be used to grow local economies and finance micro-enterprises. They can be used to finance spending on education and health, contributing "to the formation of human capital and future economic growth and development," Ramirez said. The proposed tax is part of the expansive package that also includes extensions of the 2017 Trump tax cuts, a tax break for tipped income, and new spending on border security. According to the Tax Foundation's analysis of the latest version of the bill, the included tax provisions will reduce government revenue by $4.1 trillion over the next ten years. Vice President JD Vance, then an Ohio senator, introduced legislation in 2023 aimed at implementing a 10 percent fee on remittances with the intention of targeting drug cartels. Oklahoma is the only state that already has a tax on remittances. What People Are Saying Mexico President Claudia Sheinbaum said in remarks reported by the AP: "Remittances are the fruit of the efforts of those who, through their honest work, strengthen not only the Mexican economy but also the United States', which is why we consider this measure to be arbitrary and unjust." Noah Gordon, fellow at the Carnegie Endowment for International Peace, wrote on X, formerly Twitter: "The House bill includes a 5 percent tax on remittances sent by non-US citizens. It'd be a heavy blow for countries that get 20 percent of their GDP from remittances, like Haiti, Honduras, El Salvador, Guatemala, and Nicaragua." What Happens Next While the bill has already cleared the House Ways and Means Committee, its passage is far from certain. House Speaker Mike Johnson must reconcile demands from conservatives pushing for deeper spending cuts with more moderates in swing districts voicing concerns about matters like the state and local tax (SALT) cap. Some Republicans are also raising concerns about potential Medicaid cuts. Johnson has indicated he wants to hold a vote on the bill by Memorial Day, giving the House just one week to meet that deadline.
Boston Globe
14-05-2025
- Business
- Boston Globe
Funds from migrants sent back home help fuel some towns' economies. A GOP plan targets that.
'People here, they don't live luxuriously, but they live off remittances,' Vail said. House Republicans have included in President Trump's big priority bill a 5% excise tax on remittance transfers that would cover more than 40 million people, including green card holders and nonimmigrant visa holders, such as people on H-1B, H-2A and H-2B visas. US citizens would be exempt. Get Starting Point A guide through the most important stories of the morning, delivered Monday through Friday. Enter Email Sign Up Trump also recently announced that he is finalizing a presidential memorandum to 'shut down remittances' sent by people in the US illegally. White House and Treasury officials have not responded to requests for comment from The Associated Press on specifics of the presidential memorandum that Trump previewed in an April 25 Truth Social post and how it would work. Advertisement Mexican President Claudia Sheinbaum shot back on the measure and called on Republican lawmakers to reconsider it, saying it 'would damage the economy of both nations and is also contrary to the spirit of economic freedom that the US government claims to defend.' Advertisement 'Remittances are the fruit of the efforts of those who, through their honest work, strengthen not only the Mexican economy but also the United States', which is why we consider this measure to be arbitrary and unjust,' she said in a morning press briefing. Remittance experts, local leaders and former migrants say that banning, limiting or adding a tax on certain remittances could damage communities that rely on them, prove burdensome to American citizens and firms and, paradoxically, end up causing even more illegal migration to the US. The influx of money provides an important economic lifeline to residents of poorer towns that often have little access to jobs or income. Remittances provide opportunities for people in their home country, making it less likely they would take the risk of migrating to the United States, the experts say. 'Any measure to reduce remittances will have a negative impact on the US national interest,' said Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue. 'It will have an effect on the homeland.' Proponents of efforts to target remittances say they are an effective tax on people in the US illegally and could be a revenue generator for the US government. Mark Krikorian, executive director of the Center for Immigration Studies, which advocates for less immigration, acknowledges that limiting, banning or taxing remittances would make it more difficult for immigrants in the US illegally. 'One of the main reasons people come here is to work and send money home,' Krikorian said. 'If that's much more difficult to do, it becomes less appealing to come here.' Advertisement Legislation to control remittances — through taxes on money transfers, both internationally and domestically — has been proposed in 18 states in the past few years. Almost all of those efforts have been voted down. The exception is Oklahoma, which in 2009 passed a tax on remittances: a $5 fee on any wire transfer under $500 and 1% on any amount in excess of $500. Steven Yates, who is now a senior research fellow at the Heritage Institute, wrote for the America First Policy Institute that every state should adopt this policy as a way to combat the impact of illegal immigration. Other high-ranking Trump administration officials have also supported efforts to tighten controls on remittances. Vice President JD Vance, as an Ohio senator in 2023, co-sponsored the WIRED Act, which would have imposed a 10% fee on remittances out of the US. The intention of the bill — which would allow people who could prove their citizenship to get the fee back as a refundable tax credit — was 'penalizing illicit activity, such as drug and human smuggling.' The bill did not make it out of committee. 'This legislation is a common sense solution to disincentivize illegal immigration and reduce the cartels' financial power,' Vance said at the time of the bill's introduction. According to the World Bank, remittances sent to home countries in 2023 totaled about $656 billion — equivalent to the gross domestic product of Belgium. The money that Mexican migrants send home to their relatives grew by 7.6% in 2023 to reach a record $63.3 billion for the year. Remittances are also a major factor in the global economy, often sent from American wire services rather than banks and credit unions. India, Mexico and China are the biggest recipients of those funds, according to the World Bank. Advertisement In response to the proposal to tax remittances in the new Republican House bill, Orozco said, 'Some senders would find ways to send money differently, through unauthorized channels. Others would send less.' 'Sending less would have an impact on the receiving households, limiting the capacity to save, and in turn may increase the intention to migrate,' said Orozco, who also serves as a senior fellow at Harvard University's Center for International Development. In Cajolá, local leaders say the remittance flow has stopped young people from migrating because they see economic opportunities they otherwise wouldn't have. Vail said losing that lifeline would deal a devastating blow to families like his and even cause his small business to fold. 'There's a lot of fear,' Vail said. 'Fear that for the people that live here in Guatemala, there won't be work because the businesses will be all gone.' He said his business has already been struggling since Trump took office and his sales of things like eggs, beans, sugar and more have dipped. 'When Donald Trump won, many people stopped sending remittances or they began to save money,' he said. 'Business dropped off a lot.'
Yahoo
14-05-2025
- Business
- Yahoo
Funds from migrants sent back home help fuel some towns' economies. A GOP plan targets that
WASHINGTON (AP) — Israel Vail's entire life in the small western Guatemalan town of Cajolá is built off the money that his three children send home from the United States. The money from their construction jobs paid for the two-story white home where Vail now lives — and where his children, who are in the U.S. illegally, would also reside if they ever get deported. Vail, 53, invested some of the money in opening a local food shop, which he uses to keep his family afloat. In small migratory towns like Cajolá, it is not unusual for the entire economy to be built off remittances, the funds sent by migrant workers back to their home countries. 'People here, they don't live luxuriously, but they live off remittances,' Vail said. House Republicans have included in President Donald Trump's big priority bill a 5% excise tax on remittance transfers that would cover more than 40 million people, including green card holders and nonimmigrant visa holders, such as people on H-1B, H-2A and H-2B visas. U.S. citizens would be exempt. Trump also recently announced that he is finalizing a presidential memorandum to 'shut down remittances' sent by people in the U.S. illegally. White House and Treasury officials have not responded to requests for comment from The Associated Press on specifics of the presidential memorandum that Trump previewed in an April 25 Truth Social post and how it would work. Remittance experts, local leaders and former migrants say that banning, limiting or adding a tax on certain remittances could damage communities that rely on them, prove burdensome to American citizens and firms and, paradoxically, end up causing even more illegal migration to the U.S. The influx of money provides an important economic lifeline to residents of poorer towns that often have little access to jobs or income. Remittances provide opportunities for people in their home country, making it less likely they would take the risk of migrating to the United States, the experts say. 'Any measure to reduce remittances will have a negative impact on the U.S. national interest,' said Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue. 'It will have an effect on the homeland.' Proponents of efforts to target remittances say they are an effective tax on people in the U.S. illegally and could be a revenue generator for the U.S. government. Mark Krikorian, executive director of the Center for Immigration Studies, which advocates for less immigration, acknowledges that limiting, banning or taxing remittances would make it more difficult for immigrants in the U.S. illegally. 'One of the main reasons people come here is to work and send money home,' Krikorian said. 'If that's much more difficult to do, it becomes less appealing to come here.' Legislation to control remittances — through taxes on money transfers, both internationally and domestically — has been proposed in 18 states in the past few years. Almost all of those efforts have been voted down. The exception is Oklahoma, which in 2009 passed a tax on remittances: a $5 fee on any wire transfer under $500 and 1% on any amount in excess of $500. Steven Yates, who is now a senior research fellow at the Heritage Institute, wrote for the America First Policy Institute that every state should adopt this policy as a way to combat the impact of illegal immigration. Other high-ranking Trump administration officials have also supported efforts to tighten controls on remittances. Vice President JD Vance, as an Ohio senator in 2023, co-sponsored the WIRED Act, which would have imposed a 10% fee on remittances out of the U.S. The intention of the bill — which would allow people who could prove their citizenship to get the fee back as a refundable tax credit — was 'penalizing illicit activity, such as drug and human smuggling." The bill did not make it out of committee. 'This legislation is a common sense solution to disincentivize illegal immigration and reduce the cartels' financial power," Vance said at the time of the bill's introduction. According to the World Bank, remittances sent to home countries in 2023 totaled about $656 billion — equivalent to the gross domestic product of Belgium. The money that Mexican migrants send home to their relatives grew by 7.6% in 2023 to reach a record $63.3 billion for the year. Remittances are also a major factor in the global economy, often sent from American wire services rather than banks and credit unions. India, Mexico and China are the biggest recipients of those funds, according to the World Bank. In response to the proposal to tax remittances in the new Republican House bill, Orozco said, "Some senders would find ways to send money differently, through unauthorized channels. Others would send less.' 'Sending less would have an impact on the receiving households, limiting the capacity to save, and in turn may increase the intention to migrate," said Orozco, who also serves as a senior fellow at Harvard University's Center for International Development. In Cajolá, local leaders say the remittance flow has stopped young people from migrating because they see economic opportunities they otherwise wouldn't have. Vail said losing that lifeline would deal a devastating blow to families like his and even cause his small business to fold. 'There's a lot of fear," Vail said. "Fear that for the people that live here in Guatemala, there won't be work because the businesses will be all gone.' He said his business has already been struggling since Trump took office and his sales of things like eggs, beans, sugar and more have dipped. 'When Donald Trump won, many people stopped sending remittances or they began to save money,' he said. 'Business dropped off a lot.' ___ Janetsky reported from Mexico City.
Winnipeg Free Press
14-05-2025
- Business
- Winnipeg Free Press
Funds from migrants sent back home help fuel some towns' economies. A GOP plan targets that
WASHINGTON (AP) — Israel Vail's entire life in the small western Guatemalan town of Cajolá is built off the money that his three children send home from the United States. The money from their construction jobs paid for the two-story white home where Vail now lives — and where his children, who are in the U.S. illegally, would also reside if they ever get deported. Vail, 53, invested some of the money in opening a local food shop, which he uses to keep his family afloat. In small migratory towns like Cajolá, it is not unusual for the entire economy to be built off remittances, the funds sent by migrant workers back to their home countries. 'People here, they don't live luxuriously, but they live off remittances,' Vail said. House Republicans have included in President Donald Trump's big priority bill a 5% excise tax on remittance transfers that would cover more than 40 million people, including green card holders and nonimmigrant visa holders, such as people on H-1B, H-2A and H-2B visas. U.S. citizens would be exempt. Trump also recently announced that he is finalizing a presidential memorandum to 'shut down remittances' sent by people in the U.S. illegally. White House and Treasury officials have not responded to requests for comment from The Associated Press on specifics of the presidential memorandum that Trump previewed in an April 25 Truth Social post and how it would work. Remittance experts, local leaders and former migrants say that banning, limiting or adding a tax on certain remittances could damage communities that rely on them, prove burdensome to American citizens and firms and, paradoxically, end up causing even more illegal migration to the U.S. The influx of money provides an important economic lifeline to residents of poorer towns that often have little access to jobs or income. Remittances provide opportunities for people in their home country, making it less likely they would take the risk of migrating to the United States, the experts say. 'Any measure to reduce remittances will have a negative impact on the U.S. national interest,' said Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue. 'It will have an effect on the homeland.' Proponents of efforts to target remittances say they are an effective tax on people in the U.S. illegally and could be a revenue generator for the U.S. government. Mark Krikorian, executive director of the Center for Immigration Studies, which advocates for less immigration, acknowledges that limiting, banning or taxing remittances would make it more difficult for immigrants in the U.S. illegally. 'One of the main reasons people come here is to work and send money home,' Krikorian said. 'If that's much more difficult to do, it becomes less appealing to come here.' Legislation to control remittances — through taxes on money transfers, both internationally and domestically — has been proposed in 18 states in the past few years. Almost all of those efforts have been voted down. The exception is Oklahoma, which in 2009 passed a tax on remittances: a $5 fee on any wire transfer under $500 and 1% on any amount in excess of $500. Steven Yates, who is now a senior research fellow at the Heritage Institute, wrote for the America First Policy Institute that every state should adopt this policy as a way to combat the impact of illegal immigration. Other high-ranking Trump administration officials have also supported efforts to tighten controls on remittances. Vice President JD Vance, as an Ohio senator in 2023, co-sponsored the WIRED Act, which would have imposed a 10% fee on remittances out of the U.S. The intention of the bill — which would allow people who could prove their citizenship to get the fee back as a refundable tax credit — was 'penalizing illicit activity, such as drug and human smuggling.' The bill did not make it out of committee. 'This legislation is a common sense solution to disincentivize illegal immigration and reduce the cartels' financial power,' Vance said at the time of the bill's introduction. According to the World Bank, remittances sent to home countries in 2023 totaled about $656 billion — equivalent to the gross domestic product of Belgium. The money that Mexican migrants send home to their relatives grew by 7.6% in 2023 to reach a record $63.3 billion for the year. Remittances are also a major factor in the global economy, often sent from American wire services rather than banks and credit unions. India, Mexico and China are the biggest recipients of those funds, according to the World Bank. In response to the proposal to tax remittances in the new Republican House bill, Orozco said, 'Some senders would find ways to send money differently, through unauthorized channels. Others would send less.' 'Sending less would have an impact on the receiving households, limiting the capacity to save, and in turn may increase the intention to migrate,' said Orozco, who also serves as a senior fellow at Harvard University's Center for International Development. In Cajolá, local leaders say the remittance flow has stopped young people from migrating because they see economic opportunities they otherwise wouldn't have. Vail said losing that lifeline would deal a devastating blow to families like his and even cause his small business to fold. Winnipeg Jets Game Days On Winnipeg Jets game days, hockey writers Mike McIntyre and Ken Wiebe send news, notes and quotes from the morning skate, as well as injury updates and lineup decisions. Arrives a few hours prior to puck drop. 'There's a lot of fear,' Vail said. 'Fear that for the people that live here in Guatemala, there won't be work because the businesses will be all gone.' He said his business has already been struggling since Trump took office and his sales of things like eggs, beans, sugar and more have dipped. 'When Donald Trump won, many people stopped sending remittances or they began to save money,' he said. 'Business dropped off a lot.' ___ Janetsky reported from Mexico City.
