Experts warn that the Trump administration’s proposal would hurt migrant communities, destabilize vulnerable economies, and push millions toward informal and riskier ways of sending money home.
Amid the extensive budget package pushed by President Donald Trump and recently approved by the House of Representatives, one proposal has raised serious concerns among migrant advocacy groups and economic analysts: a 3.5% tax on remittances sent from the United States to other countries. If passed, the measure would directly impact the more than $220 billion that U.S. residents sent abroad in 2024 to support their families. Over half of those funds were destined for Latin America, where remittances are often essential for daily survival.
Mexico, the top recipient of U.S. remittances, could lose more than $2.6 billion annually. Guatemala is expected to lose around $600 million. Altogether, Central American nations could see a combined drop of up to $4.65 billion, according to the Center for Global Development (CGD). “This tax will have a devastating impact on the world’s poorest people. In many countries, even more than recent aid cuts,” warned Helen Dempster, assistant director of migration policy at the CGD. “It’s a double blow to the most vulnerable,” she added, also referencing the Trump administration’s previous shutdown of multiple USAID programs.
The CGD report also notes that countries like India, the Philippines, and China would each lose approximately $500 million in remittances. In Africa, while the total volume is smaller—around $488 million—the relative impact would be significant, given the fragile economies and widespread poverty. “Africa may be even more critical in this context, especially following devastating cuts to international assistance,” said Dempster.
Remittances: More Than Money, a Lifeline
“Remittances are not just income. They are the lifeline of millions of families,” said Ariel Ruiz Soto, senior policy analyst at the Migration Policy Institute, during a June 6 press briefing organized by American Community Media. “They’re essential for daily needs—from utility bills and food to, in many cases, medical care. In areas with little government investment, remittances help build schools, homes, even hospitals.”
Despite economic crises, migrant solidarity has remained strong. During the pandemic, when jobs were scarce, remittances to Latin America did not decrease. In fact, they increased. “That shows us that even in times of economic or political uncertainty in the U.S., migrants maintain their commitment to their families and communities. They continue sending this transformative lifeline,” Ruiz Soto explained.
CGD research estimates that if sending costs increase by 3.5%, global remittances could fall by 5.6%. Such a drop would not only hit countries like Mexico, Guatemala, or India—but also deeply affect African nations already suffering from reduced foreign aid. Even if smaller in scale, the effects would be felt acutely in regions where remittances are often the only stable source of income.
Insecurity, Evasion, and a Penalty on the American Dream
Beyond economic damage, the technical implementation of the proposed tax presents serious risks to privacy and national security. To determine who would be subject to the tax, money transfer operators—including banks, fintech companies, and traditional remittance services—would be required to verify each sender’s citizenship or tax status. According to Manuel Orozco, director of the Migration, Remittances, and Development Program at the Inter-American Dialogue, this would mean that millions of users would need to present passports, birth certificates, or naturalization papers.
“Most people don’t carry those documents around on a daily basis. This opens serious vulnerabilities,” Orozco warned. “Any system that stores such sensitive information is a potential target for hackers. This could lead to identity fraud or the creation of so-called ‘ghost citizens.’ It’s a serious national security concern.”
The consequences would also be regressive within the U.S. itself. Ana Valdez, President and CEO of the Latino Donor Collaborative, pointed out that the Latino community—whose purchasing power exceeds $4 trillion—is already reacting. “We conducted multiple polls after the remittance tax was announced. People were clear: they are not going to stop sending money. We heard things like, ‘My mom is going to get her $1,000 every month, no matter what.’ But what it will cost is a reduction in domestic spending—fewer outings, fewer purchases, less consumption,” she said.
Valdez also highlighted a growing trend: many immigrant families are withdrawing large amounts of cash from their bank accounts, fearing that their assets might be frozen. As a result, more people may turn to informal or even illegal channels to send money abroad. “This tax doesn’t just hurt those who send remittances—it punishes the American dream. Because immigrants are the American dream,” Valdez concluded.