Plans by US Republicans to impose a new tax on remittances sent by migrants are drawing growing concern across Latin America, with critics warning the move could devastate communities that rely on the funds and push more people to attempt illegal migration.
In the small Guatemalan town of Cajolá, 53-year-old Israel Vail depends entirely on the money his three children, who live in the US without documentation, send back from their construction jobs. That support has funded his home and a small food shop that now supports his family.
“People here, they don’t live luxuriously, but they live off remittances,” Vail said.
House Republicans have introduced a proposal for a 5 per cent excise tax on international money transfers—commonly known as remittances—from migrants, including those with green cards and temporary visas like H-1B and H-2A. US citizens would be exempt. President Donald Trump has also indicated his intention to block remittances altogether from undocumented migrants, calling it part of his wider immigration crackdown.
While the White House and US Treasury have not clarified how the measures would be implemented, the backlash has already begun. Mexican President Claudia Sheinbaum condemned the plans, describing them as “arbitrary and unjust.”
“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’. This measure would damage the economy of both nations,” she warned.
Economists, migration experts, and former migrants argue that taxing or banning remittances would do more harm than good. The money sent home supports millions of families in countries with limited economic opportunities and, paradoxically, helps curb migration by creating livelihoods at home.
“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.”
Orozco, who is also a senior fellow at Harvard University, explained that such measures may prompt migrants to use unofficial channels or reduce the amounts they send—both of which could hurt families and push more people to migrate.
Mark Krikorian, executive director of the Center for Immigration Studies, supports the move. “One of the main reasons people come here is to work and send money home,” he said. “If that’s much more difficult to do, it becomes less appealing to come here.”
Attempts to legislate remittance taxes have failed in most US states, except Oklahoma, which in 2009 imposed a $5 fee on transfers under $500 and a 1 per cent charge on higher amounts. Former Senator JD Vance also pushed for a 10 per cent tax on remittances through the WIRED Act in 2023, though the bill did not pass.
Globally, remittances remain a vital financial flow. In 2023 alone, migrants sent $656 billion to their home countries, according to the World Bank. Mexico received $63.3 billion, while India and China were also top recipients.
In towns like Cajolá, the stakes are high. Local leaders credit remittances with discouraging migration by providing youth with alternatives. Vail warned that without that support, families and businesses will suffer.
“There’s a lot of fear,” he said. “Fear that for the people that live here in Guatemala, there won’t be work because the businesses will be all gone.”
He added that the community has already seen a downturn since Trump’s return to the political stage. “When Donald Trump won, many people stopped sending remittances or they began to save money. Business dropped off a lot.”
As Republicans push forward with the proposal, families across the developing world are watching anxiously, fearing their fragile economic lifelines may soon be cut.
Source: graphic.com.gh