House Republicans are pushing a plan to tax money transfers sent by foreigners residing in the U.S. to friends and relatives abroad as part of the party’s major tax and spending bill, which they say could help curb illegal immigration and drug smuggling.
The current version of the GOP’s reconciliation bill to implement the Trump administration’s policy goals would impose a 5% tax on non-citizen or foreign national senders of remittances outside of the U.S. The Joint Committee on Taxation estimates the tax will generate more than $22 billion in revenue over a decade, which Republicans expect will help fund other parts of President Donald Trump’s agenda, including extending the tax cuts enacted during Trump’s first term.
Proponents of the measure frame the tax as a tool to combat drug trafficking and illegal immigration. Republican Rep. Kevin Hern of Oklahoma, along with then-Republican Ohio Sen. JD Vance, introduced a similar bill in 2023 that would have established a 10% tax on remittances.
“It’s a two-fold win: taxing remittances will help slow down the cash flow to cartels and will also create a new revenue source we can use to build the wall and secure our border,” Hern told the Daily Caller News Foundation. “We must be using every tool at our disposal to combat the cartels smuggling fentanyl into this country.”
The proposal was inspired by a similar tax in Hern’s home state of Oklahoma, which generated $13.2 million in revenue for the state during fiscal year 2024, Hern told the DCNF.
Remittances to Central American nations such as Guatemala, El Salvador and Honduras have all soared by 14-20% since Trump took office, Bloomberg reported in April. Officials from the Guatemalan and Honduran central banks attributed the rise to the Trump administration’s crackdown on illegal immigration and the fear of impending deportation.
The provision has the blessing of the president, who believes the proposal will help further deter illegal immigration into the country.
“The One Big Beautiful Bill is the most significant immigration legislation in years. Not only will it fund thousands of miles of new border barriers and give ICE the funding necessary to deport 1 million illegals a year, but by taxing remittances it reduces a ‘pull’ factor bringing illegals to the United States,” White House Principal Deputy Communications Director Alex Pfeiffer said in a statement to the DCNF.
A similar proposal was floated during Trump’s first term but was eventually abandoned due to legal and technical difficulties in distinguishing between trade-related and worker outflows, Bloomberg reported.
In 2019, remittances accounted for approximately 17% of the GDP in Northern Central America, according to World Bank data analyzed by Bloomberg. Other countries, like India, which received about $32 billion in remittances from its workers living in the U.S. in 2024, also expect a significant hit if the proposal passes.
“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,” said President Claudia Sheinbaum of Mexico, a country where remittances are 4.5% of GDP.
Others have raised concerns around privacy and the potential that even those with legal status will be targeted.
“It’s hard to see this as anything other than a way to harass legal immigrants and increase government surveillance,” Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told Semafor. “For relatively little tax revenue, it will make it harder for families to keep their income, discourage hard working people from improving their lives and becoming Americans, and add yet another layer of regulation on financial services companies and law-abiding taxpayers.”
The reconciliation package must be passed by the House before it moves to the Senate for further modifications.
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