The U.S. proposal to tax money transfers by non-citizens could generate $22 billion, but it’s facing backlash from Mexico, immigration groups, and privacy advocates who warn of economic harm and data overreach.
At a Glance
- President of Mexico wants exemption from a proposed 3.5% tax on remittances.
- The proposed tax affects funds sent by non-U.S. citizens.
- Remittances to Mexico hit a record $64.7 billion last year.
- The tax could generate $22 billion for the U.S. over the next decade.
- The Cato Institute voices privacy concerns over the proposed tax.
Proposed Tax and Its Implications
The United States is weighing a sweeping change to its remittance policies with the introduction of a 3.5% tax on funds transferred abroad by non-citizens, part of a legislative push dubbed the One Big Beautiful Bill Act. This controversial measure has drawn immediate condemnation from Mexico’s president, who is demanding his country be exempt from the tax.
Remittances to Mexico hit a historic high of $64.7 billion last year, making them a vital lifeline for millions of Mexican families. Many of these transfers originate from immigrant workers in the U.S., a group now bracing for potential financial penalties under the proposed legislation. Mexican officials are coordinating with advocacy groups across the U.S., mobilizing peaceful opposition efforts to counter what they see as a discriminatory and economically damaging proposal.
Watch a report: U.S. Considers Tax on Immigrant Money Transfers.
Economic and Privacy Backlash
The Joint Committee on Taxation estimates the proposed tax could bring in more than $22 billion over the next decade. Supporters argue that it would reduce incentives for illegal immigration. Mark Krikorian of the Center for Immigration Studies claimed, “One of the main reasons people come here is to work and send money home.”
However, critics warn the tax risks undermining both economic and humanitarian interests. The Cato Institute has flagged serious privacy concerns. To avoid the tax, senders would need to prove U.S. citizenship and use government-approved service providers—effectively creating what some are calling a “two-tiered system” that collects sensitive personal data and restricts financial freedom.
“Individuals can avoid the tax if they prove they are U.S. citizens or nationals and use a government-approved service provider… that means surrendering personal information,” said Nicholas Anthony of the Cato Institute.
Strategic and Diplomatic Fallout
The remittance tax is also shaping up to be a flashpoint in U.S.-Mexico relations. Mexican leaders argue that the move penalizes immigrants and undermines the cross-border economic integration that both nations depend on. Several advocacy groups have already voiced opposition, warning that taxing remittances would not deter immigration but instead destabilize communities in both countries.
Meanwhile, Mexican Americans and diaspora organizations are joining the opposition, describing the tax as unjust and racially discriminatory. With tensions growing, the Biden administration faces mounting pressure to either adjust the proposal or risk alienating a critical foreign partner.
At its core, the proposed remittance tax raises fundamental questions about immigration, privacy, and economic fairness. As debates intensify in Congress and beyond, the policy’s fate could redefine how the U.S. manages both its borders and its global financial influence.
