Mexican government opposes remittance provision in Trump tax bill

The House Republican bill aimed at enacting President Trump’s domestic policy agenda has stirred up controversy with a provision that proposes a tax on cash payments sent by non-U.S. citizens to family members in their home countries. These payments, commonly referred to as remittances, would be subject to a 5% excise tax, impacting over 40 million individuals, including green card holders and nonimmigrant visa holders.

Mexico’s government has strongly opposed this provision, with Ambassador Esteban Moctezuma Barragán and Chief Officer for North America, Robert Velasco Alvarez, urging lawmakers to reconsider the proposal. Mexican President Claudia Sheinbaum has also criticized the plan, stating that it would harm the economies of both nations and goes against the principles of economic freedom.

The Center for Latin American Monetary Studies estimates that Mexican migrant workers send an average of 16.7% of their labor income as remittances, with the majority of their earnings staying within the U.S. economy. While the Joint Committee on Taxation predicts that the proposal could generate significant tax revenue, Barragán argues that it would amount to double taxation and disproportionately impact those with the least ability to pay.

Concerns have also been raised about the potential consequences of the remittance tax, including the possibility of migrants turning to informal or unregulated channels to send money, leading to financial security risks, tax evasion, and money laundering. Lawmakers, including Texas Rep. Tony Gonzalez and House Foreign Affairs Committee Chairman Brian Mast, have engaged in discussions with Barragán regarding the proposal.

Representatives from the electronic payment transfer industry have voiced their apprehension, stating that taxing remittances could harm vulnerable communities, disrupt financial regulations, and drive consumers towards unregulated channels to avoid additional costs. The Electronic Transactions Association emphasized the potential negative impact on small businesses and law enforcement’s ability to combat illicit activities.

As the debate continues, lawmakers and stakeholders are assessing the implications of the remittance tax proposal and considering its effects on both the U.S. and Mexican economies. The issue remains a point of contention, with the Mexican government and industry representatives advocating for a reconsideration of the controversial provision.