[Edgewise] Trump spending bill to tax immigrants’ remittances 

This tax will hurt Filipinos and people in low-income countries in Latin America and Africa who rely on money from relatives abroad as lifelines

As if secret police-style Immigration and Customs Enforcement (ICE) raids and mass detentions of people who look or sound like they might be “illegal aliens” weren’t cruel enough, wannabe military dictator Donald Trump has yet another anti-immigrant scheme: slapping a tax on immigrants’ dollar remittances to family and relations abroad.

Buried in his 1,116-page “Big Beautiful” spending bill passed by the GOP-ruled House and awaiting a Senate vote is a provision imposing a 3.5% tax on remittances from the US by non-citizens. Meaning, money transfers by green card holders, H1B, F1 visa holders, etc. would be subject to this excise tax.

A 3.5% tax on a $100-transfer would leave $96.50. Deducted further from that amount would be an average fee of 10% for bank transfers, or 5 to 7% via operators like Western Union or Moneygram. 

This tax will hurt Filipinos and people in low-income countries in Latin America and Africa who rely on money from relatives abroad as lifelines. Last year, Filipinos in the US sent some $14 billion to recipients in the Philippines, representing 41 percent of all funds from Filipinos abroad. The US is the biggest source of Filipino remittances that make up 3.4% of the Philippines’ GDP. 

The tax provision amounts to double taxation. Working immigrants already pay US income and sales taxes. Those without legal status, alone, paid $96.5 billion in federal, state, and local taxes in 2022, according to the Institute on Taxation and Economic Policy. 

These billions are virtually a net gain for the feds because the undocumented don’t have access to social services like health, housing, social security, or food stamps and often don’t seek tax credits or refunds for fear of revealing their immigration status. And yet, xenophobes believe that foreign nationals are just “siphoning” money from the US to their countries of origin.

Ostensibly, the proposed levy on remittances is mainly aimed at generating revenue estimated at $2.6 billion annually for the federal government. But critics argue that implementing it would be complicated, burdensome, and plagued with loopholes.

It will be costly, too, for both the government and remittance service providers. The latter must collect the tax as well as verify and report the senders’ citizenship status. So, expensive system upgrades and new compliance, monitoring, reporting, and auditing mechanisms would be needed. 

The Tax Foundation, a tax policy think tank, concludes that “this is a small tax base with a big compliance burden. Its primary impact will be far more paperwork, not more revenue.”

Besides, a large share of remittances flow through informal channels. “Estimates vary widely,” states a World Bank study, “ranging from 35 percent to 250 percent of recorded flows.” The remittance tax would only increase money transfers via travelers, unregulated couriers, and cryptocurrencies, and US-citizen proxy senders, undermining potential tax earnings and requiring tighter enforcement. 

But if the offsets seem too much for the trouble, why tax remittances at all? It’s part of the Trump/Maga drive to curtail non-white and non-Christian immigration.

In addition to mass raids and deportations Trump has issued bans on travelers from more than a dozen African, Latin American, and predominantly Muslim countries. Trump and his enforcers in Congress also believe that making remittances costlier and less attractive will discourage illegal immigration to the US. It’s highly unlikely. 

Poverty and lack of economic opportunities in distressed countries have always been the powerful engine of international migration. Cutting off remittance lifelines will only boost the quest for better lives abroad. So, taxing non-US citizens’ remittances amounts to nothing more than another punitive, anti-immigrant measure. – Rappler.com