Trump's 1 Percent Tax on Money Immigrants Send Home Is a Tax on the Global Poor
Analysts expect the One Big Beautiful Bill Act to reduce the number of remittance payments sent abroad.
President Donald Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4. One measure buried deep in the 870-page law imposes a 1 percent tax on remittances—the money that people send to friends and relatives in their home countries. The 1 percent tax applies to all remittance senders in the United States, though not to transfers sent from bank accounts and U.S.-issued debit or credit cards.
The Center for Global Development (CGD), an economic research think tank, suggests that remittances could drop by 1.6 percent "if the new tax raises costs by 1 percent." Analyzing the potential impact on remittances sent by migrants in the U.S., the CGD finds that Central American countries will "suffer the greatest loss relative to their gross national income (GNI)." El Salvador is projected to lose 0.6 percent of its GNI, Honduras 0.55 percent, and Jamaica 0.42 percent.
The Tax Foundation found that an earlier version of the measure—which would have imposed a 3.5 percent tax—was "likely to create collateral damage by imposing compliance burdens on people who are not the intended target of the tax while struggling to collect revenue from the intended targets." In other words, the tax's "primary impact will be far more paperwork, not more revenue."
Remittances account for a large share of many countries' economies. (Tajikistan tops the list at 51 percent.) The OBBBA's remittance tax likely won't produce much revenue for the United States. It's far more likely to reduce the amount of money people send home, drive senders to use riskier money-transferring channels, and harm impoverished communities that rely on remittances.
