House Republicans are targeting remittances sent to foreign countries by immigrants working in the United States, apparently in an effort to dissuade migration and to raise revenue. If passed, the provision could have devastating consequences for some Latin American economies that rely heavily on money being sent to their countries from the United States. 

Lawmakers are currently working through the amendment process of President Trump’s tax bill — a process that could last for days. Tucked into the bill text, released on Monday, is a provision that would create a new remittance tax of 5 percent that applies to non-citizens. American citizens will pay the tax, though they will receive a tax credit to reimburse them for the fee. 

A tax on remittances has been pushed by many anti-immigration activists in recent years as payments to foreign countries from the United States have grown. Globally, there were more than $900 billion in remittances sent last year, according to data compiled by the World Bank and the International Monetary Fund. 

A tax on such payments — coupled with the president’s mass deportation operation — would likely have the greatest impact on Latin American countries, considering the number of migrant employees who come to the United States to work and then send funds home to their families. The payments account for large shares of some of these smaller countries’ gross domestic products. 

According to the World Bank’s most recent data from 2023, some of the countries most reliant on remittances get an outsized percentage of those funds from employees in the United States. Nicaragua and Honduras’s economies are especially vulnerable to a tax on remittances; money sent from abroad accounts for 26.1 percent of their GDPs. 

Mr. Trump’s new ally in Central America, President Bukele of El Salvador, would also be hit especially hard by a remittances tax. In 2023, more than 24 percent of his economy was made up of payments sent from abroad, the vast majority of which came from the United States. Data compiled by the Global Migration Data Analysis Centre show that 66 percent of all remittances to El Salvador came from the United States. 

It would be even worse for the Mexican economy, with nearly all remittance payments coming from migrant employees working north of the Rio Grande. According to the same data from the Global Migration Data Analysis Centre, 97 percent of all remittances to Mexico originate in the United States. 

Some Republicans want to go even further than the 5 percent figure, though their effort is not likely to go far. The 5 percent tax is included in legislation now being considered by the House, but several other lawmakers have proposed a separate bill that would impose a 37 percent tax on remittances — equivalent to the current top income tax bracket — as a way to decrease incentives for migration. 

Congressman Nathan Moran, a Texas Republican, introduced legislation in January to establish a trust fund for states along the southern border that primarily deal with migrants crossing into the United States. The funds collected from the 37 percent remittances tax would be used to fill the coffers of that trust fund, which would then reimburse states for costs associated with border security and immigration enforcement. 

The Federation for American Immigration Reform praised Mr. Moran’s legislation at the time, saying that it was a necessary step to deincentivize payments being sent abroad. 

“Every year, the United States loses around 150 billion [dollars] in remittance payments sent to relatives or friends still abroad by immigrants here,” the group says. “The loss of revenue from sales, excise and restaurant taxes that could be used to offset the increasingly large number of public services consumed by aliens here is crushing.”