US Remittance Tax Could Threaten Mexican Families' Finances

As US lawmakers debate a sweeping Republican tax bill, much attention has focused on its US$5.6 trillion in tax breaks for corporations and the wealthy, funded by deep cuts to healthcare, nutrition, and social programs. However, a lesser-known provision buried on page 991 of the proposal could have devastating consequences for immigrant communities in the United States and millions of families across Latin America, particularly in Mexico.

The House bill proposes a 3.5% tax on remittances sent abroad by non-US citizens. Some senators are pushing to raise this tax to 15%. While framed as a measure targeting undocumented immigration, this policy would directly reduce the income of millions of Mexican households.

Mexico is the largest recipient of US remittances, receiving over US$63 billion in 2023. This financial lifeline supports nearly 12 million households, particularly in rural areas where remittances make up 20% of family incomes. Funds are spent on necessities like food, education, and healthcare.

A 3.5% tax could strip Mexican families of US$2.2 billion annually, while a 15% tax would cost them over US$9 billion—more than Mexico’s annual foreign direct investment from major trade partners.  The impact would be especially severe in states like Michoacan, Oaxaca, and Guerrero, where remittances drive local economies.

“Remittances are a critical tool for financial inclusion,” said Jaime Márquez, Executive Director of Business Development, STP.

Over the past two decades, US and international efforts to formalize remittance flows have enhanced transparency and reduced risks. In 2002, 30% of Latin American immigrants relied on informal channels to send money. Today, 97% of US-Mexico remittances are transferred through formal systems regulated under anti-money laundering (AML) and counter-terrorism financing (CFT) laws.

This tax threatens to reverse those gains. A 2017 survey of Latino immigrants found that 64% would change how they send money if a tax were enacted, and 41% said they would switch to informal channels entirely. Shifting even a portion of the US$200 billion in annual US remittances to informal systems would compromise oversight and security, as unregulated channels are more vulnerable to criminal exploitation.

Enforcing the tax would also create administrative challenges, requiring financial institutions to collect and verify immigration status. This could deter legal residents and citizens from using formal systems, especially in immigrant communities where document access is limited.

The proposal could further strain US-Mexico relations at a time when both nations are deeply interconnected through trade and migration. While policymakers focus on penalizing immigrants, remittances remain a vital stabilizing force for millions of families in Mexico, often providing more consistent support than aid or investment.

Mexico’s reliance on remittances continues to grow. In 2024, inflows hit a record US$64.75 billion, marking 11 straight years of growth, according to Banxico. Top recipient states included Michoacan (US$5.65 billion), Guanajuato (US$5.64 billion), and Jalisco (US$5.5 billion), per  BBVA Research.

From January to April 2025, remittances reached US$19.01 billion, slightly below the same period in 2024, with electronic transfers accounting for 99% of all transactions.