Last year, approximately 160 billion US dollars were sent from the United States to families across Latin America. However, now a portion of these remittances may be subject to taxation. Concerns are rising throughout the region south of the Rio Bravo.
Mexico’s president chose a meaningful venue to voice her criticism of the US proposal: during the inauguration of a hospital in Los Cabos last weekend, Claudia Sheinbaum stated, “You can’t double tax those who already pay taxes.” Her choice of setting visually emphasized the sociopolitical significance of her stance against a US proposal currently causing controversy across Latin America.
The proposal in question involves taxing remittances—funds sent by migrants to their home countries. Specifically, it suggests a five percent tax on these remittances. The idea originated with the Republicans during the presidency of Donald Trump.
Remittances worth around $160 billion
According to the annual report from the Migration Department of the Inter-American Development Bank, in 2024, total remittances from the US to Latin American and Caribbean countries reached approximately $160.9 billion—a $7.7 billion increase compared to the previous year. The largest recipients south of the Rio Bravo (known as the Rio Grande in the US) are Mexico, which received $64.7 billion, and Guatemala, with $21.5 billion. This translates to roughly $177 million flowing into Mexico every day.
Exchange office and receiving station for foreign money transfers in the Mexican border town of Ciudad Juarez
According to Jesús Alejandro Cervantes González of the Center for Latin American Monetary Studies (CEMLA) in Mexico City, remittances constitute a significant portion of the economies in the region when compared to gross domestic product (GDP). In 2024, remittances accounted for approximately 20 percent of GDP in countries such as Guatemala and Haiti, 27 percent in Nicaragua, 26 percent in Honduras, 24 percent in El Salvador, and 19 percent in Jamaica. CEMLA specializes in studying the economic impact of remittances.
The economic and sociopolitical importance of these funds for recipient countries is substantial. Cervantes González explains, “Remittances alleviate the budgetary constraints faced by millions of households, reduce poverty levels, and enable families to improve their living standards. They help finance spending on consumer goods, education, healthcare, housing, and sometimes even investments in family-owned businesses.”
CEMLA studies estimate that in Mexico alone, 4.5 million households and 9.8 million adults receive remittances. Rural and impoverished areas stand to benefit the most from these financial flows.
Taxes and Identity Verification as Strategies to Combat Irregular Migration
In Florida, Governor Ron DeSantis is exploring the implementation of identity verification for money transfers, requiring senders to demonstrate they are legally employed in the United States. This initiative, reported by “El Economista,” aims to prevent irregular migrants from sending remittances.
Mexican Senator Antonino Morales of the ruling Morena party from Oaxaca criticizes these proposals as “openly discriminatory and racist,” arguing that they disproportionately impact foreigners with irregular residence in the US. He points out that, in addition to the proposed tax on remittances, such measures could limit their access to programs like Obamacare and Medicare. Morales refers to the common practice of applying for US health insurance under the names of registered individuals.
Legal Uncertainty
“The tax would generally apply only to non-citizen immigrants—this includes undocumented immigrants as well as those with legal residency,” explained Cervantes González, an expert from CEMLA, in an interview with https://24dailyusa.online/ .
The remittance tax, which could be enacted in 2026, risks significantly reducing the volume of remittances sent to Latin America and the Caribbean. Such a decline could have profound economic consequences for the region.
This situation would be especially detrimental for Mexico, Guatemala, Honduras, El Salvador, and Nicaragua, given the high proportion of remittances relative to their GDPs. These countries would be affected twice over—first by the additional tax, and second by the ongoing deportations of undocumented immigrants. Cervantes González notes that this comes at a time when there are indications of a decline in employment opportunities for Latin American immigrants in the United States.
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The consequences of the US proposal to prevent undocumented migrants from sending money to their countries of origin could have even further repercussions. The CEMLA expert sees a black market risk: “The remittance tax could lead to remittances being made informally by couriers or through digital transfers via crypto assets.”
Republicans disappoint Latino voters
However, things could turn out very differently. Due to the sometimes brutal images of arrests of Latin American migrants in the US, as well as the constant stream of bad news for Hispanic Americans, pressure from this voting group is growing on Republican politicians running in the US midterm elections in November 2026. In the so-called midterm elections, the entire House of Representatives and one-third of the Senate are elected every two years. In the last presidential election in 2024, significantly more Latinos voted for the Republicans and Donald Trump than in 2020.
The US labor market depends on Latin American immigrants – especially in the catering industry.
Some individuals in stronghold areas like Florida now feel betrayed by their party. Mexican President Sheinbaum explicitly urged Mexicans living in the U.S. to voice their concerns to local politicians. This pressure appears to be influencing some lawmakers’ offices; for example, certain Republican legislators have halted an initial effort spearheaded by the Trump camp. However, the proposal remains under consideration and is not yet abandoned.
