Trump move to tax money sent abroad could devastate Latin America, Caribbean economies
A proposed tax on the money sent by immigrants in the United States to friends and families back in their home countries could have unintended devastating consequences for US. national security and for receiving countries, especially those in Latin America and the Caribbean that have come to heavily rely on the funds, experts warn.
The 3.5% tax on remittances, which are not currently taxed, is among several provisions tucked inside President Donald Trump's 'One, Big, Beautiful Bill' tax and spending plan that House Republicans narrowly passed last month. Senate Republicans are now trying to agree on a version before sending it to the floor for a vote ahead of July 4, the deadline Trump has set for it to hit his desk.
While there are some notable differences between what the House passed and what the Senate Finance Committee published on Monday, the proposed tax on remittances still risks pushing migrants to use unregulated and unlicensed networks to send money to their home countries and plunging countries like Haiti, where the money represents a key source of family income, deeper into economic hardship. It also requires U.S. citizens, green-card holders and anyone with a Social Security number to provide that information before they can send money abroad.
'We did a conservative estimate of the impact of these flows and it will have an effect of reducing transfers by at least 5% in the next year,' said Manuel Orozco, director of Migration, Remittances and Development Program at the Inter-American Dialogue in Washington.
Orozco said that will have a devastating effect for countries in Central America along with the four nations — Cuba, Haiti, Nicaragua and Venezuela — that were recently part of a Biden-era humanitarian parole program now being targeted by the Trump administration. Earlier this month the Supreme Court ruled that the Department of Homeland Security can deport beneficiaries of the program that had allowed them to temporarily stay and work in the U.S. for up to two years, while Trump's decision to end the program is being litigated in the courts.
Last week, the administration began sending revocation letters to about 500,000 recipients of the program, urging them to leave the U.S. on their own. Many of those targeted are also enrolled in Temporary Protected Status, another benefit that the administration is seeking to end after rolling back their end dates.
'On the one hand, the Temporary Protected Status and the humanitarian parole is being discontinued for people from these four nationalities,' Orozco said. 'On the other hand, you have the tax increase for those nationalities who happen to be much less likely to have a social security number because they arrived recently, they escaped their home country for political reasons or due to state fragility or state failure as in the case of Haiti.'
In the case of Haiti, which has become highly dependent on remittances, 'you're dealing with a time bomb,' said Orozco, who found that for every $10 dollars remitted to Haiti in 2020 — when the country received $3.8 billion from abroad — at least $8 came from the U.S.
'The impact of this tax on Haiti will be devastating because there are 500,000 Haitians' at risk of losing their legal right to stay in the U.S. in August., Orozco said. 'Haiti's dependence on remittances is significant in a moment where … the state has already collapsed, and income basically depends on remittance flows. So the implications of these are far more complex.'
But Haiti's remittance flows, which surpassed $4 billion last year according to its central bank, are not the only ones that risk taking a hit should the tax provision pass.
Central American nations with economies weakened by years of instability and insecurity also will be hurt. Orozco cites the case of Guatemala, where he recently examined 15 years' worth of data through 2024. A 1% increase in remittances, Orozco said, led to a 15% increase in the country's GDP.
'Remittances have increased an average of 13% for the past 15 years,' he said. 'If remittances were to fall 10%, you will have an economic recession in Guatemala, because a 1% decrease will decelerate the Guatemalan economy substantially for more than four months.'
The decline, he said, would be much more severe in Honduras, where a 1% increase in remittances increased the GDP by 33%. In both Central American nations, remittance income accounts for 30% of private consumption and any decline will have a direct effect on gross domestic product, GDP, Orozco said.
'You will have a big blow in these countries' economies,' he said.
On Wednesday, Orozco was part of a conversation about the effects of the legislation on family remittances. Fellow panelists Kathy Tomasofsky, the executive director of Money Services Business Association, and Marina Olman-Pal, chair of the Legal & Regulatory Affairs Committee of the Financial & International Business Association, said many questions that remain about the legislation.
The Senate version appears to focus on cross-border transfers that are initiated in cash and being sent to family members, Olman-Pal said. Transfers funded with debit or credit cards appear to be excluded in the Senate version.
The original tax got scaled back from 5% to 3.5%. While the House version required senders to be U.S. citizens, the Senate version expands the universe to include those with social security numbers that allow them to work. It also offers more exemptions ,such as individuals using debit and credit cards to transfer money abroad.
In the version released by the Senate Finance Committee on Monday, the tax must be collected by the remittance company and paid quarterly to the Treasury Department.
'For an American citizen, a green card holder that has that Social Security information, you are going to now have to complete a form and hand over that information to your cashier in order to affect the transfer,' said Tomasofsky. 'The business company, that small business, is going to have to set up a procedure to collect the information, to store that information. There are concerns about privacy.'
Tomasofsky said the industry has made significant strides in the last 20 years, but the new reporting system could have an adverse effect on small grocery stores and businesses. For example, a company that only does 500 transactions a month may opt to get out of the business after deciding it's not worth the extra compliance.
'I'm not certain that it's going to provide any benefit to anyone in the long run because of it,' she said.
Olman-Pal said while social security numbers are protected under federal and state law, there is a risk associated with increased collection. She agrees with Tomasofsky that the cost of banking could also go up as a result of the legislation's new requirements.
29 bills on taxing remittances
The motivation for such legislation varies depending on the proponent. Some say it's intended to discourage unauthorized migration. Some others say it's a means to raise revenue, while some proponents accuse migrants of not paying taxes and say it's a way to tax them indirectly. Orozco and the others caution against all of these assumptions, noting that studies show that migrants, regardless of immigration status, do file taxes and in some cases the money they send home has discouraged migration to the U.S.
Still, this past year, 18 states have proposed 29 different bills on taxing remittances, Tomasofsky said. In all but one instance, Tomasofsky said, the industry was able to push back 'by demonstrating how many unintended consequences there are in this bill, and the states have not moved those bills forward.'
But this is the first time that the push to tax remittances, which already come with high fees, has reached a level where there appears to be political appetite for approving it.
'The motivations may be political, but everything is about the fine print, the content of what you try to come up with, and the adverse effect that it can have, the backfiring effect,' Orozco said.
To underscore his point, he brought up the case of Ghanaians living in Europe and an analysis of the global money transfer market and the relationship between stiff regulations and higher transaction costs. As a result of the stiffer controls on the origination and destination of remittances, nationals of Ghana in Europe, for example, turned to informal channels, Orozco said.
'Statistically, for a 1% increase in the transaction cost the use of informal fund transfers will increase by 6% but also, there is a cost element to it,' he said. 'Immigrants don't have an infinite amount of resources. They have a very limited income capacity that in the U.S. averages to about $3,300 a month.'
'If your transaction cost goes from 3 to 6% or 6.5%, you're actually spending 1% of your monthly income just to pay those costs. And what typically people do is send less money,' Orozco added. 'So you will see one side going informal, and another side who may pay the tax but send less money.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Hamilton Spectator
17 minutes ago
- Hamilton Spectator
Democrats are at odds over response as Trump announces the US has entered Israel-Iran war
After nearly two years of stark divisions over the war in Gaza and support for Israel, Democrats seemed to remain at odds over policy toward Iran. Progressives demanded unified opposition before President Donald Trump announced U.S. strikes against Tehran's nuclear program but party leaders were treading more cautiously. U.S. leaders of all stripes have found common ground for two decades on the position that Iran could not be allowed to obtain a nuclear weapon. The longtime U.S. foe has supported groups that have killed Americans across the Mideast and threatened to destroy Israel. But Trump's announcement Saturday that the U.S. had struck three nuclear sites could become the Democratic Party's latest schism, just as it was sharply dividing Trump's isolationist 'Make America Great Again' base from more hawkish conservatives. Ken Martin, chair of the Democratic National Committee, noted that in January, Trump suggested the U.S. could 'measure our success not only by the battles we win, but also by the wars that we end, and perhaps most importantly, the wars we never get into.' 'Today, against his own words, the president sent bombers into Iran,' Martin said in a statement. 'Americans overwhelmingly do not want to go to war. Americans do not want to risk the safety of our troops abroad.' Sen. Peter Welch, a Vermont Democrat, said the U.S. entering the war in Iran 'does not make America more secure.' 'This bombing was an act of war that risks retaliation by the Iranian regime,' Welch said in a statement. While progressives in the lead-up to the military action had staked out clear opposition to Trump's potential intervention, the party leadership played the safer ground of insisting on a role for Congress before any use of force. Martin's statement took a similar tact, stating, 'Americans do not want a president who bypasses our constitution and pulls us towards war without Congressional approval. Donald Trump needs to bring his case to Congress immediately.' Virginia Democratic Sen. Tim Kaine called Trump's actions, 'Horrible judgement' and said he'd 'push for all senators to vote on whether they are for this third idiotic Middle East war.' Many prominent Democrats with 2028 presidential aspirations had been silent on the Israel-Iran war , even before Trump's announcement — underscoring how politically tricky the issue can be for the party. 'They are sort of hedging their bets,' said Joel Rubin, a former deputy assistant secretary of state who served under Democratic President Barack Obama and is now a strategist on foreign policy. 'The beasts of the Democratic Party's constituencies right now are so hostile to Israel's war in Gaza that it's really difficult to come out looking like one would corroborate an unauthorized war that supports Israel without blowback.' Progressive Democrats also are using Trump's ideas and words Rep. Ro Khanna, D-Calif., had called Trump's consideration of an attack 'a defining moment for our party.' Khanna had introduced legislation with Rep. Thomas Massie, R-Ky., that called on the Republican president to 'terminate' the use of U.S. armed forces against Iran unless 'explicitly authorized' by a declaration of war from Congress. Khanna used Trump's own campaign arguments of putting American interests first when the congressman spoke to Theo Von, a comedian who has been supportive of the president and is popular in the so-called 'manosphere' of male Trump supporters. 'That's going to cost this country a lot of money that should be being spent here at home,' said Khanna, who is said to be among the many Democrats eyeing the party's 2028 primary. Vermont Sen. Bernie Sanders, an independent who twice sought the Democratic presidential nomination, had pointed to Trump's stated goal during his inaugural speech of being known as 'a peacemaker and a unifier.' 'Supporting Netanyahu's war against Iran would be a catastrophic mistake,' Sanders said about Israeli Prime Minister Benjamin Netanyahu. Sanders reintroduced legislation prohibiting the use of federal money for force against Iran, insisted that U.S. military intervention would be unwise and illegal and accused Israel of striking unprovoked. Senate Democratic leader Chuck Schumer of New York signed on to a similar bill from Sanders in 2020, but so far was holding off this time. Some believed the party should stake out a clear anti-war stance. 'The leaders of the Democratic Party need to step up and loudly oppose war with Iran and demand a vote in Congress,' said Tommy Vietor, a former Obama aide, on X. Mainstream Democrats are cautious, while critical The staunch support from the Democratic administration of President Joe Biden and Vice President Kamala Harris for Israel's war against Hamas loomed over the party's White House ticket in 2024, even with the criticism of Israel's handling of the humanitarian crisis in Gaza. Trump exploited the divisions to make inroads with Arab American voters and Orthodox Jews on his way back to the White House. Today, the Israel-Iran war is the latest test for a party struggling to repair its coalition before next year's midterm elections and the quick-to-follow kickoff to the 2028 presidential race. The party will look to bridge the divide between an activist base that is skeptical of foreign interventions and already critical of U.S. support for Israel and more traditional Democrats and independents who make up a sizable, if not always vocal, voting bloc. In a statement after Israel's first strikes on Iran, Schumer said Israel has a right to defend itself and 'the United States' commitment to Israel's security and defense must be ironclad as they prepare for Iran's response.' Sen. Jacky Rosen, D-Nev., said 'the U.S. must continue to stand with Israel, as it has for decades, at this dangerous moment.' Other Democrats have condemned Israel's strikes and accused Netanyahu of sabotaging nuclear talks with Iran. They are reminding the public that Trump withdrew in 2018 from a nuclear agreement that limited Tehran's enrichment of uranium in exchange for the lifting of economic sanctions negotiated during the Obama administration. 'Trump created the problem,' Sen. Chris Murphy, D-Conn., posted on X. The progressives' pushback A Pearson Institute/Associated Press-NORC Center for Public Affairs Research poll from September 2024 found that about half of Democrats said the U.S. was being 'too supportive' of Israel and about 4 in 10 said their level of support was 'about right.' Democrats were more likely than independents and Republicans to say the Israeli government had 'a lot' of responsibility for the continuation of the war between Israel and Hamas. About 6 in 10 Democrats and half of Republicans felt Iran was an adversary with whom the U.S. was in conflict. ___ Associated Press writers Mary Clare Jalonick, Linley Sanders, Will Weissert and Lisa Mascaro in Washington contributed to this report Error! Sorry, there was an error processing your request. There was a problem with the recaptcha. Please try again. You may unsubscribe at any time. By signing up, you agree to our terms of use and privacy policy . This site is protected by reCAPTCHA and the Google privacy policy and terms of service apply. Want more of the latest from us? Sign up for more at our newsletter page .
Hamilton Spectator
17 minutes ago
- Hamilton Spectator
Trump ignites debate on presidential authority with Iran strikes and wins praise from Republicans
WASHINGTON (AP) — President Donald Trump's bombardment of three sites in Iran quickly sparked debate in Congress over his authority to launch the strikes, with Republicans praising Trump for decisive action even as many Democrats warned he should have sought congressional approval. The instant divisions in the U.S. Congress reflected an already swirling debate over the president's ability to conduct such a consequential action on his own, without authorization from the House and Senate on the use of military force. While Trump is hardly the first U.S. president to go it alone, his expansive use of presidential power raised immediate questions about what comes next, and whether he is exceeding the limits of his authority. 'Well done, President Trump,' Sen. Lindsey Graham of South Carolina posted on X. Alabama Sen. Katie Britt called the bombings 'strong and surgical.' The Senate Armed Services Committee chairman, Roger Wicker of Mississippi, said Trump 'has made a deliberate — and correct — decision to eliminate the existential threat posed by the Iranian regime.' Democrats, and a few Republicans, said the strikes were unconstitutional. House Democratic Leader Hakeem Jeffries, who called for an immediate classified briefing for lawmakers, said that Trump 'misled the country about his intentions, failed to seek congressional authorization for the use of military force and risks American entanglement in a potentially disastrous war in the Middle East.' Some Republicans had similar concerns. Kentucky Rep. Thomas Massie, a Republican and a longtime opponent of U.S. involvement in foreign wars, posted on X after Trump announced the attacks that, 'This is not Constitutional.' But the quick GOP endorsements of stepped up U.S. involvement in Iran came after Trump publicly considered the strikes for days. Many congressional Republicans had cautiously said they thought he would make the right decision. The party's schism over Iran could complicate the GOP's efforts to boost Pentagon spending as part of a $350 billion national security package in Trump's 'big, beautiful' tax breaks bill , which is speeding toward votes next week. 'We now have very serious choices ahead to provide security for our citizens and our allies,' Wicker posted on X. House Speaker Mike Johnson, R-La., and Senate Majority Leader John Thune both were briefed ahead of the strikes on Saturday, according to people familiar with the situation and granted anonymity to discuss it. Thune said Saturday evening that 'as we take action tonight to ensure a nuclear weapon remains out of reach for Iran, I stand with President Trump and pray for the American troops and personnel in harm's way.' Johnson said in a statement that the military operations 'should serve as a clear reminder to our adversaries and allies that President Trump means what he says.' House Intelligence Committee Chairman Rick Crawford, R-Ark., said he had also been in touch with the White House and 'I am grateful to the U.S. servicemembers who carried out these precise and successful strikes.' Breaking from many of his Democratic colleagues, Sen. John Fetterman of Pennsylvania, an outspoken supporter of Israel, also praised the attacks on Iran. 'As I've long maintained, this was the correct move by @POTUS,' he posted. 'Iran is the world's leading sponsor of terrorism and cannot have nuclear capabilities.' Both parties have seen splits in recent days over the prospect of striking Iran, including some of Trump's most ardent supporters who share his criticism of America's 'forever wars.' Republican Rep. Warren Davidson of Ohio posted that 'while President Trump's decision may prove just, it's hard to conceive a rationale that's Constitutional.' 'This is not our fight,' posted Republican Rep. Marjorie Taylor Greene of Georgia. Most Democrats have maintained that Congress should have a say, even as presidents in both parties have ignored the legislative branch's constitutional authority. The Senate was scheduled to vote soon on a resolution from Virginia Sen. Tim Kaine that would require congressional approval before the U.S. declares war on Iran or takes specific military action. Kaine said the bombings were 'horrible judgment.' 'I will push for all senators to vote on whether they are for this third idiotic Middle East war,' Kaine said. Democratic Rep. Greg Casar, the chairman of the Congressional Progressive Caucus, also called on Congress to immediately pass a war powers resolution. He said politicians had always promised that 'new wars in the Middle East would be quick and easy.' 'Then they sent other people's children to fight and die endlessly,' Casar said. 'Enough.' Error! Sorry, there was an error processing your request. There was a problem with the recaptcha. Please try again. You may unsubscribe at any time. By signing up, you agree to our terms of use and privacy policy . This site is protected by reCAPTCHA and the Google privacy policy and terms of service apply. Want more of the latest from us? Sign up for more at our newsletter page .
Vox
17 minutes ago
- Vox
This time it's Trump's war
is a senior correspondent at Vox covering foreign policy and world news with a focus on the future of international conflict. He is the author of the 2018 book, Invisible Countries: Journeys to the Edge of Nationhood , an exploration of border conflicts, unrecognized countries, and changes to the world map. US President Donald Trump addresses the nation, alongside US Vice President JD Vance, US Secretary of State Marco Rubio and US Secretary of Defense Pete Hegseth, from the White House in Washington, DC on June 21, 2025. Carlos Barria/Pool/AFP via Getty Images Donald Trump claimed during his 2024 campaign for president that America had fought 'no wars' during his first presidency, and that he was the first president in 72 years who could say that. This was not, strictly speaking, true. In his first term, Trump intensified the air war against ISIS in Iraq and Syria, ordered airstrikes against Bashar al-Assad's Syrian regime in response to chemical weapons use, and escalated a little-noticed counterinsurgency campaign in Somalia. But in those cases, Trump could say, with some justification, that he was just dealing with festering crises he had inherited from Barack Obama. Likewise, the president has repeatedly claimed that the wars in Gaza and Ukraine never would have happened had he been president when they broke out, rather than Joe Biden. That's a counterfactual that is impossible to prove, and he may have been overly optimistic in his promises to quickly negotiate an end to both those conflicts, but it's fair to say that both are wars Trump inherited rather than chose. This time, it's different. This time, it's Trump's war. On Saturday night, the United States bombed three nuclear sites in Iran at Fordow, Natanz, and Esfahan, ending weeks of speculation about whether the US military would join the Israeli war on Iran that began more than a week ago. The past few days in Washington have felt a bit like the battles over intelligence in the lead-up to the war in Iraq, but run in fast-forward. Rather than pressuring intelligence agencies to justify his preferred course of action, Trump has simply overruled them. Rather than building a case before Congress and the UN for the need to act, he's simply ignored them. Trump argued that Iran brought the attack on themselves by not taking the deal he was offering — but negotiations were ongoing at the time Trump abandoned the diplomatic path. Trump endorsed the Israeli assessment that war was necessary because new information showed Iran was 'very close to having a weapon.' But this contradicts the very recent statements from his own intelligence agencies and director of national intelligence. According to the Wall Street Journal's reporting, officials in these agencies were not convinced by Israel's new evidence that something dramatic had changed in Iran's nuclear program. It also contradicts Trump's own statements from earlier this month when he publicly discouraged Israel from attacking Iran, saying it would derail his efforts to negotiate a new nuclear deal. It's hard to overstate just how fast the Trump administration's policy has shifted. Just a month ago, Trump appeared to be giving Netanyahu's government the cold shoulder, pursuing direct diplomacy with Israel's staunchest enemies – including Iran – and cozying up to governments in the Gulf that plainly had no appetite for a new war. Now Trump has not only endorsed Netanyahu's war; he has joined it, and boasted in his brief statement from the White House on Saturday that the two had worked as a team like 'perhaps no team has ever worked before.' He ended his speech with 'God bless Israel' along with 'God bless America.' Tonight was also a major blow to those on the right, as well as some on the left, who hoped that the Trump administration would usher in either a new era of military restraint or a shift in priorities away from the Middle East toward China. (The US has now relocated military assets from Asia for this war.) There's still a lot we still don't know, but it's fair at this point to say that this is a war of Trump's choosing. Trump's extraordinary gamble In his statement from the White House on Saturday night, Trump said that the operation had been a 'spectacular military success' and that the enrichment facilities had been 'totally obliterated.' For the moment, we don't have corroborating evidence of that. Israel had mostly avoided striking these sites itself. Only the US has the powerful GBU-57 'bunker buster' bombs that can destroy Iran's most security nuclear sites, particularly the underground uranium enrichment facility at Fordow, and only the US has the aircraft that can carry them. US officials told the New York Times that US bombers dropped a dozen bunker busters on Fordow on Saturday. Many experts believe the facility would be difficult to destroy and require multiple strikes, even with those bombs. Doubts about whether Fordow could be destroyed were reportedly one reason why Trump hesitated in ordering these strikes. In his statement, Trump also implied that this was a one-off operation for now. Speaking of the pilots who dropped the bombs, Trump said, 'hopefully we will no longer need their services at this capacity' but also threatened that if Iran did not 'make peace' then 'future attacks will be far greater and a lot easier.' He added: 'There are many targets left.' The hope appears to be that Iran will now be forced to cut a deal to entirely give up its nuclear program. But an Iranian regime mindful of its own legitimacy is also likely to retaliate in some form, possibly by targeting some of the roughly 40,000 US troops deployed around the Middle East. The hope may be that these will be limited tit-for-tat strikes like those that followed the US assassination of Gen. Qassem Soleimani in 2020, though subsequent assessments have found that those attacks did more damage than was initially thought and could easily have killed far more US troops. In any event, the Iranian regime is far more desperate now, and once the missiles start flying, it could get very easy for things to escalate out of control. If Iran has any remaining enrichment infrastructure, either at these sites or hidden elsewhere throughout the country, the country's leaders may now feel far less hesitation about rushing to build a bomb. There was long a view that Iran's leaders preferred to remain a 'threshold nuclear state' — working toward a bomb without actually building one. In this view, they believed that their growing capacity to build a weapon gave them leverage, while not actually trying to build one avoided US and Israeli intervention. That logic is now obsolete. It's also not clear that Israel simply wants nuclear concessions from the Iranian regime. While Prime Minister Benjamin Netanyahu said that new intelligence about Iran's nuclear capabilities was the reason for starting this war, it's been clear both from the Israeli government's rhetoric and choice of targets that this is a war against the Islamic Republic itself, and that regime change may be the ultimate goal. Trump didn't mention regime change in his statement, but he has now committed American military power to that Israeli war. So far, this war has been characterized by stunning Israeli tactical successes, as well as the seeming impotence of Iran and its once vaunted network of regional proxies in its response. (Though it's unclear how long Israel's air defense system can keep up if Iranian strikes continue at this pace.) This may have emboldened a president who has backed off of actions like this in the past, convincing him that striking Iran's nuclear program now would be effective and that the blowback would be manageable.
