Gonzalez: A tax on remittances is a tax on immigrants

RAYMONDVILLE, Texas – Remittance is the name given to the money sent by migrants to support their families in their countries of origin. They are a critical economic lifeline for many countries. 

Remittances make up 4.5% of Mexico’s GDP and support millions of families. Indeed in 2024, Mexico received a record $64.7 billion in remittances. In Nicaragua and Honduras remittances represent 25% of gross domestic product. In El Salvador it is 23.5%, and in Guatemala it is 19.5 percent. 

President Trump proposed a five percent tax on remittances  The Republican leadership in U.S. House has reduced the proposed tax to 3.5 percent. The Senate has yet to agree to this. 

Congressman Vicente Gonzalez of McAllen says there should be no tax on remittances. He says if a tax is imposed it will spur an underground economy whereby the money is transferred without payment of the tax. “A tax on remittances is disgraceful,” Gonzalez said. He says such a tax on remittances likely flouts the USMCA trade agreement and predicts it will be challenged by Mexico. Here is an interview the Rio Grande Guardian secured with Gonzalez on the topic:

Mexican perspective

Mexican officials met with the Congressional Hispanic Caucus recently to express their objection to the levy on remittances. Rep. Gonzalez said he was one of the CHC members they met with. He said the officials should have paid a visit to Washington a lot sooner.

The Mexican government is pleased the potential tax on remittances is dropping to 3.5 percent. They said it is a step in the right direction. But it is not enough, they argue, saying it needs to  go to zero.

The Mexican government says Congress needs to realize remittances are a critical economic lifeline for many countries. When Mexican immigrants in the U.S. send money to their families in Mexico, the U.S. gains economically, diplomatically, and strategically, the Mexican officials argue. 

They say these points are worth noting:

• Remittances do not export American goods or services—only dollars already earned.
• Remittances support U.S. exports by allowing Mexican families to buy American-made products.
• Remittances stabilize Mexico, reducing illegal immigration and cross-border insecurity.
• Remittances strengthen the dollar by increasing demand for pesos, improving U.S. trade competitiveness.

The fact is that when dollars go to Mexico, value comes back to the U.S, the Mexican government argues. The fact is there is no loss of labor, its officials say. Their argument is as follows:

Immigrants earn wages within the U.S. economy by producing goods and services domestically. Remittances are an export boost. That is because many Mexican families use remittances to purchase U.S. goods—especially electronics, appliances, and agricultural equipment. There is also a positive effect on currency. Remittances strengthen the peso. A stronger peso makes Mexican exports more expensive and U.S. exports more competitive. And there is regional stability. A more economically stable Mexico reduces undocumented immigration and lowers border enforcement costs.

In fact, it could be argued that remittances mean more U.S. jobs, the Mexican government says, arguing that remittances keep America first by making Mexico more stable. And a strong Peso means stronger U.S. exports, Mexico says.  

Not only do remittances reduce pressure on the U.S.-Mexico border. U.S. companies profit from increased demand for American goods. And U.S. banks and remittance companies earn billions annually in fees and floating interest, Mexico says. 

President Sheinbaum continues to push for the full elimination of taxes on remittances. She argues that the tax would harm not just Mexico, but many countries in the region and beyond. 

“We will continue speaking with both Republican and Democratic senators to explain why it is not good to have a remittance tax in the country,” Sheinbaum said, in a recent briefing to the nation.

“For now, the remittance tax rate has been reduced from 5% to 3.5%. Still, we don’t want there to be any tax at all, so we will continue working to ensure there is no tax on the remittances our compatriots send to their families in Mexico,” she added.

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