Reuters /

President Trump’s One, Big, Beautiful Act (OBBBA)— which passed the House last month — is a proposal to impose a 3.5 percent excise tax on international remittances sent by individuals who live in the United States but are not U.S. citizens or nationals.

Remittances are payments typically made through U.S. financial institutions to parties outside the United States. At the American Community Media briefing earlier this month, panelists noted that the tax could adversely impact the US economy. It will result in a reduction in domestic spending on the part of the immigrants who send money back home on the one hand. On the other hand, this measure may drive more financial transactions underground, and therefore, end up costing more money than it raises.

Reduction in domestic spending on the part of the immigrants

“Even in times of economic or political uncertainty in the U.S., migrants maintain their commitment to their families and communities. They continue sending this transformative lifeline,” said Ariel Ruiz Soto, Senior Policy Analyst, Migration Policy Institute.

 The consequences would be regressive within the U.S. itself. Ana Valdez, President and CEO of the Latino Donor Collaborative, pointed out that the Latino community—whose purchasing power exceeds $4 trillion—is already reacting. “We conducted multiple polls after the remittance tax was announced. People were clear: they are not going to stop sending money. “My mom is going to get her $1,000 every month, no matter what. They will cut back on their expenses. “Fewer outings, fewer purchases, less consumption,” she said.

In 2024, US residents sent more than $220 billion to families and friends in other countries: more than half went to Latin America. Mexico is the largest recipient of US remittances, while India is the top recipient of remittances from around the world. The Center for Global Development (CGD) report notes that countries like India, the Philippines, and China would each lose approximately $500 million in remittances.

The Indian diaspora is one of the largest migrant communities in the United States. As of 2023, over 2.9 million Indian immigrants reside in the US. According to data from the Migration Policy Institute, after the United Arab Emirates, the United States is the second most popular destination for Indians globally.

Under the new bill, the remittance tax—referred to as an “excise tax”—will apply only to non-US citizens. US citizens are exempt. Those affected include green card holders and individuals on employment visas.

Double taxation may drive financial transactions underground

Panelists argued that the proposal represents a form of double taxation as senders — including millions of undocumented immigrants — already pay income and payroll taxes on these earnings. It could, they add, drive many to seek more informal, riskier ways to send money home.

Valdez noted that more people may turn to informal or even illegal channels to send money abroad. “This tax doesn’t just hurt those who send remittances—it punishes the American dream. Because immigrants are the American dream,” Valdez said.

“This tax will have a devastating impact on the world’s poorest people. In many countries, even more than recent aid cuts,” warned Helen Dempster, assistant director of migration policy at the CGD. “Levied on the heels of the Trump administration’s previous shutdown of multiple USAID programs, it’s a double blow to the most vulnerable,” she added,

Tax may discourage foreigners from investing in the United States

 The tax will undermine the Trump economic goal of attracting trillions of dollars of overseas funds to be invested to create jobs here in America.

Every year, about $800 billion in remittance payments are made from U.S. financial institutions to foreigners, on trillions of dollars of investment capital parked here.

 For America to retain its status as the hub of the financial world, global investors need to know that dollars invested in U.S. financial institutions will not be subject to intrusive government regulation and taxation and that their financial privacy will be protected, they said.

 The bill is currently in the Senate for consideration. Senate Republicans' have a self-imposed deadline to pass the bill by July 4. If the Senate passes the bill, it will return to the House for a vote. While the remittance tax was included in the House-passed OBBBA, the Senate may choose to modify or remove this provision.