"Big Beautiful Bill": Without reducing the deficit, it hits Mexican families hard.

During his second term, President Donald Trump revived one of his most controversial proposals: a tax on remittances sent from the United States abroad. After a lengthy debate in the House of Representatives, the measure was approved by 215 votes to 214, leaving the rate at 3.5%. This measure is part of the "Big Beautiful Bill" tax bill, which seeks to maintain the tax cuts from his first term and fund new deductions. The remittance tax is justified as a way to offset the fiscal deficit generated by those policies and strengthen border security.

However, experts point out that the revenue from this tax is marginal compared to the enormous deficits that Trump's economic plans will generate. For example, the Committee for a Responsible Federal Budget estimates that his proposals will increase the US debt by more than $5.4 billion over the next decade. In contrast, the remittance tax could raise around $3.25 billion annually, considering only the money sent to Mexico, the main destination for remittances from that country.

On the Mexican side, however, serious consequences are anticipated for millions of families. In 2024, remittances reached $64 billion, surpassing oil revenues. Remittances support more than 10 million households ; in fact, in Mexico, more than a third of remittance-receiving households live in towns with fewer than 2,500 inhabitants. According to the Center for Latin American Monetary Studies ( CEMLA ), in states such as Oaxaca, Zacatecas, Michoacán, Guerrero, and Chiapas, remittances represent between 10% and 14% of their state GDP. A tax, therefore, would directly reduce the disposable income of these families and limit their ability to cover basic expenses such as healthcare, education, and food.

In addition to impacting the poorest the most, the measure could encourage financial informality and facilitate illegal activities. BBVA Mexico warns that increasing the cost of sending money up to fourfold will lead many migrants to use channels outside the banking system, increasing the risk of fraud and money laundering by organized crime. This policy would destroy a formal, competitive, and secure market for sending remittances and pave the way for informal and dangerous methods.

The proposal is also based on false assumptions. Contrary to the idea that undocumented immigrants don't pay taxes, the Institute on Taxation and Economic Policy (ITEP) reports that in 2022 these immigrants contributed $96.7 billion in federal, state, and local taxes, an average of $8,889 per person. More than a third of that money funds programs like Social Security, Medicare, and unemployment insurance, services they cannot access due to their immigration status. Thus, 46% of their state and local contributions came from sales and excise taxes, 31% from property taxes, and 21% from personal and business income taxes. Six states—California, Texas, New York, Florida, Illinois, and New Jersey—collected more than $1 billion each that year thanks to taxes paid by undocumented immigrants. The ITEP estimates that, in 40 states, these types of taxpayers paid higher taxes than the richest 1% of American households and met their tax obligations at a higher rate than higher-income taxpayers. The underlying reason is that the U.S. tax system is disconnected from the immigration system, so applicants for work permits, asylum, visas, and even citizenship rely on their tax returns and payments as evidence of good faith and civic responsibility.

On the other hand, there is concern about the suspicion that a fraction of remittances sent to Mexico could originate from illicit activities, although there is no consensus on the magnitude. According to a report by the Mexican think tank Signos Vitales , in 2022, approximately 7.6% of remittances (about $4.4 billion out of a total of $58.497 billion) could have been linked to drug money laundering. The analysis detected anomalies such as unusual increases from some US states with small Mexican populations and municipalities with more transfers than registered households. Indeed, journalistic investigations have documented that Mexican cartels, such as the Sinaloa cartel, use remittances to repatriate drug trafficking profits, especially fentanyl, through electronic transfers, cash transportation, and cryptocurrencies.

However, BBVA Mexico points out that there is no solid evidence to support the claim that illicit remittance money is a widespread phenomenon. Rather, the growth is explained by the economic recovery in the U.S. and improved employment among Mexican migrants. For its part, the Attorney General's Office reports only one case involving illicit remittance-related transactions since 2013, indicating low official detection rates.

Although there are indications that some remittances may be used for money laundering, the majority remain a legitimate and essential source of income for millions of Mexican families. Therefore, instead of punishing all those who economically support communities inside and outside the U.S., the logical course of action would be to design and implement a security strategy to prosecute drug trafficking crimes, and an immigration policy that facilitates the legalization of migrants who clearly and quickly meet the requirements.

The same ITEP study indicates that legalizing the employment of all undocumented immigrants would increase their tax contributions by $40.2 billion annually, reaching a total of $136.9 billion. Of that amount, $33.1 billion would go to the federal government and $7.1 billion to state and local governments. In other words, their inclusion would generate more revenue than their exclusion.

In short, the tax proposal underestimates the economic importance of migrants—particularly undocumented immigrants—in key sectors of the U.S. economy. Part of the impact of the 3.5% tax on remittances will fall directly on those who send them, if they are the ones who bear the additional cost.

If this measure moves forward in a context of economic slowdown in the United States, its impact could be exacerbated. It overlooks the fact that what would jeopardize migrants' ability to continue sending remittances is not the tax itself, but a deep recession that would impair their access to employment and reduce their income.

*The author is Director of Inteligencia Más and holds a master's degree in Government and Public Policy from the Universidad Panamericana.