Remittance Tax Will Hit U.S. Consumption: Migrants Will Work More but Spend Less

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The nearly 4 million undocumented Mexicans living in the United States, who sent a large portion of the $62.5 billion in remittances to their relatives living in Mexico in 2024, will have to consider new scenarios such as working more or keeping less of their salary in light of the changes the US Congress is planning to make, financial analysts said.

The US House of Representatives approved a 3.5 percent tax on remittances sent by undocumented migrants abroad, including Mexico, as part of the mega-project of tax cuts and spending promoted by President Donald Trump. It will now be debated in the Senate.

If the remittance tax continues to move forward, undocumented migrants will have to work harder to maintain the amount of dollars they send to their relatives in other countries, or, failing that, the families will begin to receive less money. This is just one of the consequences.

The other: local consumption. According to Senator Julieta Ramírez Padilla, this tax will affect local consumption because compatriots will spend less so they can send more money to their families: “It’s very likely that at the end of the day, compatriots will end up sending money even if they’re charged… and therefore, there will be less consumption in that country.”
And according to the Latino Donor Collaborative, the migrant population in the US contributes $781 billion to that country’s GDP, so much so that Mexico could even become the tenth largest economy in the world with that tax.

“This proposal could affect both the families who send these funds to their acquaintances in Mexico, as well as those who receive them, because in the end, we’re talking about the United States government withholding 5 percent of the amount sent,” Janneth Quiroz, director of economic analysis at Grupo Financiero Monex, said in an interview with SinEmbargo.