Illegal Border Crossings Today:

Remittances To Mexico Drain Dollars From American Pockets

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One of the least-discussed aspectsof U.S.-Mexico immigration policy is the potential taxation of remittancepayments being sent from the United States to Mexico. Remittances are moniesearned in the United States that are then transferred to relatives, friends, orbusiness associates who reside abroad.

According to a recently-released study by FAIR, in 2017, Mexico was the top recipient of remittances from the United States, getting a hard-currency injection of just over $30 billion directly from our economy. Mexican nationals in the U.S. remitted more money to their home country than all Chinese and Indians in America combined. China and India are the second and third highest recipients, respectively, of U.S. remittances. 

That $30 billion figure represents untaxed cash fleeing theU.S. economy and entering the Mexican economy every year. It comes from bothlegal and illegal Mexican nationals, as well as naturalized U.S. citizensoriginally from Mexico. And that money very rarely makes its way back to the UnitedStates.

The failure to tax remittances represents a massive loopholein America’s otherwise comprehensive scheme of levying fees on internationalfinancial transactions. Moreover, the fact that this loophole has not beenaddressed, especially at a time when it might help further U.S. interestsabroad, is mindboggling.

Currently, Oklahoma is the only state that taxesremittances, but if the United States placed a mere 1 percent federalremittance tax on all Mexican remittances from the U.S., it would bring severaladvantages:

  • First, the tax could reduce the number ofMexicans illegally entering the U.S. in search of employment, as remittancerevenues would decrease.
  • Next, the tax decreases the disparity betweenpublic services consumed and taxes paid by Mexican nationals living in theUnited States. A remittance tax wouldn’t ensure that Mexican nationals pay forall the services they consume but it would help reduce the burden on theAmerican taxpayer, who is forced to make up for the tax revenues lost whenremittance money exits the U.S. economy.
  • Additionally, the tax encourages moreparticipation in the Mexican labor force, which helps improve its developingeconomy.  Many Mexican households relysolely or primarily on remittances from the U.S., which discourages them fromparticipating in the domestic labor force and entrepreneurial activity. If thisexternally-generated capital is reduced, more Mexican individuals will seekemployment at home, increasing the amount of wealth generated in Mexico.
  • Lastly, the collected tax revenue from theremittances could improve societal and physical infrastructural in the UnitedStates, including potentially the southern border wall.

The massive transfer of U.S.-earned cash to Mexico is justanother way that our lax immigration policies are hurting average Americans. Therevenue raised from money retained in the U.S. that is subjected to consumptiontaxes is used to pay for schools, roads, jails and other infrastructure. It’sbad enough that some Mexicans are entering the country illegally and showingprofound disrespect for American law. What’s even worse is that they don’tappear to be paying for the public services they are using.  A remittance tax would be a good first step inalleviating that problem.