Every week in Bridgeport, Connecticut, I sit with immigrant families as they split their modest paychecks: one portion for rent, the other for relatives abroad. Through my bilingual financial literacy program, Bridges 2 Business, I help these families navigate money transfers. But lately, their biggest concern isn't my curriculum—it's how to safely send cash to loved ones in Guatemala, the Dominican Republic, or Mexico without incurring heavy fees.
Economists call these transfers remittances. In 2024, the World Bank reports that migrant workers sent over $685 billion to low- and middle-income countries—more than foreign direct investment and international aid combined. Latin America and the Caribbean received $161 billion, with Mexico alone getting $68 billion, making it the second-largest recipient globally. The Overseas Development Institute notes that in 2023, remittances to developing nations hit $656 billion, nearly three times the $224 billion in global foreign assistance. Unlike aid, which can take months, remittances are spent immediately on food and medicine. They are arguably the most efficient poverty reduction program ever created—and no government designed it.
So it should alarm anyone concerned with U.S. foreign policy that Congress has chosen to tax these flows. As part of President Trump’s One Big Beautiful Bill Act, signed into law on July 4, 2025, a new 1% excise tax on money sent abroad takes effect Jan. 1, 2026. Earlier versions proposed 5% and 3.5%, but lawmakers settled on 1%, extending it to both citizens and immigrants. The Center for Global Development estimates 48 million foreign-born individuals could be affected.
Though 1% seems small, its strategic impact is large. Mexico could lose over $1.5 billion annually, and El Salvador could see a 0.6% hit to its national income. These are precisely the economies whose instability fuels the very migration Washington claims it wants to reduce. Taxing remittances—and lowering incomes in these countries—will worsen the root causes of immigration while pretending to address them.
The tax also fails on its own terms. It exempts bank transfers and U.S.-issued debit and credit cards, so it hits cash transactions hardest—the method used by unbanked individuals. This pushes families toward less transparent channels, the opposite of the tax’s intent. It adds to the roughly 6% in transfer fees migrants already pay, double the 3% the U.N. set as a global development goal.
I was drawn to this issue by faith as much as economics. Catholic social teaching emphasizes the dignity of work and family. A remittance is money earned through labor, sent out of love. Taxing it treats an act of devotion as a loophole to close. As the debate over electoral reform shows, policy often misses human impact.
A better approach exists: lower the cost of international transfers, expand banking access, and treat remittances as a development tool more effective than most direct aid. A confident nation doesn't need to skim from a domestic worker's $60 transfer to her mother.
I will keep helping families in Bridgeport send money safely. But the next time a politician claims Washington is tackling immigration at its source, I’ll remember that new line on the transfer fee—and wonder if they understood what they were taxing.
