Buried in the Big, Beautiful Bill is a weapon Trump can use against illegal immigration, disincentivizing working illegally in the United States while at the same time cutting into money laundering by Mexican and other drug cartels.
The weapon is a one percent remittance tax on money sent by aliens in the U.S. home to their country. Small change? By the end of 2023, remittances sent by workers in the U.S., many illegal, to other countries reached approximately $93 billion dollars—about 14 percent of total remittances across the globe. Main recipient countries include India, Mexico, Guatemala, and Venezuela. Mexico currently receives money tax-free. U.S. law makes that possible, and it needs to be changed. The tax is expected to collect $10 billion for the U.S. in revenues.
“Directo a México” is the official remittance program of the Federal Reserve Bank, facilitated through the FedGlobal service, which allows illegal immigrants to transfer money to Mexico’s central bank at no additional fee. Since 2003, after an agreement was signed by George W. Bush, users of U.S. financial institutions subscribed to Directo a México can send payments to any bank account in Mexico at no cost. New Yorkers can see such services advertised in Spanish on the subway; in smaller cities the transfer work is done by Wells Fargo, Moneygram, and check-cashing storefronts. States with large populations of illegal Mexicans, such as California and Texas, rank highest in remittance outflows.
It is a well-used system—in 2022, Mexico received $56 billion in remittances from the U.S., establishing the country’s position as the second-largest destination for such funds worldwide. Remittances from abroad accounted for roughly 4.5 percent of Mexico’s total GDP in 2022 (in some poorer Mexican states remittances comprised 15 percent or more of their GDP) and form the largest single source of foreign income for Mexico, outstripping the income brought in by any other source, including foreign direct investment from the United States, tourism, and manufacturing exports. The total value of remittances increased by roughly 32 percent between 2019 and 2023, rising by an average of five percent per year. Mexico does not just send hundreds of thousands of illegal workers to the U.S.; its domestic economy outright depends on them working in el Norte. Much the same for the other leading countries, such as India, though much of its remittances come from H1-B visa holders.
Join the conversation as a VIP Member