Last year, about 160 billion US dollars were transferred from the US to families in Latin America. Now some of this money may be taxed. People who live south of the Rio Bravo are filled with great concerns. Mexican President Claudia Sheinbaum criticized the US intentions: at the opening of a hospital in Los Cabos, she defined this as double taxation: “You can't tax the money of those who have already paid taxes once”, she pointed out.
The demand to pay taxes on the so-called Remesas, as migrants call money transfers to their home countries, has caused excitement throughout Latin America. The idea of imposing a 5% tax on these remittances is from the Republicans - the ruling party of US President Donald Trump.
Remittances worth about $ 160 billion
The annual report of the "Migration" department of the Inter-American Development Bank states that in 2024 the total volume of remittances from the United States to Latin American and Caribbean countries amounted to about $ 160.9 billion - $ 7.7 billion more than the previous year. The largest recipients south of the Rio Bravo River (known in the US as the Rio Grande, ed.) are Mexico ($ 64.7 billion) and Guatemala ($ 21.5 billion). This means that $177 million is transferred to Mexico alone every day.
If we compare remittance income with the gross domestic product (GDP) of the countries in the region, we will see that in 2024 they represented 27 percent of the GDP of Nicaragua, 26 percent of that of Honduras, 24 percent - of El Salvador, 20 percent - in Haiti and Guatemala, and 19 percent of GDP in Jamaica, Jesus Alejandro Cervantes Gonzalez of the Center for Latin American Monetary Studies (CEMLA) in Mexico City told DW. This organization deals specifically with the economic importance of remittances.
The economic and socio-political importance of these remittances for the recipient countries is enormous: "This money alleviates the situation of millions of households and reduces poverty. "They allow people to have a higher standard of living - they finance spending on consumer goods, education, healthcare, housing and, in some cases, investment in family businesses," says Gonzalez. According to CEMLA, 4.5 million households and 9.8 million adults in Mexico receive remittances from relatives abroad.
Taxes as a tool to combat illegal migration
In Florida, Governor Ron DeSantis is considering introducing identity checks on remittances. The goal is to have senders prove that they work legally in the country - this way, illegal immigrants will no longer be able to transfer money abroad. Mexican Senator Antonino Morales of the ruling Morena party described the measure as "blatantly discriminatory and racist". He also points out that in this way, those residing illegally in the US will have significantly more limited access to health insurance programs such as Obamacare or Medicare.
The Mexican politician is referring to the widespread practice of using foreign names (of persons registered in the US) when applying for health insurance. "In principle, the tax will only be imposed on immigrants who do not have US citizenship. But this includes both undocumented immigrants and those with address registration – that is, people who reside legally in the US," CEMLA expert Cervantes Gonzalez told DW.
The tax on remittances, which could come into effect in 2026, could have a very negative impact on the volume of remittances to Latin America and the Caribbean. Mexico, Guatemala, Honduras, El Salvador and Nicaragua will be particularly affected by the measure - due to the high share of remittances from the US in their GDP. Moreover - these countries will be doubly affected, "since this tax is imposed in addition to the ongoing deportations of undocumented immigrants and comes at a time when there are signs that the US is seeing a decline in employment among immigrants from the Latin American region", says Gonzalez.
The expert also sees other risks - for example, for black market transactions: "The remittance tax could lead to unofficial money transfers by couriers or through digital transfers of crypto assets".
Republicans disappoint Latin American voters
Amid the brutal actions of the authorities to extradite migrants from the country, the negative sentiment of these voters towards Republicans is increasing among Latinos in the United States. In the last presidential election in 2024, significantly more Latinos voted for Republicans and for Donald Trump than in 2020.
In many places, including in Republican strongholds such as Florida, many Latino voters now feel betrayed and may reconsider their support for Trump's Republicans in the upcoming midterm elections in November 2026. Midterm elections in the United States are held every two years - they elect a completely new composition of the House of Representatives and replace a third of the senators.
Author: Tobias Koeffer