On December 14, 2023, The Washington Times published an op-ed written by ATR’s Director of Financial Policy, Bryan Bashur. The article talks about why legislative proposals to tax remittances, or international money transfers, to fund border security are bad public policy. Certain Republicans are advocating for legislation that will tax anyone in the U.S. who decides to send remittances via services provided by banks, credit unions, or nonbank financial institutions.
The same day this op-ed was published two Republicans introduced a new misguided bill to tax remittances. However, there is other Republican legislation that bolsters border security without imposing new taxes.
The article starts by stating that:
Imposing new taxes on Americans sounds a lot like a Democratic policy ploy. But Republicans in Congress and the red state of Florida are proposing new taxes on immigrants who are transferring funds to family and friends abroad.
Lawmakers should swiftly reject any proposal to establish new taxes on remittances. Once such a tax is in place, it will likely move in only one direction: up.
Some Republicans in Congress have introduced legislation to tax remittances to fund border security:
Rep. Nathaniel Moran, Texas Republican, introduced a bill to apply a government-mandated 37% “fee” on remittances. This, however, is a fee in name only. For all intents and purposes, this is a 37% tax on Americans seeking to remit funds to their loved ones in other countries. The fees collected from this bill are deposited in the Treasury Department’s general fund. Half of the deposited fees are sent to a “Reimbursement Fund,” while the other half is deposited in the “Security Fund.”
While border security is of the utmost importance, expanding the size of the Treasury Department and its capabilities would open Pandora’s box to a laundry list of bureaucratic slush funds that would justify taxing private transactions in the name of safety and security.
Florida has also wrongly introduced a proposal to tax remittances:
In Florida, misguided proposals to tax remittances are taking shape. Ostensibly to enhance immigration security and bolster safeguards against money laundering, a grand jury in Florida issued a report recommending that the state enact a 1.5% tax on remittances. The report cites Oklahoma law as a paradigm for a new tax in Florida on remittances.
This proposal would also apply to legal immigrants. The state government could rebate the tax collected from the customer, but taking away a portion of the remittance in the first place is a net increase in the growth and power of the state government. Conservatives should vehemently oppose this new tax.
What is most egregious about these types of bills, is that they tax legal immigrants and Americans who want to send money to friends and families abroad:
The most egregious aspect of these bills is that neither one differentiates between legal and illegal immigrants. So the bills impose a new tax on legal immigrants who want to send money back to family or friends. This is an insult to the American dream.
Taxing remittances is proven to be backwards policymaking:
Taxing remittance flows that are serviced by banks, credit unions, or nonbank financial institutions is regressive policy. In 2017, the World Bank wrote a blog post outlining nine reasons why taxing remittances is a bad idea. The post describes how at the time, countries considering a remittance tax included Bahrain, Kuwait, Oman, Saudi Arabia, the United States and the United Arab Emirates — strange bedfellows indeed.
According to the World Bank post, “taxing outward remittance flows” is a terrible idea because “taxing remittances amounts to double taxation for tax-paying migrants.” Taxing remittance flows, it said, also affects poor families disproportionately. Not to mention that a remittance tax “is unlikely to raise enough funds and will also directly tax many Americans.”
There are other ways to secure the border without imposing new taxes on Americans and legal immigrants who want to send remittances to friends and family. Sen. Ted Cruz (R-Texas):
has proposed several pieces of legislation and policy proposals to solve the border crisis without introducing new taxes for Americans. And the Republican-backed Secure the Border Act of 2023 does not impose any new taxes and has already passed the House of Representatives.
The article concludes by stating that:
Lower taxes and improved border security is a platform worth pursuing. Lawmakers would be wise not to introduce new taxes heading into an election cycle.
Click here to read the op-ed.