Experts warn that Republican plans to tax remittance payments could unintentionally increase migration to the United States.Why It MattersHouse Republicans have added a provision to President Donald Trump's "big beautiful bill" that would impose a 5 percent excise tax on remittance transfers. The legislation was put forward by the U.S. House Committee on Ways and Means. The measure, exempting U.S. citizens, would impact more than 40 million people, including green card holders and those on temporary work visas such as H-1B, H-2A, and H-2B.Remittances are money transfers that individuals send to family or friends in their home country, typically from a country where they are working. Millions of immigrants send money back they earn in the U.S to their home countries.What To KnowPolicy experts are sharply criticizing the proposal, saying it risks backfiring. Rather than deterring migration, as intended, the tax could deepen economic strain in parts of Mexico and Central America that rely on remittances, potentially increasing the pressure on individuals to migrate north in search of work."Rather than serving as a deterrent, a remittance tax could actually incentivize more migration. If individuals believe they'll need to earn even more to meet family needs due to the remittance penalty, they may be more likely to come—and stay longer—to offset that financial loss," Veronique de Rugy, George Gibbs Chair in Political Economy and senior research fellow with the Mercatus Center, told Newsweek."Remittances are a lifeline for millions of households in Mexico. In many rural areas, they support basic consumption, education, housing, and small-scale investment," De Rugby said."Taxing these transfers effectively reduces household income in those communities, potentially pushing families back into poverty or forcing them to forgo essential spending."That, in turn, reduces local demand, suppresses entrepreneurship, and weakens social cohesion in already vulnerable regions."In 2023 alone, Mexico received more than $66.2 billion in remittances—primarily from individuals working in the United States—accounting for roughly 4 percent of the country's GDP, according to the Migration Policy Institute.In poorer, rural areas of Mexico with few job opportunities, remittances fund essentials like food, housing, school supplies, and medications. This flow of money often makes it possible for families to remain in their communities rather than risk a dangerous journey north."There is no question that such a policy would have an impact on certain communities. Remittances pay for everything, including food, clothes, housing, medications, and school supplies," immigration attorney Hector Quiroga told Newsweek."A decrease of any kind will lead to belt tightening as people are forced to choose between two different necessities or do without some things altogether. The resulting economic impact would spread to local businesses, as the supply of cash would decrease overall," he said.Mexican President Claudia Sheinbaum has already rejected the proposal, calling it unjust and harmful to migrant families. She said it "would damage the economy of both nations and is also contrary to the spirit of economic freedom that the U.S. government claims to defend."Michelle Mittelstadt, director of Communications at the Migration Policy Institute, told Newsweek that it's unclear how much of the remittance flow would be impacted by the proposed tax, since U.S. citizens send some portion. Still, she warned that such a measure could drive people toward unofficial channels.Experts have argued that the policy could inadvertently increase migration to the U.S. rather than deter it."It's a classic case of economic nationalism backfiring," said de Rugy."Instead of reducing migration, it may increase the financial desperation that pushes more people to leave home in search of opportunity."In addition to being economically harmful, this policy sets a troubling precedent. It penalizes lawful financial behavior, distorts labor markets, and risks damaging diplomatic relations with Mexico—all while doing nothing to meaningfully address border security or fiscal sustainability."Quiroga echoed those concerns, saying the tax would likely have unintended consequences."Some individuals who send remittances to Mexico might conclude that it makes more economic sense to bring family members to the US and support them here rather than send remittances back, remittances that would not be worth as much if taxed at 5 percent," he said.Others warn that even a small cut to remittance income could have ripple effects in low-income communities. Mark Krikorian, executive director of the Center for Immigration Studies, takes the opposite view, arguing that the tax might discourage migration by reducing its economic benefit.Other high-ranking Trump officials have backed the measures.Vice President JD Vance, then an Ohio senator in 2023, co-sponsored the WIRED Act, which would have imposed a 10 percent fee on remittances out of the U.S.What People Are SayingVeronique de Rugy, George Gibbs Chair in Political Economy and Senior Research Fellow with the Mercatus Center, told Newsweek: "The logic of the tax assumes migration is driven purely by opportunity, but in reality, many migrants are responding to economic necessity. Making remittances more expensive only increases the pressure to work longer hours, stay for more years, or bring additional family members to the U.S."Michelle Mittelstadt, director of communications at the Migration Policy Institute, told Newsweek: "More than $66.2 billion in remittances were received by Mexico, chiefly from individuals living in the U.S., in 2023."This represented 4 percent of Mexico's GDP that year. So U.S. taxation on this flow of money sent by individuals to their families and other loved ones in Mexico could have an effect on remittance sending, though it is not clear at this point 1) what share is sent by U.S. citizens and thus would not be subject to this proposed tax; and 2) whether this tax would prompt people to send money through unofficial channels rather than continuing to use formal money transfer routes."Immigration attorney Hector Quiroga told Newsweek: "I personally don't think that this would have any impact one way or another. While $320 million is a lot of money, the average remittance to Mexico is about $390 per month. Five percent of that is $20. That amount would likely not be enough to dissuade migrants from coming to the United States because the economic opportunity is clearly not available in Mexico, and there really is nowhere else to go."Mark Krikorian, executive director of the right-wing Center for Immigration Studies, said: "One of the main reasons people come here is to work and send money home. If that's much more difficult to do, it becomes less appealing to come here."What Happens NextCritics say the tax is unlikely to stop people from migrating since it does not address the deeper issues driving them to leave, such as poverty and limited job prospects. By cutting into the money families rely on, the policy could worsen conditions in their home countries and push more people to seek work in the U.S.