Tax the Poor! Trump’s “One Big Beautiful Bill Act” and International Standards on Remittance Transaction Costs

Nearly one in seven people worldwide is either a sender or recipient of remittances, defined by IOM as “personal monetary transfers… made by migrants to individuals or communities with whom the migrant has links”. The World Bank estimates that, in 2024, global remittances sent through formal channels totalled over 904 billion USD. They are an important source of external finance for low and middle-income countries, estimated to have amounted to 685 billion USD in 2024, more than foreign direct investment and development aid combined. In this blogpost we sketch the international consensus that has crystallised around the need to keep remittance transaction costs low. We suggest that the US plan to impose a remittance tax in President Trump’s “Big, Beautiful Bill” will not only adversely affect migrant economies but may also undermine evolving human rights standards concerning the right to remit.

Why Remittance Transaction Costs Are High and Why They Should Be Low

A key problem for remittance senders and recipients is the stubbornly high cost of remittance transactions. In the third quarter of 2024, the global average cost for remittance transactions was nearly 7%. This means that remittance senders on average lost almost 7 USD for every 100 USD sent home. The imposition of such costs, which do not take account of the additional loss sustained by many migrants due to the foreign exchange rate set by remittance service providers, is arguably an excessive interference with what is essentially migrants’ private capital.

High transaction costs are due in part to the focus on anti-money laundering and counter-terrorism that emerged in the wake of 9/11. The post-9/11 securitisation of remittances birthed a culture of de-risking, whereby financial institutions ceased or reduced their relationships with remittance companies owing to the perceived susceptibility of remittances to financial crime and the preference for avoiding such risk rather than managing it. Furthermore, money laundering and terrorist financing recommendations have imposed stricter regulatory requirements on service providers, including mandatory customer identification protocols. These measures can restrict some migrants’ access to formal remittance channels and drive up operational costs for providers, which are ultimately passed on to customers and may deter some people from using formal remittance channels.

International consensus on the need to reduce remittance transaction costs can be traced back to the Programme of Action of the 1994 International Conference on Population and Development. This goal gradually gained greater definition and the strategies for achieving it were further fleshed out in subsequent international agreements, culminating in 2015 in the explicit commitment to reduce remittance transaction costs to 3% in the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development. Objective 20 of the 2018 UN Global Compact for Migration (GCM) sets out a detailed roster of steps that states may take to achieve the 3% target. In addition to this soft-law framework for reducing transaction costs, migrants enjoy the right to remit under some international treaties. The most robust right is to be found in Article 47 of the 1990 UN International Convention on the Protection of the Rights of All Migrant Workers and Members of Their Families (UN ICRMW). This provision not only recognises migrants’ “right to transfer their earnings and savings, in particular those funds necessary for the support of their families” to any other state, but also obliges states parties to “take appropriate measures to facilitate such transfers”.

Given that the GCM is “based on international human rights law” (para 15) and rests on the “core international human rights treaties” (para 2), one of which is the ICRMW, it may be possible to argue for an evolutive interpretation of the Article 47 obligations of states parties to the ICRMW in light of their GCM commitments. Even if such an argument were to be successful, however, its practical reach would be curtailed by a number of limitations, chief amongst them being the relatively small complement of states parties to the ICRMW. The ICRMW distinguishes itself amongst the nine core international human rights instruments with its uniquely slow and low rate of ratification. Despite being open for signature since 18 December 1990, only 60 states, primarily located in the Global South, are so far bound by the treaty. Three of those states abstained during the 2018 UN General Assembly vote on the GCM. The US, of course, is not a state party to the ICRMW and voted against the GCM in 2018.

The US Approach to Taxing Remittances: From Oklahoma to Trump  

The US has long been the top remittance-sending country in the world, with a total official remittance outflow of 98 billion USD in 2024. Most of those remittances go to Mexico and Central American countries, closely followed by India and China. While the US-Mexican remittance corridor has long been one of the largest in the world, countries such as Honduras, Guatemala, and El Salvador also receive 20-25% of their GDP from US remittances. For India, remittances from the US also account for 27.7% (32.9 billion USD) of the remittances that flowed into the country in 2023-24. The current US administration’s rapidly escalating anti-migrant enforcement policies have not triggered a decrease in the amount of remittances sent in the last six months. On the contrary, remittances in particular to Central American countries are estimated to grow approx. 15-20% this year.

The taxation of remittances has been high on the agenda of US Republicans in the last 15 years, justified on various grounds from increasing financial revenue to limiting migration or fighting cartel violence. In 2009, Oklahoma became the first US state to enact a fee on remittance transfers out of the state. It included a 5 USD fee on any wire transfer under 500 USD and 1 % on any amount above this (the amount was raised to 7.5 USD and 1.5%, respectively, in 2017. Assessments on the effectiveness of the wire transmitter fee differ: while it generated 13 million USD in revenue in 2023-24, others argue that it has encouraged illegal financial flows, the use of virtual means that are less regulated such as crypto, and imposed regulatory burdens. This is also why the World Bank considers taxation “a bad idea”.

Since then, four attempts have been made to impose a remittance transfer tax on the federal level, in 2015, 2017, 2022, and 2023, respectively. The 2015 proposal included a 7% tax on international money transfers sent by individuals who could not confirm their legal status. The 2017 bill focused on a 2% fee on money transfers sent to individuals in 42 Latin American and Caribbean by everyone in the US, regardless of their legal status. The 2022 and 2023 bills mirrored the Oklahoma legislation, including a 5%, respectively 10%, fee that could be reclaimed as a tax credit by US citizens. The latter was co-sponsored by then-Senator JD Vance.

The One Big Beautiful Bill Act and its Consequences

In May 2025, reports emerged that the GOP plans to “shut down illegal immigration” by targeting remittance transfers in Donald Trump’s monumental “One Big Beautiful Bill Act” (OBBBA). Due to the sprawling and complex nature of the OBBBA, the inclusion of a tax on money transfers of non-US citizens was at first overlooked in public commentary. However, following the cuts to development aid, numbers emerged that the tax could potentially affect 40 to 50 million people in the US and, in consequence, potentially hundreds of millions of people globally who rely on remittances. At first listed as a 5% tax on remittances, it was reduced in a series of edits, first to 3.5% and most recently to 1%. While the original proposal was only applicable to non-US citizens, the most recent version covers all remittance senders, including US citizens. This means that, while the fee is smaller, it now affects a significantly larger number of people, including the diaspora or foreign-born US citizens with ties abroad. Reports suggest that pressure from states such as Mexico led to the reduction of the transfer tax, while lobbying by the banking industry carved out exemptions for remittances sent via bank-to-bank transfer. The tax would thus be applicable for all cash-based transfers from 1 January 2026.

The consequences of this excise tax, while small, on top of the transaction fees that migrants are already paying, are likely to be drastic in several aspects:

First, the tax might reduce the amount of remittances sent by up to 1.6%. This means that dependent families and communities will receive less financial support, which will presumably hit hardest those most dependent on it, including people already suffering from the development aid cuts. As bank and debit card transfers are exempted, the tax will impact in particular those who do not have access to a reliable banking infrastructure. This means that remittances to India or Mexico might remain relatively unscathed, while Central America, the Caribbean, and certain African countries such as Nigeria and The Gambia might be hit hard. For Central American countries such as Honduras, El Salvador, Nicaragua, and Guatemala, which are so economically dependent on US remittances, even a 1% tax will have widespread macroeconomic implications. The tax is most likely to increase hunger and poverty and, paradoxically, even lead to more irregular migration as people are pushed to look for work opportunities abroad.

Secondly, the tax will affect the US and its interest in a safe, stable, and efficient global remittance transfer system. The 1% tax will raise costs and regulatory burdens, e.g., by imposing extra ID verification and reporting mechanisms on leading US-based money transfer providers such as Western Union and MoneyGram. Those providers might put additional fees on remittance senders to recoup their new compliance costs. To avoid the tax, remittance senders will look for opaque and informal channels, including cash hand-offs and cryptocurrency wallets. This will reduce the effectiveness of money laundering regulations. Ultimately, as Caribbean governments have pointed out, the remittance tax threatens to lower the international reserves of dollars. The remittance transfer system is almost exclusively based on dollar hegemony, which has already been in turmoil due to Trump’s trade policies.

Whither the International Consensus on Reducing Remittance Transaction Costs?

In their ambition to rewrite the rules of the global economic order, the introduction of a 1% remittance tax by the Trump government might seem of lesser importance. But it is sharply at odds with the international consensus, articulated in the Addis Ababa Action Agenda and the 2030 Agenda for Sustainable Development, to reduce remittance transaction costs to less than 3%. Furthermore, it is conceivable that other states may seek to replicate the US tax on remittances as a way of generating revenue or making a performative appeal to anti-migrant sentiment amongst their electorate. This would not only endanger the international consensus around the need to reduce remittance transaction costs, and the actions itemised in Objective 20 of the GCM to achieve that reduction. It would also have far-reaching practical consequences for individual migrants and their countries of origin. In the context of the current economic downturn and cuts to development aid, the needless impediment and reduction of remittances would strike already impoverished communities on the outskirts of the global economic order disproportionately.