Hefty Remittance Tax Would Help End Illegal Immigration

By Joe Guzzardi
September 19, 2014

When U.S. Rep. Michele Bachmann (R-Minn.) returned from her August border trip to view firsthand the Central American surge, she was outraged by what she saw. Hundreds of illegal aliens crossed into the United States unimpeded, and voluntarily surrendered themselves to border patrol agents. From there, they were put into a van, turned over to Health and Human Services, and began their new American life.

Bachmann suggested that in addition to securing the border with a well-lit, fully staffed border fence, the federal government levy a 100 percent tax on all remittances illegal aliens send back to their home countries. Bachmann knows more about taxation than the average congressional representative. She earned a J.D. degree from Oral Roberts University, received a LL.M. degree from the William and Mary School of Law before joining the Internal Revenue Services’ legal staff.

Noting that the surge would eventually put more illegal aliens into the work force, and the monies they wired to Central America would subsidize Guatemala, El Salvador and Honduras’ corrupt governments, Bachmann urged that the non-taxation policy on remittances end. As long as the money flows in, the Central American leaders have little incentive to clean up their governments’ methodologies.

One of the many alluring magnets for illegal immigrants is their ability to earn money in the U.S. and send it home untaxed. We’re not talking small change. Earlier this year, the Pew Research Hispanic Trends Project reported that in 2012 legal and illegal immigrants sent home more than $54 billion to Mexico and other Spanish speaking Latin American countries and $69 billion to other nations for an aggregate of more than $123 billion, a princely sum that London’s Economist described as “a river of gold.”

Some analysts claim that taxing alien remittances is a bad idea. One critic says that such a tariff would impose another burden on illegal immigrants who already pay income and sales taxes. For those who work in the underground economy, however, no income tax is paid. And since most newly arrived have low paying jobs, their incomes are too small to purchase big ticket items. Sales tax generated, therefore, is modest. Another specious argument is that a tax on remittances would be hard to administer— illogical since the one thing the feds routinely do well is apply and collect taxes.

To understand the consequences of untaxed remittances, first consider $123 billion sent abroad is to a foreign country represents money that isn’t spent in the U.S. that would stimulate our economy and create more jobs. Speaking of jobs, illegal immigrants who hold one violate immigration law, and if they’ve falsified their identity to become employed, they’ve committed a felony.

I have family and friends who live in Guatemala. They’ve told me that remittances have not helped their country. Once hard-working Guatemalans now prefer to wait for the weekly money wire. The same applies in any country where remittance income makes up a large percentage of that nation’s Gross Domestic Product. In the three leading Central American sending countries during this summer’s surge, Guatemala, El Salvador and Honduras, remittances as a percentage of GDP are, respectively, 10, 15.7 and 16.5 percent. When money flows in without the local economy producing it, costs of goods and services soar.

A hefty tax similar to the one Bachmann proposed would stimulate the U.S. economy because money would be spent on American products instead of sent abroad. At the same time, remittance receiving countries would have to adjust and create jobs to maintain their societies, a win-win situation.

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Joe Guzzardi is a Californians for Population Stabilization Senior Writing Fellow whose columns have been nationally syndicated since 1987. Contact him at [email protected]